On Open Business @ EDUfashion conference - Ljubljana 02/06/2011
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On Open Business @ EDUfashion conference - Ljubljana 02/06/2011

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While Open Source software has already developed viable business models and markets, other Open projects are still trying to define their best practices. Open Hardware, Open Design, Fab Labs, Hackerspaces and DIY Craft projects already show some emergent models and markets that can be explored and developed further.
It is strategic for Open or DIY designers to consider the specific business models and markets available for their projects, in order to run them in a sustainable way, both right now and in the possible future scenarios we can help evolve through collective collaboration.

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On Open Business @ EDUfashion conference - Ljubljana 02/06/2011 Presentation Transcript

  • 1. On Open Business ModelsMarkets and business models for Open and DIY projectsMassimo Menichinelli---------------------------------------------------------------------------Ljubljana (Slovenia): June 2nd 2011EDUfashion Conference - Refashioning fashion: new scenarios of clothinghttp://www.edufashion.org/Presentation available on:http://www.slideshare.net/openp2pdesign
  • 2. 01.Why should a designer beconcerned about business? Im a designer, after all!
  • 3. (Open) Design + Business ?a designer / researcher studying how to co-design OpenProcesses with communities--> and trying to make his design / research activity a sustainable business+ a report on business models of:* Open Hardware -->* Fab Labs* DIY Craft http://www.youcoop.org/ http://www.platoniq.net/ http://www.goteo.org/
  • 4. From a paper project to a real project Designers start thinking about the businessSource: http://www.kickstarter.com/projects/danprovost/glif-iphone-4-tripod-mount-and-stand
  • 5. From a paper project to a real project Now on Apple Store!Source: http://www.kickstarter.com/projects/1104350651/tiktok-lunatik-multi-touch-watch-kits
  • 6. Just being “Open” is not enough .. but what about the market?Source: http://www.kickstarter.com/projects/1833785894/100k-stray-toasthed-pull-toys
  • 7. 02.Open and DIY Business(as they are now)
  • 8. Business models of Open Source (software)Non-monetary incentives:* problem solving* ethical questions* education + learning* reputation --> social interactions + jobs--> its not just about money! Also a gift economy
  • 9. Business models of Open Source (software)Monetary incentives:* selling software (as open or even with dual licensing)* offering services (customisation, support, ...)* paid developer work* donation* software as service (freemium, ...)* embedding software into hardware--> … its not just about volunteer work! Also a market economy
  • 10. Business models of Open Source (software)Red Hatfirst open source company expected to break through the $1bnmark in 2011.Source: http://www.channelregister.co.uk/2011/03/24/redhat_q4_f2011_numbers/Cost of developing LinuxThe Linux Foundation (LF): $10.8 billion to build the Linuxcommunity distribution Fedora 9 in today’s dollars with today’ssoftware development costs.$1.4 billion to develop the Linux kernel alone.Source: http://www.linuxfoundation.org/sites/main/files/publications/estimatinglinux.html
  • 11. Please note: Open Business is not completely openProjects may be open but:* identity (brand) is fixed and is warranty certificate* existing business ecosystems may not be open* knowledge, expertise, tools, resources are not always “open”Source: http://www.blender.org/blenderorg/blender-foundation/logo/ Source: http://www.arduino.cc
  • 12. The levels of openness in Open HardwarePatrick McNamara defined 4 possible levels of Openness in Open Hardwareprojects:1. Closed: any hardware for which the creator of the hardware will not release any information.2. Open Interface: all the documentation on how to make a piece of hardware perform the function for which it is designed is available (minimum level of openness).3. Open Design: in which enough detailed documentation is provided that a functionally compatible device could be created by a third party.4. Open Implementation: the complete bill of materials necessary to construct the device is available.Source: http://www.osbr.ca/ojs/index.php/osbr/article/view/379/340
  • 13. The business models of Open Hardware (01/02)* Services and expertise (customization, consulting)* Manufacturing of owned or third party Open Hardware* Manufacturing of proprietary hardware based on Open Hardware* Dual-licensing* Proprietary hardware designs based on Open Hardware* Proprietary hardware tools for Open Hardware (Sparklelabs)* Proprietary software tools for developing Open HardwareSource: http://www.openp2pdesign.org/2011/open-design/business-models-for-open-hardware/
  • 14. The business models of Open Hardware (02/02)* Free services for a greater user base (Adafruit Jobs Board)* Partnership between Open and Fabbing companies (Ponoko + Sparkfun)* Funding Open Hardware projects in exchange for documentation (Bildr)* Renting spaces for co-working (Hackerspaces)* Brick and mortar store (Makerbot - Botcave)* Piracy as a learning and market building strategy (Shanzai)* Microcredit / peer-to-peer lending / crowdfunding (Open Hardware Bank)--> Long-tail seems the best strategySource: http://www.openp2pdesign.org/2011/open-design/business-models-for-open-hardware/
  • 15. 2009:The market of Open Hardware * 13 companies over $ 1 m. $11.000.000 * total: $ 50 m. $10.000.000 * $ 1 billion by 2015 $9.000.000 $8.000.000 $7.000.000 $6.000.000 Revenues $5.000.000 $4.000.000 $3.000.000 $2.000.000 $1.000.000 $0 s o d it are s i os y n t rb o La b e mb e uin rkfu fru ron rS h tud idw e Ada Ard Chu Bug Sp a Mak D e dS Liqu Mak DIY e SeeSource: http://blog.makezine.com/archive/2010/05/million-dollar-baby-businesses-de.html
  • 16. The market of Open Hardware: SparkFunNathan Seidle (founder):“In 2010, SparkFun had revenues of about $18.4MM. As of April of 2011, we havearound 120 employees, up from 87 a year ago.”“We hope to grow by 50% this year (2011) to around $28MM in sales. We expectto be in the 30-50MM range in the next 3-5.”Source:http://www.sparkfun.com/news/599
  • 17. Long Tail + DIY Craft market: Etsy Total Members: +8 million Total Active Shops: +800,000 Items Listed: 8.5 million $350.000.000 $300.000.000 $250.000.000Total $ sold (Gross Merchandise Sales) $200.000.000 $150.000.000 $100.000.000 $50.000.000 $0 2005 2006 2007 2008 2009 2010 2011 (March) Source: http://www.etsy.com/press/kit/
  • 18. ...another business model: Crowdsourcing (Threadless)Founded in 2000 with just $ 1,000, now it has a revenue of $ 17,000,000 inannual sales with a 35% profit marginSource:http://www.threadless.com/submithttp://www.openp2pdesign.org/2011/open-design/business-models-for-diy-craft/
  • 19. A place for Open / DIY projects: Fab LabsHow to start it:* $50,000 (or open source low-cost version for $12,500 - $5000)* value proposal: facilities or innovation support* The Enabler business model: launch new Labs or support them* The Education business model: a global distributed model of education through Fab Labs (Fab Academy + P2P learning among users)* The Incubator business model: provide infrastructure for entrepreneurs to turn their Fab Lab creations into sustainable businesses.* The Replicated / Network business model: product / service that utilizes the infrastructure, staff and expertise of a many Fab Labs. + Hackerspaces, Sewing Cafes, Techshops, ...Source: http://www.openp2pdesign.org/2011/fabbing/business-models-for-fab-labs/
  • 20. A place for Open / DIY projects: Fab Labs* usually not so interested in becoming profitables (though they could)* attached to institutions... or to brands (Absolut Lab, Madrid)Source: http://www.openp2pdesign.org/2011/fabbing/business-models-for-fab-labs/
  • 21. Does the long tail help small DIY business?Etsy:* very few users can make a living on it* competition, but impossibility to increase volumes --> downward pressure on prices* rather an incubator for the most promising makers (so its like a low-cost entry point into the market)None of the business examined tries to help its user to make a living on theirproject. At least Shapeways uses revenues to lower prices down.* generated 244,000 € in revenue over 2009, but at the same time it lost 1,400,000 €* received a $ 5,000,000 fund from VC in order to open offices in the USASource:http://www.openp2pdesign.org/2011/open-design/business-models-for-diy-craft/http://www.openp2pdesign.org/2011/fabbing/business-models-for-fab-labs/
  • 22. 03.The future of Open and DIYBusiness: where will be valuecreated?
  • 23. Look for what is becoming a commodityA commodity is a good for which there is demand, but whichis supplied without qualitative differentiation across a market.[...] the market treats it as equivalent or nearly so no matterwho produces it.Source: http://en.wikipedia.org/wiki/CommodityCommoditization (also called commodification) occurs as agoods or services market loses differentiation across its supplybase, often by the diffusion of the intellectual capitalnecessary to acquire or produce it efficiently. […] a unique,branded product into a market based or undifferentiatedproducts.Source: http://en.wikipedia.org/wiki/Commoditization
  • 24. Hardware and Software, becoming commodities* (50s-70s) Hardware is the product, software is for free: mainframes --> Hacker ethic of sharing information* (80s-90s) Hardware is commodity, software is the product and its proprietary: personal computers --> Microsoft emerges* (00s-...) Even software is a commodity, so lets sell services and get data from users: open source, web 2.0, services around software, software as service, the cloud --> web 2.0 emerges
  • 25. Manufacturing and Design, becoming commodities* (90s-00s) Manufacturing becomes a commodity and slowly disappears in the West (thanks to China)* (10s-...) Now its even more a commodity (thanks to Fabbing)* (00s-...) Professional design is slowly becoming a commodity (Fast Fashion, Ikea, design schools bubble, Shanzai)--> Where is value now, in Design and Manufacturing?
  • 26. … so is still now value in creativity?Source: http://www.freedomofcreation.com/home/3d-systems-acquires-freedom-of-creation
  • 27. … in attention, collaboration, creativity from “users”?“ We fnd this previously unmeasured type of household sectorinnovation to be quite large: 6.2% of UK consumers - 2.9 millionindividuals - have engaged in consumer product innovation duringthe prior 3 years. In aggregate, consumers’ annual productdevelopment expenditures are 2.3 times larger than the annualconsumer product R&D expenditures of all frms in the UKcombined. “Eric A. Von Hippel, Jeroen De Jong, Steven FlowersComparing Business and Household Sector Innovation in ConsumerProducts: Findings from a Representative Study in the UKSource: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1683503
  • 28. Open and P2P Money, are they a solution?Does it address the current problems of money, or is just a way of makingit “open” reinventing the wheel and avoiding the business models?Source: http://www.bitcoin.org/
  • 29. When everything is peaking...Even renewable resources like wood are peaking.. What and how are wegoing to manufacture when everybody will be able to do it?Source: http://ecoalfabeta.blogosfere.it/2011/03/il-picco-del-legno.html
  • 30. … reinventing an open wheel is not enoughWill just making open an unstainable past be sustainable?Source: http://www.theoscarproject.org/
  • 31. Building blocks of an Open, DIY and P2P Economy* open business for design, energy, materials, tools* open business that consider information as abundant but materials and energy as scarce resources* open money (but well designed and linked to energy and materials)* API between open businesses* Open processes (and this is my research about Open P2P Design)
  • 32. Any question or comment?
  • 33. Thank you!Massimo Menichinelli-------------------------------------------------------------------info@openp2pdesign.orgopenp2pdesign.orgtwitter.com/openp2pdesign