I recently attended a session of the Megatrends in Business speaker series hosted by UNC Executive Development and the MBA for Executives Programs at the Kenan-Flagler Business School. The session I attended was entitled The Trends and Paradoxes of Business Strategy with a presentation delivered by Dr. Albert H. Segars, Faculty Director of the Center for Sustainable Enterprise, RBC Bank Distinguished Professor and Chair of Strategy and Entrepreneurship at UNC Kenan-Flagler.
Dr. Segars was previewing a Harvard Business Review article that he co-authored with fellow Kenan-Flagler professor Dan Cable to be published in Spring 2010. I found the presentation to be extremely engaging and relevant, with particular relevance to the ideals of the open source way and the megatrends that they represent.
The presentation centered around the concept of trends, and the ability of successful companies to not only recognize emerging trends but to leverage them in creating new and innovative business models. Apple has translated such megatrends as personalization, mobility, convergence and simplification into the development and launch of the iPhone. FedEx and UPS, with their online package tracking, has recognized the emergent trends of transparency and outsourcing customer service to the customer. The entire gaming industry has ridden the trends of community and interactivity to take online gaming to new levels. And we all know that sites like YouTube, MySpace, Facebook, Twitter, and even Wikipedia have been wildly successful because they tap into the trends of unconventional knowledge, learning by seeing, and, much like reality TV, the concept of "life as art".
As I listened to Dr. Segars continuously reference megatrends such as community, transparency, and personalization, I was able to see that the very hallmarks of open source are finally being recognized as a way of gaining competitive advantage in many industries outside of technology.
Drs. Segars and Cable developed a system of classifying innovative business models that are harnessing the power of emergent trends. They assert that all business models are comprised of two components: theory (i.e. what conventional wisdom says should work) and numbers (what is actually working). Illustrated by a simple 2x2 matrix, the system defines four types of business models:
Yellow Brick Road – business models that, in theory, should work and in reality do work
World Turned Upside Down – business models that, in theory, should work yet in reality do not
Lightning in a Bottle – business models that, in theory, shouldn't work yet in reality do work
March of Folly – business models that, in theory, shouldn't work and in reality do not
Of particular interest to me was the quadrant that the authors named “lightning in a bottle”. In fact, this is the quadrant around which much of Dr. Segars' talk centered because, as he asserts, most companies that have leveraged trends to develop a new, innovative, and successful business models can be classified as "lightning in a bottle". The examples given were Southwest Airlines, Cirque du Soleil, and the entire bottled water industry.
I couldn't help but think that Red Hat would be classified in this quadrant as well. After all, in theory, it doesn't seem to make much sense to build a profitable business around the commercialization of freely available open source software. But you cannot argue Red Hat's success. And I believe Dr. Segars would maintain that this success is due, at least in part, to Red Hat's (and open source's) ability to tap into some of society's more relevant emergent megatrends.
If you'd like to read more, stay tuned for the publication of Dr. Segars and Dr. Cable's article in the Harvard Business Review this spring. In the meantime, do you believe that the open source way is a manifestation of megatrends? How do you see this concept being applied in your company or industry?