India Knowledge@Wharton | Operating in an open system

India Knowledge@Wharton | Operating in an open system

In December, when Sun Microsystems, Inc. announced a $1 million (about Rs4 crore) grant for innovative open-source projects at the Free and Open Source Software conference in Bangalore, it wasn’t the sort of news that makes headlines. Larger amounts have been committed before. Sun itself has spent almost $2 billion supporting open-source initiatives across the globe (open-source software makes the source code freely available).

But Simon Phipps, chief open-source officer at Sun, noted that while the competition is not limited to open-source programmers in India, he was announcing the award in India “because that’s where I expect the greatest open-source community growth to come from in the near future".

Can India become the new vanguard of the open-source movement? So far, open-source has made headway in e-governance projects where the scale of operations is large.

In looking at the growth of open-source software in economies such as India, Kendall Whitehouse, Wharton’s senior director of information technology (IT), stresses that it is important to distinguish between two different aspects of its proliferation: how quickly the country will become a hotbed for open-source development and the rate at which Indian companies and governmental agencies will adopt the use of open-source software.

“Although these two issues are obviously interrelated, they differ in terms of their economic incentives" because open-source software is freely distributed. Whitehouse believes it is likely the adoption of open-source software by large firms may initially advance more rapidly than development efforts by Indian programmers although, he admits, “the one will follow the other."

He adds that while some open-source advocates decry the option of using freely distributed code as the basis of a commercial product, the model may help facilitate open-source development efforts in emerging economies such as India.

Rajesh Jain, managing director of Mumbai-based Netcore Solutions Pvt. Ltd, points out that several large Internet companies “have elements of their IT infrastructure built using open-source, as do other organizations—big and small. From the perspective of developers, there is an altruistic approach to software, here. But that has also not stopped commercial companies from being created around open-source…. In the end, it’s a business model which is a win-win—for developers, IT firms and enterprises. And that’s why it has emerged as a formidable business model."

Championing alternative ‘frames’ during uncertainty

After riding a wave of unprecedented industry growth and branching into fibre optics products, an established communications technology manufacturer faces the unthinkable: The market takes a sudden turn for the worse.

Meanwhile, the firm’s research and development lab is pushing for the company to invest in a comprehensive expansion of its fibre optics network to increase consumer access and drive sales. Others at the firm strongly disagree, believing that the market has dried up. What should the company do?

According to Wharton management professor Sarah Kaplan, the best answer wouldn’t be immediately clear, and for good reason: Whereas managers often push for quick, bottom-line analysis when facing uncertainty, it might be more beneficial to encourage employees to champion alternative scenarios, or “frames", as Kaplan calls them.

In a new research paper, Framing Contests: Strategy Making under Uncertainty, Kaplan analyses the decision-making processes of a firm she studied during the bursting of the telecommunications bubble in 2001-02. What she found was that employees interpreted the market’s ambiguous signals from their own frames of reference and then engaged in a series of “framing activities to mobilize others around a particular point of view".

Whereas senior executives are normally charged with setting direction, especially during turbulent times, Kaplan’s model pulls into view the roles of all actors within the organization.

“Framing contests are not just about senior managers engaging in… ‘sense making’ and ‘sense giving’ to lower levels of the organization," she writes.

“Frames are the resources through which (multiple) actors can gain influence."

So, what should managers do in times of uncertainty? Kaplan’s first rule of thumb: “Absolutely no ‘quickie’ brainstorming sessions," she says. “People schedule themselves for two hours and expect to have brilliant ideas. It can’t happen in one session—it’s a process."

Instead, she suggests that managers plan a series of meetings and events that are not tied to regular operating goals, interspersed with periods for new data collection, analysis and reflection. “Take time to find out what the alternate scenarios are," she says. “This may appear to be inefficient, but in fact going slow up front might help you go faster down the line."

Luxury market morphs into a global cash cow

When Hubert De Givenchy dressed Audrey Hepburn for her role in Blake Edwards’ 1961 film, Break-fast at Tiffany’s, luxury was still the provenance of the social elite.

But in Deluxe: How Luxury Lost Its Luster, Dana Thomas, Newsweek cultural correspondent, explains what fashion was and what it has become. She documents how a niche industry, once oriented towards providing the finest goods to the few who could afford them, has morphed into a global cash cow, a $157 billion-a-year enterprise that places far greater premium on global marketing and profit margins than on crafted quality and refined exclusivity.

Combining compelling character vignettes and market analysis, she shows how, over the course of the 20th century, individual artisans became brand names. Today, about 60% of the business is concentrated in 35 brands. The largest—Louis Vuitton, Gucci, Hermes, Prada, Giorgio Armani and Chanel—are corporate behemoths in their own right. Louis Vuitton brings in nearly $4 billion in sales annually, while the others rake in more than $1 billion each.

According to Thomas, much of the mystique behind luxury goods hinges on the assumption that they are handmade by skilled European craftsmen. But facts belie the mystique. Hermes has outsourced the sewing of scarves to Mauritius. Louis Vuitton has recently announced plans to build a shoe factory in India. And Armani has embraced Chinese labourers.

Thomas’ point is not that we should return to the days when few people could afford nice things, but that we must be alert to marketing techniques that attempt to exploit our appetite for an impossibility: a luxury market that is at once truly democratic and truly exclusive.

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