T HE B OSTON C ONSULTING G ROUP

MAKING CONNECTIONSLessons From Open Sourceon the Power of Networked CommunitiesSoftSummitSan FranciscoOctober 2005 THE BOSTON CONSULTING GROUP

OPEN SOURCE IS ABOUT... • Breakthrough creativity • ...solving complex challenges • ...by participants • who are geographically and organizationally dispersed • who don’t do it for direct monetary reward • who display unusual passion for the endeavour • ...in ways that compete aggressively with solutions from the most fearsome commercial vendors The basic principles are not new. The full set of organizational lessons are very new (and still emerging).

IBM AND “VIRAL MARKETING”:UNTIL RECENTLY, AN OXYMORON

Security breach reported by sysadmin AB to MP and others. In parallel, security specialist MW emails MP about same issue. MP does 4 hours of homework Slashdot G2L Recognized as threat to entire Linux community, any breach must be kept confidential within a trusted team AT MP studies available data, consults with security expert DD, and engages with AB by phone rsync Team AB On three hours of sleep, AB digs into 8 hour forensic investigation, hands to MP RR MP MW MP pulls in rsync team including AT, RR, plus Gentoo Linux and other security specialists. MP, AT and RR write patch and have it vetted by others DD In parallel, AT writes technical announcement to WW Linux community Participants WW announcement out to vendor community, Slashdot, and other lists; discussion about outreach to users AB MP MW AT DD rsync Work on “honey pot” started by AB and MW RR G2L Tues, 2 Dec 2003 11 PM GMT 3 Dec 4 AM 8 AM noon 4 PM 8 PM midnight 4 Dec 4 AM 8 AM noon Time

MORE THAN 85,000 MESSAGES A MONTHCOORDINATE THE LINUX ENTERPRISE User Development Extensions Corporate mailing lists redhat- list suse- linux-e suse-linux suse-security Community mailing lists debian-devel-changes debian- devel linux “beer hiking club” linux-raid linux-newbie linux-kernel debian-user alsa-devel linux.redhat.misc linux. redhat. install Corporate bulletin boards alt.os.linux. mandrake comp.os.linux. advocacy comp.os. linux. hardware comp.os. linux. networking comp.os. linux.misc Community bulletin boards Posts/month 1,000 alt.os.linux Note: Number of messages posted in June 2000 on 147 relevant bulletin boards and mailing lists (duplicate postings removed) Source: deja.com; geocrawlers.com; BCG analysis

OVERVIEW OF KEY FINDINGS ON HACKER MOTIVATIONS Why should we care? High creativity ? What motivates hackers? Fun, skill, freedom and need Increasing knowledge biggest benefit Losing sleep biggest cost Who are these guys? Volunteer significant time IT professionals Generation Xers What about the community? Strong identification Global effort Peer leadership preferred

OSS MAKES A “CREATIVE CONNECTION” FOR PARTICIPANTS • “Like composing • poetry or music” 48.4% 61.7% • “This project is as (or most)creative as anything I have done” 72.6% • “When I program, • I lose track of time” • “With one more hour in the day, • I would spend it programming” 60.0% Note: “...like composing poetry...” answer chosen as one of top three attitudes by participants; other answers based on degree of participant agreement with statement

IT’S ABOUT LEARNING, AND GETTING STUFF DONEMore So Than A Religious War Intellectually stimulating Improves skill Work functionality Code should be open Non-work functionality Obligation from use Work with team Professional status Other Open Source reputation Beat proprietary software License forces me to Percent of respondents Note: Question asked for top three motivators of F/OSS participation, n=684

MOTIVATIONS AND CONTRIBUTION STATUSSEGMENT HACKERS “Community Believers” (19%) “Hobbyists” (27%) Motivations ? Do it because they feel obligation and believe source code should be open Do it for non-work “Professionals” (25%) “Learning & Stimulation” (29%) Do it for skill improvement and fun Do it for work need

IS YOUR ORGANIZATION THIS CANDID? • From: Linus Torvalds (torvalds@transmeta.com)Date: Tue Jun 18 2002 - 19:12:45 EST Re: latest linus-2.5 BK broken • ...This is not rocket science, and I find it ridiculous that you claim to worry about scaling up to thousands of CPU's, and then you try to send me absolute crap like the above which clearly is unacceptable for lots of CPU's. • No, C doesn't have built-in support for bitmap operations except on a small scale level (ie single words), and yes, clearly that's why Linux tends to prefer only small bitmaps, but NO, that does not make bitmaps evil. • Linus • From: Rusty Russell (rusty@rustcorp.com.au)Date: Wed Jun 19 2002 - 10:23:53 EST • ...Spinning 1000 times doesn't phase me until someone complains. Breaking userspace code does. One can be fixed if it proves to be a bottleneck. Understand? • Rusty

FIRE AT THE KARIYA #1 PLANT OF AISIN SEIKI4:18 AM February 1, 1997 Source: SMR

Nippon Denso Toyota Toyota KoritsuSangyo Aisin Aisin Fire at Kariya #1 Plant – Toyota’s sole source of P-valves (for brakes) Entire TPS faces shutdown within 72 hours Denso Aisin, Toyota and other Tier One Suppliers collaborate on an emergency production plan Tier 2 suppliers team up, under leadership of their Tier 1’s Aisin distributes blueprints, raw material, undamaged drills, and assigns staff • 22 of 30 plants closed; TPS self organizes to save system, e.g. • Nippon Denso volunteers as the logistics manager • Toyota turned to its R&D prototype department • Koritsu Sangyo, a tiny Tier 2 supplier to Aisin, was first to deliver P-valves Daily Production of Vehicles First 1000 ‘P’ valves shipped to Toyota Units Daily output of 13,000 vehicles; 62 firms manufacturing “P” valves Sat 02/01/97 Tues 04/02/97 Wed 02/02/97 Wed 02/05/97 Mon 02/10/97 Fri 01/31/97 Sat 02/01/97 Sun 02/02/97 Mon 02/03/97 Source: SMR, WSJ

Phase 1: Supplier associations for Tier 1 suppliers (kyohokai, BAMA) Phase 2: Toyota consults for free to Tier 1 suppliers (OMCD, TSSC) Phase 3: Nested networks and learning groups spanning Tier 1 and 2 suppliers (jishyuken, PDA); interfirm employee transfers (shukko) TOYOTA BUILDS ITS SUPPLY CHAIN TO ENHANCENETWORK LEARNING • Across the chain, Toyota builds • Affiliation, loyalty, shared goals, mutual dependence • Open knowledge-sharing based on a common ‘semantic’ • Teaming norms • Trust that all will be treated fairly • Dense collaboration networks Common principles used in Japan and North America Source: Dyer and Nobeoka “Creating and managing high-performance knowledge-sharing network: the Toyota case” SMJ, 2000

In negotiation August 2003 TPS SUPPLIERS SELF-ORGANIZE ON MAJOR INITIATIVES Supplier Network Restructures Over Time Toyota Encouraging Supplier Consolidation, Collaboration Toyota’s Tier One Supplier Network Increasingly Interconnected • Recent projects • Interior parts and seats (in discussion, August 2003) • Brake products: ADVICS (July 2001) • Plastic fuel tanks: FTS (Feb 2002) • Electronic power steering (Nov 2002) • Map databases: Toyota Mapmaster (1998) • Development/production collaboration • Safety systems (airbags, seatbelts) • Engine parts (throttle bodies, injectors) • Pistons • Production, business transfer and consolidation • A/C compressors • Anti-vibration rubber Note: This network map is partial representation of existing TPS collaborations Source: Morgan Stanley, August 21, 2003 Recent changes

Organizational Learning Transaction Costs WHAT’S HAPPENING WITHIN THE TPS? (I)

Organizational Learning Individual Learning Shared Mental Models Information Symmetry/ Transparency Trust “Swarming” Transaction Costs WHAT’S HAPPENING WITHIN THE TPS? (II)

WHAT’S HAPPENING WITHIN THE TPS? (III) “It’s the work, stupid” All work is an experiment Standardized documentation Leaders as mentors in the work Systemic “voltage” generation (pull, JIT, balance) Accumulate personal knowledge of work and norms • Individual Learning Principles • System oriented principles Standardized interactions Long term relationships Open knowledge sharing Discretionary “voltage” directed by leadership Stability and consistency of application of mechanisms

THE NETWORK LENS:MAKING THE INVISIBLE VISIBLE Traditional views Network analysis view Operations Org. chart TC CD HC Strategy Energy Consumer IG FS Org Matrix IT

Insight, Impact Network shows key “catchers” and “pitchers” of referrals Hospital currently reviewing referral process Possible marketing vehicle for pharma KEY PLAYERS BECOME APPARENT IN PHYSICIAN REFERRAL NETWORK Example of attending and referring physicians Situation High variation in number of referrals made by physicians Uncertainty about high leverage marketing targets Attending physician (~250 referrals received) Referring physician (~250 referrals made) Source: BCG analysis

Situation Declining return on marketing spend in complex medical market Uncertainty about how to decide on who to influence and how Insight, Impact Patterns of influence across KOLs identified and optimal influence team identified Current client position assessed and marketing spend focused and optimized KEY OPINION LEADERS IN MEDICAL MARKET

Example of sales reps (linked by who hired them) B A Insight, Impact C Evidence suggests that certain sales reps. gaming the hiring system to achieve bonus quotas Company modified incentive compensation system to account for “gaming” factors Manager: A B C Cancelled reps: 41% 78% 95% Active reps: 59% 22% 5% TELECOM REVIEWING SALES FORCE EFFECTIVENESSFOR EFFICIENCY IMPROVEMENTS Situation High variation in attrition rates among sales force reps Network analysis conducted on hiring patterns of managers Source: BCG analysis

? AN APPROACH TO NETWORK ANALYSIS Five Step Process Methodology Objective • Develop lay of the land • Define the measurement plan • Build the fact base • Create the diagnostic • Launch the network transformation • Define network aspirations (i.e. “good” collaboration) and characteristics which promote it • Determine methods to observe and measure interactions that define “good” collaboration • Map networks and analyze quantitative network performance metrics • Synthesize analysis to assess overall network performance and develop action plan to pursue opportunities • Design and implement new business processes to foster the network characteristics recommended

WHERE TO START?Candidates For Networked Community Action • Look for target problems or projects: • That have a clear, valuable objective • Where individual action can make a difference • That will benefit from “lots of eyes” • Cross organization boundaries • A few ideas to consider: • Your product support knowledge base • IT or technology standards • Your IT application portfolio

“OPEN SOURCE” PILOT CHECK LIST Global goal : A compelling, collective vision Individual goals: “It’s the work, stupid” Peer leadership: Fact-based, passionate, open, accountable Modularity: “Chunks” where individuals can make a difference Connectivity: Connections across silos Work norms: Disciplined, fact-based interaction around the workRelease early/release oftenOpenness Work space: Activity must exist where individuals work “Call to arms”: Why this effort, why us, why now Get started. Learn by doing.

T HE B OSTON C ONSULTING G ROUP