The Open Business Model

In 2000, Proctor & Gamble had to make a choice. For a century they had the most powerful Research and Development department in product history. Everything was developed internally. But during the late 90's they started to loose money and had to do something to turnaround the company. New CEO A.G. Lafley decided to look for new ideas from external sources.

In Henry W. Chesbrough's book Open Business Models, he describes how successful inward-looking companies must look outside themselves in order to maintain innovation in the new marketplace. The term is the “open source” business model, or the "open" business model. At first, this seems like an expensive venture— hiring consultants, vendors, outside companies. At times true, but for most companies it can merely involve including an intertwining of customer, marketplace observation, and frontline employee feedback in your development. (I mention frontline employee, because often they are "closed" from your normal business planning.)

They key is listening and learning how to disseminate the information into relevant information. In future blogs, we'll look at some methods to work in an open source marketplace.