In the previous part of this series, we continued looking at the cooperative method that could exist among engineers, suppliers, and customers or end-users. We'll continue that and look at one example.
An industry functioning the open-source way differs from that with traditional company structure. For one, it results in more and smaller companies. Extraordinary riches for either designers or suppliers are less likely in that entry barriers are lower for competing enterprises and more can participate. Fewer barriers exist to keep competitors out. It is more of an equal-opportunity strategy, and the better designers and suppliers will be more successful.
A low entry barrier has developed in the recording industry, which is feeling pressure from any entrepreneur with access to a DVD or CD recorder. Besides making recordings in studios and producing records (CD, DVDs), recording companies add little value to what the recording artists, like designers, have to offer. Yet recording companies have made most of the profits, not the artists.
A case in point is the popular 60s music group that has sold more recordings than any other in recording history. (Any guess as to which group that would be?) I know the lead guitarist and his group has not reaped the windfall that the recording company has. In open-source industry, anyone who can manufacture a product from an open-source design is free to sell it. Open-source performers would make most of their income from live performances and direct recording sales while record companies are free to copy and distribute any recordings.
This openness at first seems, in the context of our traditional way of thinking, fraught with danger. Yet it is not so different from the evolving industry. Asian manufacturers are demonstrating that established companies with a more expensive labor base feel the pressure to collaborate with them. There is not as much product protection from the traditional closed-source strategy as it might seem. Traditional reasoning tells a designer to look after his own supplier function to assure its success.
Yet the designer can only be a single supplier and this sole effort is less likely to succeed than multiple suppliers. Having multiple suppliers for a design does not make it easier, overall, to succeed in the electronics business; the market still presents the same demands. By separating designer and supplier functions, however, neither is solely dependent on a single one or another.
An engineer interested in operating in an open-source environment must still be able to design competitive products. The second challenge is that of finding (or being found through a website by) prospective suppliers. Existing traditional companies interested in new product designs are also prospective clients for designers if they want to experiment with more open access of a part of their product offering. A designer website could also invite suppliers for designs. My enterprise, Innovatia, does this by offering “designware” to prospective suppliers.
Because the open-source movement is new, having multiple suppliers increases market awareness of multiple-sourced products for all of them. Each receives free advertising through product exposure by its competitors. Newer product designs and suppliers that are not yet established benefit from the wider market exposure of both multiple suppliers and designers who lower the “advertising barrier” for all of them.
How might the open-source industry develop? Some traditional companies could split into designer and supplier companies, where some of the traditional advantage is retained by preference agreements between the splitting companies. Each company acquires freedom to sell designs to other suppliers or acquire designs from other designers.
To some extent, signs of this kind of decomposition are showing as companies use both outside contract engineering and manufacturing. A further step would be for both contract engineers and manufacturers to expand beyond traditional company support into enterprises that use their capabilities in whatever way they can and this would include the designer and supplier roles of the open-source scheme. However, established contract companies usually prefer to keep doing what has made them successful, and this leaves the future open for new entrepreneurs to benefit from the opportunities of the open-source way.
Let us know of your experiences with this approach to business.
- The Electronics Cooperative Concept, Part 1
- The Electronics Cooperative Concept, Part 2
- The Electronics Cooperative Concept: Part 3
- Is There a New Way Ahead for Electronics Enterprise? Part 1
- Is There a New Way Ahead for Electronics Enterprise? Part 2
- Is There a New Way Ahead for Electronics Enterprise? Part 3
- Is There a New Way Ahead for Electronics Enterprise? Part 4
- Is There a New Way Ahead for Electronics Enterprise? Part 5
- Is There a New Way Ahead for Electronics Enterprise? Part 6