The 10 Principles of Open Business: Defining goal state and making the business case David Cushman, July

2012

We believe in Open Business
Contents: 1. Open Business: Definitions. 2. 10 Principles and Goal State descriptions 3. Business Benefits 4. Evidence: Examples of the principles in practice 5. Next Steps

1. Purpose: Goal State (Scores 5/5): You have a clear ‘Why’ of the organisation – why it exists (what is it about the world you are trying to put right/fix etc). Everyone who knows of you knows of your purpose. 100% of your actions are aligned with and express that purpose. Worst Case: (Scores 1/5) The number one reason your business exists is to make money. Mission statements simply enshrine the requirement to deliver shareholder value. 2. Open capital: Goal State (Scores 5/5): The organisation is 100% crowd-funded Worst Case (Scores 1/5): All funding comes from ‘big capital’ – VCs, institutional shareholders – concentrating power over the organisation and its aims in those institutions. 3. Networked organisation Goal state (Scores 5/5): No more than 1 in 10 in your organisation’s ecosystem are employees – the rest partner with you from outside the organisation. Your staff act as an enabling platform for participation from outside the org. Worst Case (Score 1/5) You employ staff to fulfil every function of the enterprise. 4. Sharability: Goal State (Score 5/5) Knowledge/thought leadership in all formats is created in such a way that it can be easily and readily published openly, and shared. Share functions are built into each document/asset. Creative commons is the default.

Definitions An Open Business is one which uses its available resources to discover people who care about the same Purpose it does, brings those people together and joins with them to achieve that Purpose. It is designed from the outset to scale through participation. It makes partners of customers.

10 Principles Of Open Business We define 10 principles of Open Business against which the performance of any organisation could and should be judged. For each, listed below, we offer ‘Goal State’ as the ideal outcome (a perfect outcome) of our strategy consulting work with clients. In this document we also describe the ‘Worst Case’ position – to enable you to quickly benchmark your organisation’s progress towards each of the Goal States so far, and against which we can measure your progress in the future.

David@ninety10group.com, London T. +44 0207 253 0354 M. +44 (0)7736 353590

The 10 Principles of Open Business: Defining goal state and making the business case David Cushman, July 2012
Worst Case (Scores 1/5) Knowledge created in the organisation stays within the organisation. Anything published outside is done so with extensive copyright protections in place. 5. Connectedness: Goal State (Scores 5/5) All employees are using open social media daily for external connection and applying it to make best use of the synchronous/asynchrynous opportunities of the global web. Internal/external comms are rarely distinguished. Worst Case (Scores 1/5) Social media is actively discouraged during working hours. Internal comms are one-way broadcasts from the centre and kept strictly internal. 6. Open Innovation: Goal State (Scores 5/5) 100% of developments in service, product or comms design are made in collaboration with people outside the org in an organisationallyappropriate co-creation process. Worst Case (Score 1/5) All developments are made in secret and internally. 7. Open data: Goal State (Scores 5/5) Any data generated or collected by the organisation is made publicly available where there is a possibility that sharing this data can create additional public good. Eg apis. All data is searchable internally and externally. Worst Case (Score 1/5) Data is jealously guarded and kept secret. Competitive advantage is believed to reside in ownership rather than collaboration. 8. Transparency: Goal State: (Scores 5/5) Decision making is done openly, with the process exposed to all employees, stakeholders and anyone wishing to hold the org to account. Board meetings (within legal constraints) are open to all and offered as a webcast/webinar. Worst Case (Scores 1/5) Decisions are made behind closed doors without explanation. Records are shared only as required by law. 9. Member led: Goal State (Scores 5/5) 100% of all key decisions (within legal constraints) are made by and with those charged with implementing them in collaboration with partner-customers (members) and/or wider supporters of the organisation. Worst Case (Score 1/5) All key decisions are made at board level and imposed downwards on those charged with implementing them. Stakeholders and customers are considered only in the context of what can be gained from them. 10. Trust: Goal State (Scores 5/5). Stakeholders, partner-customers (members), employees have 100% trust in your organisation’s mission and motives as measured in 360-degree surveys. 90% of new business is generated by peer recommendation. Worst Case (Scores 1/5). Trust levels are measured at sub 10%. 90% of new business is generated through marketing spend.

David@ninety10group.com, London T. +44 0207 253 0354 M. +44 (0)7736 353590

The 10 Principles of Open Business: Defining goal state and making the business case David Cushman, July 2012
3. Business Benefits Many of the success stories of the 21st Century are built on multiple Open Business Principles. Google, Apple and Amazon are among the more famous. According to IBM’s CEO survey in May 2012, companies that outperform their sector are 30% more likely to identify ‘Openness’ as a key factor in their success with particular benefits for collaboration and innovation. Businesses starting today build on the 10 Principles from the word go. They do so because the principles are self-evident to those growing up in a networked world. They know they are simply the most effective way of taking greatest advantage of the world as it exists today. This places them at significant competitive advantage over those who are not seeking to apply the principles for legacy or other reasons. Applying the Principles offers:          Better market and customer knowledge Better fit with customer need, Accelerated more successful innovation, Evidence-based decision making New access to capital, More effective knowledge management Improved internal and external collaboration and idea generation Lower (distributed) risk through networks of partners, A greater sense of doing business that benefits the society in which you operate  A greater sense of customer and employee ‘ownership’ through the democratisation of business Raised levels of trust – and customer and employee loyalty and satisfaction which derives from this More attraction and retention for the right talent and customers.

Your new competitors and those who are yet to emerge will find it easier to scale, react to and meet customer need as a result of launching with the 10 Principles as their start point. If you were starting your business today knowing what you now know about how new technologies have disrupted traditional business processes (from marketing to customer service, from raising capital to delivering innovation) few would choose to recreate businesses along traditional lines. Measurable results Customer satisfaction increase of 2030% achieved at 20% the cost Resulting in an increase of 31% in customer retention 27% increase in existing customer sales 31% increase in brand advocates (each worth 5 x the average customer) 34% increase in feedback & ideas from customers 34% increase in brand awareness 27% increase in new customer sales 31% increase in ideas generated within the company Net profit per employee rose by 53% Overall sales-to-assets increase of 66% (sources, see over)

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David@ninety10group.com, London T. +44 0207 253 0354 M. +44 (0)7736 353590

The 10 Principles of Open Business: Defining goal state and making the business case David Cushman, July 2012
Sources:
Cohort-Study on Social Innovation – TNO Work & Employment 2008-09 P&G Connect & Develop Program – Harvard Business review June 2011 Social Business Software Survey (Jive Funded) 2010 BT Care Interview 90:10 Group Jamie Burke

3. Networked organisation BlurGroup.com is a Global Services Exchange which connects a worldwide network of experts to respond to briefs from multinational clients. To July 12, 2012, 908 briefs had been received - the largest worth $5m. (Source BlurGroup.com) Apple’s iPhone and iPad have demonstrated the value of a networked organisational approach. Apple resources provided a platform to enable those outside the org (developers, brands, media companies) to create value by building, marketing and selling apps. The app makers get 70% of the sales value on each download made via the app store. The app store’s market cap value (the value this delivered to apple) as of December 2011 was ITRO $7.08bn (Source Apple.com) More than half of CEOs (53 percent) are planning to use technology to facilitate greater partnering and collaboration with outside organisations, while 52 percent are shifting their attention to promoting greater internal collaboration. In 2008, slightly more than half of the CEOs interviewed planned to partner extensively. Now, more than twothirds intend to do so. (Source IBM CEO Survey, May 2012) 4. Sharability: O’Reilly Media: Sharing what you know pays dividends – even when it’s all you’ve got to sell: When O’Reilly removed the DRM antisharing mechanism on its e-books it saw a rise of 104% in sales within a year. (Source BoingBoing.com) IBM and Linux: In 1999 IBM announced its support for the Linux operating system and
David@ninety10group.com, London T. +44 0207 253 0354 M. +44 (0)7736 353590

Evidence: The Principles in Practice 1. Purpose: Jim Collins and Jerry Porras write in Built to Last that organisations driven by purpose outperform the general market 15:1 and comparison companies 6:1. Eg Disney (To use our imaginations to bring happiness to millions) eg Google ( To organise the world's information and make it universally useful.) Disney has out-performed Warner by 7:1. Google is the fastest growing company of all time. 2. Open capital TikTok watch: Traditional routes to capital failed to find a backer for this innovative iPod nano/watch. More than 13,000 individual backers on Kickstarter (a crowd-funding site) proved old capital wrong. They wanted the watch so provided the funds. Supply and demand in perfect unison. (Source: Kickstarter.com) Prosper.com: Has now funded £363m in personal loans in a peer-to-peer model illustrating that success with Open Business principles applies as readily to regulated industries as in more laissez faire sectors. (Source Prosper.com)

The 10 Principles of Open Business: Defining goal state and making the business case David Cushman, July 2012
has remained among the largest contributors to this open source ever since. The return: Linux is supported on all modern IBM Systems, Over 500 IBM software products run natively on Linux, IBM has developed a full line of implementation, support, and migration services and facilitated thousands of migrations to Linux. It has served tens of thousands of customers with hardware, middleware, and service products. (Source IBM.com) 5. Connectedness: Internal enterprise social tool Yammer has been deployed to connect employees in 200,000 companies worldwide (including the likes of DHL, CapGemini, Shell, 7-11). A Forrester report on the total economic impact of deploying such a social tool over a 3 year period in a company of 21,000 employees with one third using the tool, measured: “a risk-adjusted return on investment of 365 per cent with a payback period of 4.3 months and $5.7 million in net present value.” (Source, Forrester Research) Burberry: Going further – and externally – this global luxury brand has committed to being the first ‘digital end-to-end’ company. CEO Angela Ahrendts says: “You have to be totally connected with everyone who touches your brand. If you’re not I don’t know what your business model is going to be in five years.” Burberry’s social strategies have been credited with a 10% rise in same-store sales (source: beingpeterkim.com) 6. Open Innovation: Syngenta: When multinational agribusiness Syngenta adopted open innovation processes Forrester compared the total economic impact compared to traditional closed methods of innovation. They saw an ROI of 182 percent with payback in less than two months. In addition to financial returns, the study revealed qualitative benefits including greater efficiencies, cost savings, and productivity. (Source: Forrester) 7. Open data: The Telegraph published stories about MPs breaking expenses rules but it was The Guardian who used the Freedom of Information Act to open up the data - forcing the release of 700,000 relevant documents. The challenge was resourcing the analysis of that data. For this they turned to their readers – who delivered scoop after scoop, forcing a step-change in the accountability of UK MPs. 8. Transparency: Walmart turns over $444bn a year and employs more than 2m people. And that’s not including its supply chains. The retail giant is taking transparency so seriously it has launched a sustainability index to openly show how its supply chains can be judged against the following criteria: To be supplied 100 percent by renewable energy; To create zero waste; To sell products that sustain people and the environment. Members of relevant sustainability lobbies sit on key decision-making bodies within Walmart to hold the company to account. In the Uk the group is represented by the ASDA retail chain. Its sustainability strategy will deliver £800m in savings by 2020. (Source: Walmartstores.com)

David@ninety10group.com, London T. +44 0207 253 0354 M. +44 (0)7736 353590

The 10 Principles of Open Business: Defining goal state and making the business case David Cushman, July 2012
9. Member led: The Co-operative movement: Ed Mayo, Secretary General, Co-operatives UK said "In a tough economy, mass ownership is a perfect business strategy because you have your customers and workers onside. The idea of sharing profits with those who are involved in the business is now widely recognised (but) few companies do it as well as the cooperative sector." In January 2012 Co-operatives UK published a report which showed four years of growth- in the UK's co-operative economy (turning over £35.6bn), outperforming the UK's GDP over the same period by 21 per cent. Around 1 billion people are members of cooperatives around the world. 10. Trust: PR company Edelman publishes a Trust Barometer each year. The 2012 survey found that if a company lacks trust people are more inclined to believe negative things they hear about it and trade less with them as a result. A global survey by WPP and the Futures Company “... found that the (most trusted) brand in each of the 22 countries we researched was nearly seven times more likely to be purchased and consumers were 10 times more likely to have formed a strong bond.” Edelman’s report concludes that to win trust – and ultimately recruit and retain customers: “Business must align profit and purpose for business benefit.” We agree – and believe the 10 Principles of Open Business are the best route to achieving this. Next Steps: The need to adapt to survive has never been as relevant or as urgent. There is a growing demand from customers to be treated better and for the organisations they will trade with to do better by the world in which they operate. How does your business score against the 10 Principles? Go ahead, give your organisation a score. Take a first step toward understanding how even large organisations with substantial legacies can adapt to benefit from the advantages of the Open Economy delivered by our networked world. We’ll help you on the rest of the journey. David Cushman Co-Founder 90:10 Group david@ninety10group.com +44 (0)7736 353590 Currently being augmented as a series online here: http://www.9010group.com/open-business2/the-10-principles-of-open-business

David@ninety10group.com, London T. +44 0207 253 0354 M. +44 (0)7736 353590