Open data, open source, open banking… what exactly do these things mean? Are they related? While we’ve all heard of some of these open projects, few of us have stopped to wonder what they actually entail.
But the open movement is changing the way society operates, and business is feeling the effects. It’s time to take heed before things start to close.
In understanding the open movement, it’s important to note that although it is applied to technology in many ways, it isn’t itself a technological term.
Rooted in the open source push of the late ‘90s, the idea of openness was originally applied to the use and modification of software.1 Among other requirements, open-source software had to be free to redistribute, include accessible source code, and allow for modifications by the public. The theory was that opening up the software was a way to allow other users and developers to participate in a community that would, by the nature of competition, improve the product.
Around this idea, the movement towards openness has grown. At its heart it is really a philosophy that prioritises ideas of collaboration for the common good. For software, this means people working towards better quality, more reliable, and lower cost products than would be theoretically produced by a proprietary model of development (e.g. where money is made from restricting access).
Essentially, the opening up of the system is just that – and it is in that action that healthy competition, and better quality lies. Everybody wins; well, almost.
From its early days in internet software and code, such as Netscape, Mozilla and Linux, these principles of openness have spread to a whole spate of other areas.
Wikipedia, with its goal of creating a “world in which every single human being can freely share in the sum of all knowledge,” is openly licensed to allow everyone to access, modify and re-use its information.2 This opening of content can also be seen in TedX talks, and the creative commons licenses used to share media. No longer is this knowledge relegated to those who can afford a set of encyclopedias.
Many other areas of business and society are also opening up. Crowdsourcing (which at its heart, is what the open movement is run on) is enabling open innovation and a democratisation of crowdfunding, the sharing economy and companies such as Airbnb or Uber work by providing platforms to shared resources, and open datasets are encouraging diversity in software development that proprietary models are often lacking. In the academic world, open access aims to remove the proprietary restrictions placed on the access to research journals.3
In financial circles, Bitcoin and other related cryptocurrencies are examples of the power of opening up something usually heavily regulated, such as a currency, to the power of the people who provide the engine for it to run. Open Banking, which we will be exploring in coming weeks, is an effort to open up consumer data owned by banks, placing it back in the hands of customers.
In many ways, the open movement can be seen in the changing nature of customer preferences. New models of innovation and product have shown the power of giving customers expanded choice and better experiences. Transparency has become a key requirement for customers with the option of choice in their providers that people now have in the digital age.
Frustrations with closed proprietary models and perceived unfair practices or sub-par customer experience and products correlate nicely with the ideals of the open movement and its focus on competition, meritocracy and egalitarianism. As a foil, it is also one that appeals to governments, who can use this pressure to enact legislation which seeks efficiency, fairness, opportunity and competition in aid of consumer rights – often antithetical to the bottom line of big business.4
Importantly, open and free* doesn’t have to mean non-commercial. The principles of the open movement are not mutually exclusive to making money, but the business models are often different. Instead of a two-party relationship between a consumer and a brand, there is an opening up to other competitors.
The most common reaction of this to business, be they banks, tech, or other, is to resist. It’s a naturally worrisome prospect given that for many businesses, their competitive edge has been based on access rather than other attributes. But putting up roadblocks and delaying will only work in the short term, as ultimately, it is customers who will get their way.
Instead, it is more effective to work alongside the spirit of the open movement. This may mean looking at new business or distribution models, where to sit within value chains (or other people’s value chains), tapping into the open innovation resource and setting yourself up to work with other parties in the platform economy. Experience, alongside adding value and convenience, will be critical to success.
As an example, take the case of open source software. One only has to look at the way in which Microsoft has now become a major player in this area. Until a few years ago such a role from Microsoft would have been unthinkable. This move from being a leading proprietary software vendor to an open source software player surprised many in the industry. By leveraging open source, Microsoft was able to drive adoption of their Azure cloud platform. The results of this strategy was apparent with Microsoft topping Amazon Web Services and IBM in cloud revenue.5
Could players in the other sectors, such as financial services, telecommunications or utilities learn from Microsoft and adopt a business model that leverages the power of open movement to their advantage?
Open collaboration and its various incarnations change the relationship between customers and product/service providers.
With consumer expectations at an alltime high and digital transformation enabling alternate production and distribution models, the consumer (and government) push towards models that allow for choice, quality and fairness is not going away.
Embracing the ideals of the open movement does not necessitate a shift towards a socialist, anti-commercial world. In fact, it will be the encouragement of greater competition and shared development that will lead to success, based on merit instead of access.
As an added benefit, it’s good business.
*In the context of free software, free is used to indicate access rights, not price.
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