Open-as-Strategy Part I: Emergence and Outsourcing

Open innovation, enterprise 2.0, social media for the corporation, and open government have become a major driving force in creating value. Apple, Facebook, Google, and Samsung have created multi-billion revenue streams by strategically utilizing openness: in the Apple appstore, the Android operating system, or the Facebook user experience. But even though targeted “openness” has become a major ingredient of the net worth in next generation technology companies, it has yet to be mainstreamed into the processes and cultures of more classical organizations.

We are confronted with a digital divide: an openess-gap has emerged between next generation companies and our classical 20th Century organizations. So, if leveraging openness will be the biggest wealth-creator in the next 20 years, strategists need to learn how to operationalize “open-as-strategy” for all organizations, both old and new.

Why Open-as-Strategy?

 Today, we still often equate openness with mere participation in social media such as blogs, twitter, or facebook – something that can be outsourced to marketing and public relations. That does not come as a surprise as open-as-strategy has only recently become part of the toolset of senior executives defining the value proposition and operating models of their companies and hence not many senior executives have yet fully wrapped their minds around the concept.

 Open-as-strategy does not imply anarchy, insecurity, radical transparency or that “anything goes”, but it means that openness is intelligently designed into secure systems to increase value. With the advent of digital networking technology open-as-strategy becomes a viable strategic option, when the transaction costs of collaborating across space and time are reduced, processes can be split up in modular and granular fashion, and quality control can be automated or outsourced to communities.  

Open-as-strategy consists of two general approaches: utilizing the power of emergence and outsourcing specific tasks. Utilizing the power of emergence means that a process is designed where the outcome is not specified ex ante. By offering the iOS software developer kit (SDK), Apple allowed new modes of using the Iphone to emerge: the Iphone as a tracking device for sports is only one example of uses that would not have been imagined by Apple developers themselves. Outsourcing specific tasks to the community can be seen, when tasks in the value chain that need outside input (human or data) are opened up, so that the work is done from outside the organisation: Facebook’s content is provided by the users, Wikipedia’s articles are written by all-of-us.

Achieving this is not easy. There are numerous examples of failure, and even today’s poster children did not get it right every time: Apple’s eWorld, Google’s Orkut, or Facebook’s Beacon speak to that. Openness that does not build upon and manage a community of collaborators remains lonely and does not add value. And even great design and fantastic community management will fail, if the technological platform (APIs and Interfaces) do not live up to expectations!

In the next entry, I will propose a framework to operationalize open-as-strategy.

Philipp Müller

Philipp Müller

Philipp S. Müller is a director at CSC and teaches/has taught strategy and leadership at Harvard, the University of Salzburg, Sciences Po, and Universidad de los Andes. He is the author of three books and many articles focusing on the interplay of information technology, strategy, and organization.

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