SpectatorBytes

As web services and open platforms become more popular, the opportunity to change the ways Internet businesses operate is dramatic. Amazon and eBay (among the large players) pioneered these efforts starting in 2003. Today, with open source initiatives such as WordPress and Open X, more and more companies are leveraging “openness” to enable rapid adoption and product customization.

In 2006, Facebook proved the attractiveness of the open model by opening its services to all developers. This move allowed Facebook to quickly enrich its offering with a diverse set of new features and functionality created by “friendly” third parties.

Recently, Twitter has gone a step further by allowing developers almost unrestricted access to its core functionality, thus enabling the rapid expansion of functionality that’s helping it address the emerging needs of its growing user base.  The best example of the power of Twitter’s open platform occurred a couple of weeks ago when Twitter announced their plans to launch real-time link search, only to learn that a startup called OneRiot was about to introduce an application with essentially the same functionality. The overall Twitter experience for consumers has evolved faster thanks to external product developers than if only the internal teams were responsible for it.

So, while technologists are fascinated with openness, I would argue that business folks should be equally excited. Open platforms allow the deployment of highly scalable and efficient operating models for Internet businesses.

The following are some of the key benefits that can be extracted by creating a service built around an open platform:

Product Development:  Companies can accelerate the development of new features and products. Open platforms allow internal teams within an organization to work more efficiently by eliminating bottlenecks and permission-based technology cultures (i.e., product developers need to ask for permission from most other product/feature teams to innovate). They also allow companies to easily tap external talent/specialists to accelerate product development initiatives.  The focus on highly customized/complex business development relationships should give way to allowing developers to have the freedom to easily access the platform to drive innovation. In other words, openness allows a business to easily access marketplace innovation. Implication: Greater ability to meet evolving consumer needs and deliver product innovation at a faster pace.

Distribution: Open platforms enable the creation of robust syndication initiatives (e.g., widgets, “share this” functionality). Allowing 3rd parties access to the platform can create a distribution army for the open company. This makes it easier for a product to easily become part of the overall Web ecosystem. Beyond syndication, open source can maximize distribution at a rapid rate and at a very low cost. Implication: internal product distribution teams would no longer be necessary.

Marketing: The need for traditional marketing decreases as consumers and the marketplace become more efficient arbiters of winners and losers. Given the lack of friction and inefficiency in the system, successful products do not need to spend on traditional marketing campaigns to secure consumer adoption or distribution. Companies need to seed new products with influencers through smaller, highly-targeted campaigns. As positive word of mouth spreads, open platforms allow early adopters/passionate users to drive adoption of the products. Implication: Limited need to spend on marketing.

Management: Open platforms allow management to distribute control over operations more readily. This leads to a more decentralized organization where the decision making power is in the hands of product owners and thus closer to the end user. Openness reduces the need for an organizational matrix. Smaller groups can be empowered to make decisions since they have limited impact on each other. This approach provides management greater flexibility as it can easily stop failing projects without impacting the rest of the organization.

Sales/Revenues: An open platform allows companies to easily test different monetization models, primarily performance based. Again, third party models can be evaluated with limited friction. This is particularly important because online revenue generating solutions continue to evolve. Implication:  Focus on developing internal capabilities around premium monetization and rely on third parties to handle performance unless your product requires a unique ad solution.

G&A: Lastly, openness allows organizations to be much more widely distributed. For some, distributed may mean inefficient. However, the reality is that distributed models tend to be much more efficient as you can engage productive talent pools, reduce the need for hand-off managers, and time-consuming decision-making processes. Implication: Focus on developing the right set of processes to enable a distributed model to succeed.

I increasingly think of open businesses rather than simply open platforms. Those business leaders who embrace openness are more likely to succeed than those who focus on obtaining cost-efficiencies within closed operational environments.

Please share your experience with open models.