In the case of Mandrake and Linux Weekly News, when clients are prepared to support a company financially in exchange for "nothing', i.e. not in return for certain products, one of the key issues has become how to report back to those clients on the company's financial situation. The message from the clients is clear: "We're happy to support you, but you must tell us how much money you need.' Some have even suggested that the companies make their entire accounts public, so that everyone has free access to check up on anything and to gain a clear picture of the company's financial situation at any given time.
I've yet to hear of any company that has actually done this, and for a listed company it may not be easy to do, as there are strict rules about what information they can and must give, and when. However, the thought itself is intriguing. It may not be completely realistic, and it is not directly connected to Open Source, but let's use the rest of Part Three on this mind game. If a company wanted to be as open as possible, how open could it be and what would it lead to?
Although the question is carried to the extreme, it is not entirely without precedent. Nokia, for instance, was cited earlier in this book as an example of a company that is sadly enamoured with non-disclosure agreements. However, the passion for keeping secrets is not something the company carries into every area. In its relationship with its subcontractors Nokia strives to make the information flow both ways as smoothly and openly as possible.1 If, for instance, a subcontractor could follow the sales figures for mobile phones by directly tapping into Nokia's databases, the subcontractor could prepare for the increased demand in advance, before the actual order comes in from Nokia. This would remove a number of bottlenecks and make the long and complex chain of production run more smoothly.
So, there is a realistic argument to be made for open thinking. But how open could a company be and what would it lead to? Now that IT companies are building their head offices from Plexiglas, it's about time we tried a thought experiment: What would a totally transparent company be like?
Our totally transparent company wouldn't necessarily be in the IT field, but the product would naturally follow the spirit of Open Source whenever appropriate.2 That goes without saying. But what else?
Well, first of all, it would obviously not have a single trade secret. Non-disclosure agreements would be banned. Like Mandrake's Cooker, product development would be open, with company e-mailing lists open to people outside the company.
Budgets and financial accounts would be open to public scrutiny insofar as it's possible and makes sense. Naturally, for reasons of confidentiality, the salaries and sick days of individual workers could not be made public, but otherwise everything would be out in the open.
In addition to product development, the company's board meetings and other negotiations at management level would also be publicly accessible. And I don't mean just the final decisions, but also any vetoed ideas and other suggestions that have been put forward would all be recorded and made accessible - the meetings could, for instance, be video-taped.
If a company were to meet such demands for 100 per cent openness, it would become a totally transparent company. What a contrast to all the "Enrons' of today to whose tune the financial world dances. Office buildings of Plexiglas may look transparent, but actually even the glass walls are less than see-through, as from the outside they reflect the external light rather than what goes on inside. Our fictional company, on the other hand, would be a true, genuinely transparent Glass House.
So, what would happen to this transparent company? If the observations we've made of the Open Source world are reliable, the open processes in the product development of the company and its management would surely open up the company for some surprises in the form of help from the outside. That would accelerate product development and over time make it better than its competition. The company could form totally new kinds of partnerships, or perhaps its clients would come up with suggestions for reorganizing its sales methods, just as outsiders send in suggestions for improvements to the code for Open Source programming projects.
Of course, the Open Source product would also be available to the competition, which would be a challenge for our transparent company. A company which works to the principles of openness cannot hide behind copyright, patents, trade secrets and other traditional models of mean-spiritedness, but must be prepared to face competition openly. That would not only keep the company on its toes at all times but also force it to continually evolve and renew itself. Of course, such declarations are endlessly repeated like some kind of mantra by most companies, but in an open business such aims would become real requirements.
Total transparency would also lead to some surprising and possibly difficult situations, which would require the company to look at the basics of business from a new perspective - a bit like when Open Source was a new concept and the first Linux companies had to reassess their ways of working in the IT field.
An example of the kind of situation that would require new thinking might be when a client invites tenders from several potential business associates and specifies a certain day for receiving bids. First, the tenders are kept secret and not opened until the deadline is reached, at which point the client usually chooses the cheapest alternative. Because of the secrecy surrounding the tendering process, nobody can know for certain what their competitors will bid. Naturally, the point of all this is for the client inviting the tenders to get a product or service supplied as cheaply as possible.
Working to the principles of openness in such a competitive situation, our transparent company would inevitably be worse off than the others. While the closed companies would submit secret tenders, our transparent company would be open to having the minutes of its management meetings examined by their competitors, who would not only discover exactly what sum our company had tendered but perhaps even what detailed calculations had led up to it. Naturally, in such a situation, it would be ridiculously easy for a competitor to put in a lower tender.
This may mean that our open business would lose a lot of tenders. But, it's not quite that simple. The problem with inviting tenders is that there is a sort of gamble built into the law of supply and demand, because no party selling a product or service ever makes tenders purely on the basis of actual costs. Instead, they try to second-guess what the competing parties will tender, then formulate their own on the basis of that. They aim to strike a balance between making the tender as high as possible, yet lower than those of the competition, so that their produce or service is the one that wins the job and them the highest possible profit margin. Which is why many offers aren't necessarily as low as they could be.
Our open and transparent company could therefore protect itself by always and only submitting honest tenders! Honesty here means that our company would base its tenders only on the actual cost of the work involved, then honestly put in a tender that is as low as possible without actually losing money on the deal. If somebody makes an even lower offer, there's no reason to cry over the lost deal, because selling our product or service for less than our tendered amount would not have been good for us anyway. And it might just be that our tender is as low as anyone can go. If so, we've won honestly, without hiding anything at all!
If one looks at the situation from the point of view of the client requiring the service or product, for them to work with a company that always plays an open card would be to work with an ideal partner. Naturally it's not good for the client when tenders are based mostly on the competing companies guessing at how fat a deal they all think they can fool the client company into paying this time. A company that has calculated its tender openly is much easier to trust. If I were to receive an honest tender of â‚¬1,000,000 from a company that operated with open principles, and the tender from a closed company came in at â‚¬999,500, I'm likely to laugh at the latter and accept the former.
Verdict: The Glass House was an entirely fictitious company invented to exemplify what can follow from openness. Who am I to judge whether or not my ideas are good or bad? The aim of this book is to stimulate different ways of thinking about business, but also to encourage readers to increasingly apply open thinking in their own lives.
- 1Well, if we're honest, we must admit that the culture of secrecy and mean-spiritedness is so strong in all of us that it's not always so easy to create such a culture of open information, but at least in theory Nokia is as open as possible towards its subcontractors.
- 2The next section of the book will deal with the use of the Open Source ideology outside the IT sector.