Striking the Balance between Giving It Away and Making Money

December 6, 2008

By accident I found these two posts from Michel Bauwens and Steve Bosserman on the challenge of striking the critical balance between giving something away (for free) and making money in a digital age. They deliver the thesis that the “Internet Economy” is redefining operational assumptions and models for all organizations within the public and privat sectors and that the transformation does not stop in the realm of bits and bytes; it is spilling into the traditional mainstays of agriculture and all types of industry and threatens to alter the most basic tenets of how to market, value, and receive compensation for our creativity, collaboration, and contribution. Steve Bosserman shows this descriptive on an example from the agriculture industry.

“When information is free, it is a great equalizer. This equalizing feature is changing the business models of corporations that made their fortunes from a portfolio of proprietary offerings.”

So the authors are trying to answer the basic question: where is money made in such an environment?

Both posts are argumenting along a very basic diagram that shows the general options for a business model:

basic-options

I don´t want to repost the articles here, just want to highlight the most important insight for me:

The classic business model of the analog age (paid & closed, in the diagram up,right.)  that we are all familiar with and which relies on state-protected intellectual rights monopolies, is obviously the model that is being most undermined by free information. But the point is that, as the other three business model options become more established in the society,  it is not just hackers and consumers that threaten such a business model, but your own competitors. In any sector, there will always be a pioneering company that decides to give the primary commodity for free, or gives away the source code, deriving income from secondary modalities, leaving the traditional closed rights holders in the cold, and making this model unsustainable in the long run.
So let´s start thinking about the other three options.

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