Business

Last updated: 28 july, 2009 - 09:51 GMT

Lessons from Red Hat

About this programme by Peter Day

Funny when you think about it, how few business models there have been in the past 250 years of the industrial revolution. Partnerships, small family firms, big family firms, stockholder companies, multinationals, public corporations such as the BBC and state-run organisations. Plus cooperatives and not for profits. Not a huge diversity of ideas to chose from when picking an enterprise structure on which to build upon.

That’s why my ears prick up when anyone talks about a new way of doing business, especially when the change has the Internet built in.

If the Net really is as disruptive as it appears to be, then the new business methods that it provokes, influences or powers ought to be significant ones. They ought frontally to challenge the way business has been done over the past 100 years of mass production.

So hats off to Red Hat, whose chairman Matthew Szulik is the subject of this week’s Global Business. Red Hat is built on the computer operating system software system Linux, devised 19 years ago by the Finnish developer Linus Torvalds, and then worked on by thousands of collaborators all over the world, to become a plausible free-to-use option instead of the big brands of proprietary software.

Red Hat has found a way of making money out of selling free software, as the company puts it. It attaches paid-for support or structuring services to the Linux operating system, bringing confidence to business users of software which they would otherwise be nervous of replying on.

Stopwatch

To conventional business people, the collaboration among inventive peers promoted by the open source movement is dangerously close to anarchy.

But out of this anarchy comes great stuff, say the open source proponents. Where else but Wikipedia (for example) is there a Scots encyclopaedia (with almost 2,700 articles in it)?

How big a change to established business practice is this ? There is no way of knowing, but (as I said at the start) we don't have many versions.

In 1776, Prof Adam Smith celebrated the economic forces brought into existence by the Division of Labour, in the Wealth of Nations, though he also warned of the "mental mutilation" that might be caused to the workers by the concentration of a single repetitive task.

That did not worry the celebrated early time and motion consultant the American Frederick Wilmslow Taylor, who went into Bethlehem Steel in Pennsylvania putting a stopwatch on the blast furnace operatives to improve the efficiency of the firm. He called it Scientific Management. Making the production line work faster and more efficiently became the main principle of business efficiency for much of the 20th century, tempered by influence of organised warfare in the 1940s.

The teamwork needed for fighting dragged psychology into the evolution of management theory. But no matter what bosses say about their people being their most important asset, things did not change very much on the shop floor, though white collar workers changed the balanced of how a business was shaped..the rise of the knowledge organisation, as the famous late Peter Drucker called it.

Volunteers

Ten years ago Prof Drucker told me that he did not think the computer had yet begun to make an impact on business. Sounded crazy at the time, but the more I thought about it the wiser his remark seemed to be. Few corporations had done much to change their size, shape or mode of operation as a result of this extraordinarily powerful new device.

But it may be happening now. For here comes the Internet to overthrow some traditional business principles by enabling huge amounts of business information to be generated, organised, and then worked on collaboratively, from anywhere.

Open Source volunteerism where a community creates software advances (and maybe hardware as well) and then shares them as part of the deal enables technology and knowledge to advance minute by minute, rather than being locked up for years in the patent system.

But despite the enthusiastic adoption of brand new tools such as the Wikipedia and free-to-use software (whether or not wrapped up in a commercial package such as Red Hat) it is still not clear that there is much of a long-lasting business plan attached to it. Open Source providers get personal users enthusiastic about the efficacy and cheapness (freeness) of their new product and then hope they will recommend the paying version to their businesses..who need paid-for support, just to be sure.

But after the buzz of the start-up, how many businesses will that provide a revenue flow for? Open Source is a dramatic disruptive idea from the community point of view. It ought to make a huge impact on business practice, but who knows how, and when?

Previous updates -June

  • Peter Day finds out how to innovate your way out of an economic downturn.

  • A sense of time and place is changing Internet businesses everywhere.

  • Social entrepreneurs from Lebanon, Palestine and Egypt who are all innovating and confronting poverty in new ways.

  • A look at a hugely successful childrens TV series and it's boss Magnus Scheving.

  • No business school has a more daunting image than Harvard, 100 years old last year.

May

  • Intel is going to appeal against both the judgement that it broke European Union monopoly rules and an eye-watering fine.

  • Men got us into this current economic mess, maybe women can get us out of it.

  • An entrepreneur's thoughts on a way of weaning motorists off their reliance on oil.

  • The industry that changed the world – the US automobile business – is in deep trouble. Peter Day finds out why.

April

  • A look at the edges of Europe and asking whether joining the EU, or in the case of Iceland wanting to, was worth it?

  • A look at the edges of Europe and asking whether joining the EU, or in the case of Iceland wanting to, was worth it?

  • A look at the edges of Europe and asking whether joining the EU, or in the case of Iceland wanting to, was worth it?

March

  • Sydney Finkelstein, co-author of Think Again - Why Good Leaders Make Bad Decisions and How to Keep It From Happening to You.

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