Which are the possible business models for Open projects like Open Design and Open Hardware? And what about running a Fab Lab or a similar place? Which strategies can we adopt in order to have successful DIY Craft projects? People that want to organize collaborative spaces or companies need to think about how to run their business in a sustainable way, but even single or groups of Open Designers could get more insights for their project if they discover the possible business models. Let's have a look at the existing markets, the common business models and the possible future scenarios.

1. Open P2P Design
Markets and business models for Open and DIY projects
Massimo Menichinelli
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June 04-05 2011
DMY Berlin - MakerLab
http://dmy-berlin.com/en/festival/2011-2/makerlab/
Presentation available on:
http://www.slideshare.net/openp2pdesign

2. 01.
Why should a designer be
concerned about business?
I'm a designer, after all!

3. (Open) Design + Business ?
a designer / researcher studying how to co-design Open
Processes with communities
--> and trying to make his design / research activity a
sustainable business
+ a report on business models of:
* Open Hardware -->
* Fab Labs
* DIY Craft
http://www.youcoop.org/
http://www.platoniq.net/
http://www.goteo.org/

4. From a paper project to a real project
Designers start thinking
about the business
Source: http://www.kickstarter.com/projects/danprovost/glif-iphone-4-tripod-mount-and-stand

5. From a paper project to a real project
Now on Apple Store!
Source: http://www.kickstarter.com/projects/1104350651/tiktok-lunatik-multi-touch-watch-kits

6. Just being Open” is not enough
.. but what about the
market?
Source: http://www.kickstarter.com/projects/1833785894/100k-stray-toasthed-pull-toys

7. 02.
Open and DIY Business
(as they are now)

8. Business models of Open Source (software)
Non-monetary incentives:
* problem solving
* ethical questions
* education + learning
* reputation --> social interactions + jobs
--> it's not just about money! Also a gift economy

9. Business models of Open Source (software)
Monetary incentives:
* selling software (as open or even with dual licensing)
* offering services (customisation, support, ...)
* paid developer work
* donation
* software as service (freemium, ...)
* embedding software into hardware
--> … it's not just only volunteer work!
Also a market economy

10. Business models of Open Source (software)
Red Hat
frst open source company expected to break through the
$1bn mark in 2011.
Source: http://www.channelregister.co.uk/2011/03/24/redhat_q4_f2011_numbers/
Cost of developing Linux
The Linux Foundation (LF) (2008): $10.8 billion to build the
Linux community distribution Fedora 9 in today’s dollars
with today’s software development costs.
$1.4 billion to develop the Linux kernel alone.
Source: http://www.linuxfoundation.org/sites/main/fles/publications/estimatinglinux.html

11. Please note: Open Business is not completely open
* identity (brand) is fxed and is warranty certifcate
* existing business ecosystems may not be open
* knowledge, expertise, tools, resources are not always “open”
Source: http://www.blender.org/blenderorg/blender-foundation/logo/ Source: http://www.arduino.cc

12. The levels of openness in Open Hardware
Patrick McNamara defned 4 possible levels of Openness in Open Hardware
projects:
1. Closed: any hardware for which the creator of the hardware
will not release any information.
2. Open Interface: all the documentation on how to make a
piece of hardware perform the function for which it is designed
is available (minimum level of openness).
3. Open Design: in which enough detailed documentation is
provided that a functionally compatible device could be
created by a third party.
4. Open Implementation: the complete bill of materials
necessary to construct the device is available.
Source: http://www.osbr.ca/ojs/index.php/osbr/article/view/379/340

13. The business models of Open Hardware
* Services and expertise (customization, consulting)
* Manufacturing of owned or third party Open Hardware
* Manufacturing of proprietary hardware based on Open
Hardware
* Dual-licensing
* Proprietary hardware designs based on Open Hardware
* Proprietary software tools for developing Open Hardware
* ... and:
Source: http://www.openp2pdesign.org/2011/open-design/business-models-for-open-hardware/

14. The business models of Open Hardware
* Proprietary hardware tools for Open Hardware (Sparklelabs)
Source: http://kits.sparklelabs.com/

15. The business models of Open Hardware
* Free services for building a greater user base (Adafruit Jobs Board)
Source: http://www.adafruit.com/jobs/

16. The business models of Open Hardware
+ =
* Partnership between Open and Fabbing companies (Ponoko + Sparkfun)
Source: http://www.ponoko.com/make-and-sell/electronics

17. The business models of Open Hardware
* Funding Open Hardware projects in exchange for documentation
Source: http://bildr.org/

18. The business models of Open Hardware
* Piracy as a learning and market building strategy (Shanzai)
Source: http://www.flickr.com/photos/ttstam/4177935719/

19. The business models of Open Hardware
* Brick and mortar store (Makerbot - Botcave)
Source: http://www.makerbot.com/blog/2010/11/26/makerbot-botcave-store-opens-today/

20. The business models of Open Hardware
* Renting spaces for co-working (Hackerspaces)
Source: http://hackerspaces.org/wiki/NYC_Resistor

21. The business models of Open Hardware
* Microcredit / peer-to-peer lending / crowdfunding (Open Hardware Bank)
Source: http://www.oshwbank.org/

22. 2009:
The market of Open Hardware * 13 companies over $ 1 m.
$11.000.000
* total: $ 50 m.
$10.000.000 * $ 1 billion by 2015
$9.000.000
$8.000.000
$7.000.000
$6.000.000
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$5.000.000
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$3.000.000
$2.000.000
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Source: http://blog.makezine.com/archive/2010/05/million-dollar-baby-businesses-de.html

23. The market of Open Hardware: SparkFun
Nathan Seidle (founder):
“In 2010, SparkFun had revenues of about $18.4MM. As of April of 2011, we have
around 120 employees, up from 87 a year ago.”
“We hope to grow by 50% this year (2011) to around $28MM in sales. We expect
to be in the 30-50MM range in the next 3-5.”
Source:http://www.sparkfun.com/news/599

24. Similar models for DIY Craft... Etsy
Source: http://www.etsy.com/

25. Similar models for DIY Craft... Etsy Total Members: +8 million
Total Active Shops: +800,000
Items Listed: 8.5 million
$350.000.000
$300.000.000
$250.000.000
Total $ sold (Gross Merchandise Sales)
$200.000.000
$150.000.000
$100.000.000
$50.000.000
$0
2005 2006 2007 2008 2009 2010 2011 (March)
Source: http://www.etsy.com/press/kit/

26. Similar models for DIY Craft... Sewing Cafes
* Renting spaces for co-working (Sewing Cafes)
Source: http://sweatshopparis.blogspot.com/

27. ...and 1 more: Crowdsourcing (Threadless)
Founded in 2000 with just $ 1,000, now it has a revenue of $ 17,000,000 in
annual sales with a 35% proft margin
Source:
http://www.threadless.com/submit
http://www.openp2pdesign.org/2011/open-design/business-models-for-diy-craft/

28. A place for Open / DIY projects: Fab Labs
How to start it:
* $50,000-$55,000 (or open source low-cost version for $12,500 - $5000)
* value proposal: facilities or innovation support
* The Enabler business model: launch new Labs or support them
* The Education business model: a global distributed model of education
through Fab Labs (Fab Academy + P2P learning among users)
* The Incubator business model: provide infrastructure for entrepreneurs to
turn their Fab Lab creations into sustainable businesses.
* The Replicated / Network business model: product / service that utilizes
the infrastructure, staff and expertise of a many Fab Labs.
* not so interested in becoming proftables
+ Hackerspaces, Sewing
(though they could) Cafes, Techshops, ...
Source: http://www.openp2pdesign.org/2011/fabbing/business-models-for-fab-labs/

29. A place for Open / DIY projects: Fab Labs
* attached to institutions... or to brands (Absolut Lab, Madrid)
http://www.absolut-lab.com/
-->
Source:
http://www.openp2pdesign.org/2011/fabbing/business-models-for-fab-labs/
http://www.advertolog.com/absolut/print-outdoor/berlin-7686855/

30. Does the long tail of Etsy help small DIY business?
* very few users can make a living on it
* competition, but impossibility to increase volumes
--> downward pressure on prices
* rather an incubator for the most promising DIYers
(a low-cost entry point into the market)
Source:
http://www.openp2pdesign.org/2011/open-design/business-models-for-diy-craft/

31. Does the long tail help small DIY business?
None of the business examined tries to help its user to make a living on their
project. At least Shapeways uses revenues to lower prices down. But
Shapeways:
* generated 244,000 € in revenue over 2009, but at the same time it lost
1,400,000 €
* received a $ 5,000,000 fund from VC in order to open offices in the USA
Source:
http://www.openp2pdesign.org/2011/fabbing/business-models-for-fab-labs/

32. … and a lesson from the past
In 1914 Ford offered a $5 per day wage ($110 in current dollar terms), which
more than doubled the wages. Ford's policy proved that paying people more
would enable Ford workers to afford the cars they were producing and be good
for the economy. Ford explained the policy as proft-sharing rather than
wages.
Source:
http://en.wikipedia.org/wiki/Henry_Ford

33. 03.
The future of Open and DIY
Business: where will be value
created?

34. Look for what is becoming a commodity
A commodity is a good for which there is demand, but which is
supplied without qualitative differentiation across a market. [...] the
market treats it as equivalent or nearly so no matter who produces
it.
Source: http://en.wikipedia.org/wiki/Commodity
Commoditization (also called commodifcation) occurs as a goods
or services market loses differentiation across its supply base, often
by the diffusion of the intellectual capital necessary to acquire or
produce it efficiently. […] a unique, branded product into a market
based on undifferentiated products.
Source: http://en.wikipedia.org/wiki/Commoditization

35. Hardware and Software, becoming commodities
* ('50s-'70s) Hardware is the product, software is for free:
mainframes
--> Hacker ethic of sharing information
* ('80s-'90s) Hardware is commodity, software is the product
and it's proprietary: personal computers
--> Microsoft emerges
* ('00s-...) Even software is a commodity, so let's sell services
and get data from users: open source, web 2.0, services
around software, software as service, the cloud
--> web 2.0 emerges

36. Manufacturing and Design, becoming commodities
* ('90s-'00s) Manufacturing becomes a commodity and
slowly disappears in the West (thanks to China)
* ('10s-...) Now it's even more a commodity
(thanks to Fabbing)
* ('00s-...) Professional design is slowly becoming a
commodity
(thanks to Fast Fashion, Ikea, design schools bubble,
Shanzai)
--> Where is value now, in Design and Manufacturing?

37. … so is still value in creativity?
Source: http://www.freedomofcreation.com/home/3d-systems-acquires-freedom-of-creation

38. … or in attention, collaboration, creativity from “users”?
“ We fnd this previously unmeasured type of household sector
innovation to be quite large: 6.2% of UK consumers - 2.9 million
individuals - have engaged in consumer product innovation during
the prior 3 years. In aggregate, consumers’ annual product
development expenditures are 2.3 times larger than the annual
consumer product R&D expenditures of all frms in the UK
combined. “
Eric A. Von Hippel, Jeroen De Jong, Steven Flowers
Comparing Business and Household Sector Innovation in Consumer
Products: Findings from a Representative Study in the UK
Source: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1683503

39. Open and P2P Money, are they a solution?
Does it address the current problems of money, or is just a way of making
it “open” reinventing the wheel Without proposing business models?
Source: http://www.bitcoin.org/

40. When everything is peaking...
Even renewable resources like wood are peaking.. What and how are we
going to manufacture when everybody will be able to do it?
Source: http://ecoalfabeta.blogosfere.it/2011/03/il-picco-del-legno.html

41. … reinventing an open wheel is not enough
Will just making open an unstainable past be sustainable?
Source: http://www.theoscarproject.org/

42. New language, business for the new media: collaboration
Every new technology takes time to develop its own uses, languages and
business models.
Source: http://en.wikipedia.org/wiki/Car

43. New language, business for the new media: collaboration
Every new technology takes time to develop its own uses, languages and
business models.
Source: http://en.wikipedia.org/wiki/Horse-drawn_vehicle

44. … blocks of an Open, DIY and P2P Economy
* open business for design, energy, materials, tools
* open business that consider information as abundant but
materials and energy as scarce resources
* open money (but well designed and linked to energy and
materials)
* API between open businesses
* Open processes + distributed testing of business models

45. Any question or comment?

46. Thank you!
Massimo Menichinelli
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