Having given in to gravity, America's elite graduate schools are taking on open source.
In recent research published in Production and Operations Management, Deishin Lee (Harvard Business School) and Haim Mendelson (Stanford Graduate School of Business) teach would-be business executives how to "Divide and Conquer: Competing with Free Technology Under Network Effects."
The professors argue that:
(T)he ideal scenario for the commercial vendor is to bring its product to market first, to judiciously improve its product features, to keep its product "closed" so the open-source product cannot tap into the network already built by the commercial product, and to segment the market so it can take advantage of a divide-and-conquer strategy.
But what to do if the open-source product gets to market first?
In that case, the commercial vendor does well to enter the market with a compatible product and then invest in new product features to make its product compelling even though it costs more--a strategy sometimes known as "embrace and extend." In this case, being "open" (or compatible) helps the commercial firm tap into the network created by the free product. Then, the commercial firm must compete by out-innovating the free product.
It's nice to see that $48,921 in Stanford MBA tuition going to a such a worthy cause.
More intriguingly, despite open source's still-small market share relative to the Microsofts and Oracles of the world, it's surely meaningful that professors from the world's elite business institutions are turning their attention to figuring out how to beat open source. If it weren't a threat, there would be no market for research like this.
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