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In the last issue of Wired Magazine, Larry Lessig writes about a Danish artist collective, called Superflex, which started a new brewery that produces beer based on the software industry’s open source model. The beer is aptly called “Free Beer” (or maybe it’s going to confuse people who are not familiar with open source, as the beer is actually not free.)

The idea is that the beer’s recipe is open and licensed freely. Anyone can make improvements, but when they do they must release the changes as well. Superflex maintains a log with all the improvements at www.freebeer.org. The project seems to be off to a good start - with their first batch of beer sold-out overnight and the company now trying to close distribution deals with other breweries.

If you operate in markets with many lead users, a term coined by MIT Professor Eric Von Hippel to refer to users who tinker and modify your product to better suit their needs, then an open source business model seems to make a lot of sense. It comes down to embedding user innovation directly into your product innovation process.

But do all industries have lead users? And is that the sole criterion for potentially rolling out open source business models? Some markets clearly have them. Think about scientific instrumentation markets, where scientists in labs, universities and hospitals routinely make custom modifications to products, so that they would work better within their particular research constraints. Does that mean that an open source business model based scientific instrumentation company could survive? Assuming that a company could get over the culture shock of giving up its patent protections on product innovations, and considering that every competitor could now offer the same instrument, is there a big enough market for that to happen in a sustainable and profitable way?

What could work is to put widely used sub-assemblies in open source - think for example of a lens motion compensation system. In this case the innovation could be embedded in all sorts of products - including scientific instruments but also consumer cameras and perhaps other products. By doing this you would not only ensure a large enough pool of innovators to make it worthwhile from an innovation point of view, but you would also address the market size and differentiation issues which are probably key to make this work in a profitable way.

Yochai Benkler, quoted in the article and author of The Wealth of Networks, has it right when he says: “we are in the midst of a quite basic transformation in how we perceive the world around us and how we act, alone and in concert with others.”

[Tags: open source business model product innovation innovation lead user]

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