CONTACTS 
0201 - Bootstrap Institute                  510 713 3550
020101 - Mr. Douglas C. Engelbart, Ph.D.
020102 - doug@bootstrap.org

SUBJECTS
Sponsor/Stakeholder Planning
Killer Application
Preliminary analysis
Evaluate Market Conditions
Evaluate Progress Prospects
Market Potential
Open Source Evaluation
Civilization Improved
Consulting in New SDS Market
Open Source Development Freeware
Evaluate Market Conditions
Disruptive Technology Big Rewards New Standards Dominate Market
Open Source Business Model Unclear Rationale for Success, Eric Armstr
Business Case for Open Source Development, Eric Armstrong

2516 -    ..
2517 - Summary/Objective
2518 -
251801 - Follow up ref SDS 45 4877, ref SDS 38 4877.
251802 -
251803 - Eric Armstrong develops analysis on process, risks and rewards for
251804 - innovation in products and marketing.
251805 -
251806 -    [On 000406 wrote to Jack Park on this. ref SDS 47 0001
251807 -
251808 -    [On 020510 Jack Park submits new ideas for revenue stream for
251809 -    Bootstrap Institute. ref SDS 51 MW6H
251810 -
251811 -
251812 -
251813 -  ..
2519 -
2520 -
2521 - Progress
2522 -
252201 -  ..
252202 - SDS Chronology and Subject Management Powerful New KM Capabilities
252203 - Building New Markets Requires New Standards for Productive Utility
252204 -
252205 - Received ref DRT 1 0001 from Eric Armstrong responding to a letter
252206 - from Jack Park.  Eric initially quotes Jack...
252207 -
252208 -       ...how does one build an industry when one is putting out the
252209 -       key product as an open source (read: free) product?  We're
252210 -       talking business models here, I think.
252211 -
252212 - Eric frames the question...
252213 -
252214 -     How does one build an industry?
252215 -     ..
252216 -     The answer, as Lee Iverson stated so succinctly, is "simple
252217 -     standards and free software". The HTML standard, coupled with the
252218 -     Mosaic browser, did indeed create a new industry, defining a new
252219 -     defacto standard upon which communications have become
252220 -     increasingly based. Yahoo did it, as well. ref DRT 1 4029
252221 -
252222 - We may be able to set new standards for using chronology and subject
252223 - management as the foundation for knowledge management, since nobody
252224 - else has figured out how to do this.  For example, on 000227 Eric
252225 - Armstrong wrote a letter setting out an expectation that knowledge
252226 - management capability for information in books, magazines, journals,
252227 - papers, and Web articles, would improve daily work enough to establish
252228 - eventual supremacy of knowledge management in a "survival of the
252229 - fittest" business climate. ref SDS 28 0937
252230 -
252231 -     [On 000405 Paul Fernhout set out progress in AI and KM communities
252232 -     on this issue. ref SDS 46 0005
252233 - ..
252234 - On 970418 US Army Corps of Engineers reported this method saved
252235 - time and money money by improving management. ref SDS 5 3368  This was
252236 - confirmed with another report on 971008, ref SDS 7 2979, and again on
252237 - 981027. ref SDS 11 7315
252238 -
252239 -
252240 -
252241 -  ..
252242 - Create Successful Company in New Industry
252243 -
252244 - Eric frames the question...
252245 -
252246 -     How does one create a self-sustaining *company*? (In particular,
252247 -     one that operates within that industry.) As you say, this is
252248 -     fundamentally a question of business models.
252249 -
252250 -     What business model makes sense?
252251 -
252252 -     What it is the value proposition that produces revenue?
252253 -     ref DRT 1 7420
252254 - ..
252255 - One value proposition is time and money saved the customer from
252256 - adding "intelligence" to management, as reported by USACE, per above.
252257 - ref SDS 0 6798  PG&E made similar findings.
252258 -
252259 - Experience seems to show, however, that people fear accountability
252260 - more than they desire to increase earnings.  The preference is to buy
252261 - off mistakes to avoid accountability, rather than take steps to avoid
252262 - mistakes, but risk accountability.
252263 - ..
252264 - This suggests another angle is needed to make a successful
252265 - business (see Eric's excellent analogy on getting people to come to
252266 - the "racetrack." ref SDS 0 0702
252267 -
252268 -     1.  Easier use of the application.
252269 -
252270 -     2.  Support infrastructure, consultants to transition.
252271 -
252272 -     3.  Promotion to get the word out.
252273 -
252274 -     4.  Alternate revenue stream from advertising that delivers
252275 -         anytime, anywhere "intelligence" below cost while industry
252276 -         absorbs a new capability.
252277 -
252278 -         Yahoo and others sell billboard space.
252279 -         ..
252280 -         SDS records can do the same.
252281 -
252282 -         This makes it possible to deliver "intelligence" without
252283 -         significant front-end investment by the customer.
252284 -
252285 -     5.  Develop installed base.
252286 -
252287 -         Make money on upgrades.
252288 -
252289 -      ..
252290 -     Open Source Business Models are Hard to Generate Rewards
252291 -
252292 -     Follow up ref SDS 45 4622, ref SDS 38 4622.
252293 -
252294 -     Eric sets out marketing challenges...
252295 -
252296 -     I have to confess to being almost totally mystified on this point.
252297 -     I *still* do not understand the Netscape/Yahoo/RedHat business
252298 -     models. It's not clear to me how they go about making any money at
252299 -     all, much less enough to support a large organization. There is
252300 -     manifestly *some* model that makes sense, though. ref DRT 1 7370
252301 -
252302 -        Eric does not mention his favorable analysis on 000227 for KM
252303 -        capability that organizes case study and generic source
252304 -        material, ref SDS 28 0937, which may make possible a market
252305 -        breakthrough, per above. ref SDS 0 3835
252306 -
252307 -        [On 000407 listed as agenda issue for project meetings.
252308 -        ref SDS 48 6973
252309 -
252310 -        [On 000411 report that market losing confidence in open source
252311 -        companies. ref SDS 49 5956
252312 -
252313 -        [On 001101 article explains Mozilla example open source
252314 -        development overwhelming tendency to use bad management.
252315 -        ref SDS 50 4O5K
252316 -     ..
252317 -     This addresses issue from planning meeting on 000324.
252318 -     ref SDS 38 4622  On 000330 it was not discussed. ref SDS 45 4622
252319 -
252320 -     Eric ...asks "what open source business models are fundable?"
252321 -     ref DRT 1 2961  And, lists following...
252322 -
252323 -     1.  Education and Services model
252324 -
252325 -         Give the software away, and make money providing education and
252326 -         services (such as prioritized development). That's the Red Hat
252327 -         model. I'm not sure it's a huge winner, but so far it seems to
252328 -         be at least reasonably effective. ref DRT 1 4500
252329 -         ..
252330 -         Jack Park submitted a response, ref DRT 2 0001,
252331 -         commenting...
252332 -
252333 -            ...we are...engaged in the design and construction of the
252334 -            savior of the whole earth, life, and everything, and we are
252335 -            doing it for free because we cannot afford not to. Dangling
252336 -            participle aside, I suspect that this is precisely what we
252337 -            are actually going to do. Nevermind the track, the horses,
252338 -            and so forth.  The web is providing us with a wealth of
252339 -            stuff from which we can, and will start. Aha! The web is
252340 -            the track.  We cannot lose. Gads. ref DRT 2 2904
252341 -
252342 -            On 000120 an objective was set during the Colloquium of
252343 -            solving world problems. ref SDS 19 2688
252344 -         ..
252345 -     2.  Derivative Service model
252346 -
252347 -         The software is something you use to provide a valuable
252348 -         service.  You have some other value-add with respect to that
252349 -         services that makes it a viable business proposition.
252350 -
252351 -            Communication Metrics has struggled with this effort
252352 -            against resistance to front-end investment against future
252353 -            savings.
252354 -
252355 -         Venture Capitalists love open source in that model, because
252356 -         you get a whole world of developers helping you to refine the
252357 -         software you use to make money. For example, you might provide
252358 -         payroll services to small companies. The payroll software
252359 -         would be free, and large companies might decide to use it. But
252360 -         most small companies will still pay to outsource the
252361 -         operation, for lack of inhouse manpower to take over the job,
252362 -         so your fundamental business proposition is unaffected.
252363 -         ref DRT 1 2610
252364 -         ..
252365 -     3.  Horse Race model
252366 -
252367 -         In this model, a bunch of Ventur Capitalist types get together
252368 -         to have a horse race. They each back their own "pony"
252369 -         (individual company). But they pool their resources to create
252370 -         the "race track" (base of open source software they can build
252371 -         on). ref DRT 1 2832
252372 -
252373 -         Jack Park submitted a response. ref SDS 0 4622
252374 -
252375 -      ..
252376 -     Build Better Race Track and Ponys, "Hope" They Catch On
252377 -
252378 -     Eric provides excellent analysis and notes...
252379 -
252380 -     The folks who built the racetrack [developed standards and initial
252381 -     capability] therefore, are only rewarded if they also have a pony
252382 -     in the race.
252383 -
252384 -     When pioneering a new industry, the risks are greater -- you need
252385 -     to develop freely available versions and hope they catch on at the
252386 -     same time that you need to develop a proprietary version. So your
252387 -     investment costs are higher. Plus the risk increases because if
252388 -     *either* project fails, you lose. Finally, unlike investment in a
252389 -     new potato peeler (which you know people use) investing in a new
252390 -     industry runs the real risk that it never gets accepted. (If no
252391 -     one goes to the racetrack, having the best pony in the race
252392 -     produces no reward.), ref DRT 1 0391
252393 -       ..
252394 -       This is a good analogy for the status of SDS, and reflects
252395 -       Christensen's analysis of disruptive technologies, reviewed on
252396 -       990527. ref SDS 14 3795
252397 -
252398 -       The "racetrack" analogy seems like another way of explaining the
252399 -       need to demonstrate "self-evident" benefits, where people
252400 -       quickly sense something is "neat," "cool," "slick," etc.  The
252401 -       personal computer is a classical example of something that until
252402 -       very recently had almost no actual value, but everyone wanted
252403 -       one, like a cabbage patch doll, hulla hoop and pet rocks,
252404 -       because it seemed like it should have value, and seemed like a
252405 -       forward looking thing to do, then it became a status symbol,
252406 -       etc. So, actual value per se, is really not the determining
252407 -       issue, but it can help make a product attractive.
252408 -       ..
252409 -       Ideas for getting people to "come to the track" are above.
252410 -       ref SDS 0 0374
252411 -
252412 -       Prior review on 000324 set out issues on this. ref SDS 38 6224
252413 -
252414 -
252415 -
252416 -
252417 -  ..
252418 - Rewards are Huge for Success of Disruptive Technologies
252419 -
252420 - Eric cites IBM to exemplify advantage of being an early mover in a new
252421 - industry, where you can set the standards. ref DRT 1 0456  Seems like
252422 - Intel and Microsoft are more recent examples.
252423 -
252424 - Disruptive technologies was reviewed on 990527 showing that major
252425 - advances are lurches, rather than smooth transitions. ref SDS 14 0001
252426 -
252427 - Andy Grove describes same process as a Strategic Inflection Point, in
252428 - his book, "Only the Paranoid Survive," reviewed on 980307. ref SDS 9
252429 - 6148   He explains a "new reality" occurs when a variety of diverse
252430 - forces form at a point in time to enable a strategic inflection point
252431 - to occur. ref SDS 10 1660
252432 -
252433 -
252434 -
252435 -
252436 -
252437 -
252438 -
252439 -
252440 -
252441 -
252442 -
252443 -
252444 -
252445 -
252446 -
252447 -
252448 -
2525 -
2526 -