Ten things the world can learn from open source

With this in mind, I put together a list of ten principles that I've
gleaned from my open source experience, which I believe can be applied
to just about any business.

1. Adoption precedes monetization. This seems like such a
   simple, intuitive concept, but many (most?) businesses are built on an
   orthogonal principle of control and maximum monetization. It took Jonathan Schwartz of Sun Microsystems to remind me.
   
   
   If you're starting a business, adoption is your first consideration.
   Period. Nothing else comes close in terms of importance. If prospects
   don't have interest in your product, it doesn't matter what you charge
   or how well you protect and control your product. You will (deservedly)
   go bankrupt.


2. Lots of customers is a greater barrier to entry than lots of intellectual property (IP). This is a corollary principle to #1, and is taken from something Mike Moritz of Sequoia Capital once said.
   Focusing on adoption continues to be the right strategy, even when you
   have adoption. Adoption is what keeps competitors out, not artificial
   barriers created through copyright or patent law. This is largely due
   to Principle #3:


3. A business' brand is its greatest asset in driving sales.
   Not its IP. Not its sales team. Brand. Brand is what gives a customer
   trust that the product (and service behind it) is worth buying, even
   when another product is cheaper, easier, etc. Vendors need to invest
   heavily in their brands (through public relations, for example), and
   it's the primary area that lawyers become supremely helpful, i.e.,
   through trademark law. A brand should be earned and protected at all
   costs.


4. Lower barriers to evaluating and using your product. With a
   strong brand, this becomes easier to stomach, but it's critical at
   every phase of a company's growth (see Principles 1 and 2). It is
   arguably an easier decision, for example, for MySQL to open source its
   database under a very liberal license (the GPL) than a new entrant to
   the market, because that new entrant lacks the same brand that
   convinces people to pay, even when they can get the product for free.
   Even so, because adoption is paramount, evaluation without strings
   attached is critical.


5. Sell customer value, not vendor value. This is related to
   Principle 4, and it's egregiously misunderstood in the software world,
   where we often sell the wrong things. Service is any company's primary value.
   Other products (like an Enterprise Content Management system) simply
   create a relationship from which service can be sold. Open-source
   companies understand this because our business model requires it.
   
   
   Most businesses aren't widgets businesses where you ship a tangible
   product and the customer has no further contact with you as a vendor.
   Even fewer are happier about being in that kind of business, because
   it's tough to earn repeat business if your product is thought of as a
   few pieces of metal/plastic/fabric put together with
   screws/thread/what-not. Service breeds customer loyalty.
   
   
   
   Having said this, remember that popularity without profits is a dumb business.
   You need a trigger that invites payment. That trigger should be
   additional value beyond the code, if in the software world, or beyond
   your tangible product, if in a different industry. For example, I may
   choose to eat steak for dinner tonight, but my choice as to restaurant
   comes down to the expertise that a particular restaurant prepares and serves that steak. I have lots of choices where to eat. Service is the value that dictates which restaurant I choose.


6. Product use should breed re-use and further sharing.
   Otherwise put, you want your customers to also be your
   sellers/marketers/etc. This is how marketing truly scales in an
   open-source company, and it's the way great businesses in any industry
   grow. You don't want to have an isolated relationship with a customer
   where you give, they take, and that's it. You want them to contribute
   back in some meaningful way, and to contribute to the next downstream
   potential prospect.


7. A collective product best serves a collective market. In
   other words, a diversity of inputs best creates diverse outputs, which
   is what a rich market looks like. You may be very smart, and may
   understand a range of different customer requirements. But as one
   person/company, you cannot hope to reflect the diverse customer needs
   that could feed you cash in return for solutions to those needs. But if
   you can harness the power of a community, your business can be
   "localized" in a way that makes you relevant and critical to a wide
   array of customers.


8. Invest in service and your product, not sales. By this I
   don't mean that vendors shouldn't invest at all in sales. Of course
   they should. But if it costs a vendor more to sell a product than it
   does to build the product, it has a product that isn't worth selling.
   The real money should go into development, and then the product should largely sell itself (through brand, customers marketing to prospective customers, etc.).


9. Transparency breeds trust, and trust breeds revenue. Open
   source teaches ust o reveal the supposed crown jewels--source code--but
   it also teaches open-source companies to provide open roadmaps, user
   forums, etc. The more transparent a company, the less time that is
   wasted on helping customers to justify a purchase decision. Give them
   maximum information and then sell to them on their terms, when they're
   ready to buy. In the open-source world this translates into
   dramatically shorter sales cycles because by the time a customer knocks
   on your door, they're already sold.


10. People make a business.

Read full article

Powered by ScribeFire.