Open source model raises questions for business

Could you give away the exact formula for what you do? Do you think you’d have a business afterward?

Ryan Jarvis

Every legitimate company falls on the goods and services spectrum. Some companies, like house cleaners, provide an almost purely service-oriented model while others, like Coca-Cola, provide a purely product-oriented model. There is a wide spectrum in between and in my business I’ve always fallen in the middle somewhere, providing products and the expertise around them.

In the past it has been fairly easy differentiating goods and services. However, as I pursue product development at my company I am beginning to realize that that line is increasingly blurry.

Case in point:

Consumer 3-D printing was all the rage a few years ago, but it has been a tough nut to crack when it comes to creating a business model around the printers. Almost every consumer 3-D printing company has gone out of business. Almost every 3-D printer Kickstarter has been a disaster. Companies that had a huge head start to market, like Makerbot, are basically on life-support after laying off hundreds of employees and generally lackluster sales.

The exception to this is a company called Lulzbot. They sell 3-D printers but also publish step-by-step guides on how to build the same printer from parts you buy yourself. They are 100 percent open source hardware. This means that if you wanted to you could start up a factory, take their plans and start building high quality 3-D printers based on their design, and sell them! The one caveat? Legally, your 3-D printers would have to be open source too; you’d have to publish any changes and make sure people had access to them.

I think most MBA programs would tell you this was insane, but almost universally the 3-D printing companies that failed used the closed source model and the ones that succeeded are using the open source model. Lulzbot provides printers to NASA, Nike and a number of Fortune 500 companies.

Lulzbot is just one company that is an example of open source that has been incredibly successful. Some other examples include: Soylent (nutrition drink), pfSense (network routers) and opendesk (furniture). These are all companies that are giving their ideas away for free, but selling the product if you want it. You could take any one of these companies and recreate their entire product line from instructions that they provide you.

Could you give away the exact formula for what you do? If you manufacture something, could you give away the blueprints for how it’s made? Do you think you would have a business afterward? How do these companies survive if it is so easy to replicate them?

These new style companies are treating their goods as a service – or vice versa. The line blurs as you look closer. They are giving away their innovations, but still finding the audience for their products. The ‘service’ aspect extends to the birth of the product on the assembly line.

One guess: There is a tremendous community around these products. This community plays the role of support, salesman and customer all rolled into one.

As I am working on our next round of product offerings I’m taking some of this to heart. We’ll be releasing a number of our software products as open source and some of the small hardware innovations we have made I am planning to document and put on our website, alongside the product shots. We’ll never see anywhere near the involvement that 3-D printing has, but my hope is that someone will see what we’ve done, implement it and either come back to me with improvements or, even better, recognize our expertise and ask us to build something just a little bit crazier than what we already have.

I don’t think this approach is for everyone, but I think it raises some interesting questions about technology. I’d be curious to hear what you think would happen tomorrow if you told everyone how your business makes its secret sauce?

Ryan Jarvis is the president and owner of Vancouver-based Shopbox, a provider of wireless POS systems for pop-up events and kiosks. He can be reached at ryan@shopboxretail.com.

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