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strategy and business
 / Fall 2004 / Issue 36(originally published by Booz & Company)


Post-capitalism's Drop-out Prophet

Open source also inverts the conventional free-market logic, which dictates that there is little benefit to working on a product that’s given away. In fact, the thousands of open source engineers garner indirect benefits from their activities, including faster learning, reputational assets, and the ability to influence the direction of software development, all of which enhance their earning potential. Software engineers can also earn fees when they help companies adapt and support highly customized applications of the free software.

Open source has additionally led to some subtle — and some not so subtle — changes in employment relationships, foreshadowing perhaps the new social contract of federation advocates. In some cases, corporations have released designers from standard work-for-hire intellectual property agreements in order to allow them to participate in an open-source community, according to Siobhan O’Mahony, a Harvard Business School professor and an expert in community-managed software and technical communities.

Another shift in employment relationships appropriate to a federation model can be seen in outsourcing and subcontracting. Instead of being victimized by corporate downsizing, many of today’s freelancers and entrepreneurs have embraced the chance to opt out of the corporate hierarchy, and they serve as examples of Professor Zuboff’s contention that an impetus for change is the yearning for psychological self-determination.

“What if the practice of subcontracting and outsourcing were to expand enormously — to the point where a network of dispersed suppliers replaced the central company altogether?” writes MIT’s Thomas W. Malone in his book The Future of Work: How the New Order of Business Will Shape Your Organization, Your Management Style, and Your Life (Harvard Business School Press, 2004). “What if, in other words, many tasks currently done by large companies were done instead by temporary combinations of small companies and subcontractors? In an e-lance economy, the fundamental unit is not the corporation, but the individual.” In 2003, Professor Malone estimates that more than one-quarter of the U.S. work force was freelancing.

Professor Zuboff points to eBay as an organizational model that is evolving in a way that fits her vision of a company aimed at individuated consumption. She attributes the growth of eBay to its creation of a virtual marketplace in which buyers and sellers can “meet their own aims.” Unlike most 20th-century companies, which determine what customers can buy and under what conditions, eBay “makes money when it listens to and supports the dynamic needs of its users,” Professor Zuboff wrote in the March 2004 issue of Fast Company, where she is a columnist. Consider the eBay-based retail-logistics partnership between UPS and AuctionDrop Inc., a startup company with stores, is expanding AuctionDrop’s locations to 3,400 UPS stores around the United States. AuctionDrop sells items on eBay for a commission (eBay also gets a cut of the final sale price), and consumers are spared the hassles of having to handle the auction and delivery process themselves.

Jim Maxmin tells of an entrepreneur who has developed a “smart” medical warning system aimed at providing the broadest definition of “life support” for elderly people. This entrepreneur plans to assemble all the data an older person might need in an emergency, including medical history, legal documents, and next of kin, and embed it in a smart chip or card. “By the time the patient gets to the emergency ward, it is all there,” he says. “The interesting thing is not the technology, but that the entrepreneur has taken the individual as the unit of analysis” so all the information is simultaneously available.

Real or Rarified?
The life of the Maxmin–Zuboff family is in many ways emblematic of their image of the “new individuals.” And therein lies one major criticism of The Support Economy. Even admirers of the book feel the authors’ vision is too rarified. “Some of the anecdotes happened to them as a couple or as a family, and they were the source of these ‘eureka!’ moments,” says Pulitzer Prize–winning historian Thomas McCraw, a professor at Harvard. “But they’re in a certain income bracket.”

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  1. Art Kleiner, “The World’s Most Exciting Accountant,” s+b, Summer 2004; Click here. 
  2. “New Pact to Ease Hassles of eBay,” Wall Street Journal, June 17, 2004
  3. “Laura Ashley and Federal Express Strategic Alliance,” Harvard Business School, December 4, 1996. Case Number 9-693-050; Click here. 
  4. C.K. Prahalad and Venkatram Ramaswamy, The Future of Competition: Co-Creating Unique Value with Customers (Harvard Business School Press, 2004)
  5. Thomas W. Malone, The Future of Work: How the New Order of Business Will Shape Your Organization, Your Management Style, and Your Life (Harvard Business School Press, 2004)
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