Editor’s note: Joshua McClure is founder and CEO of RealMassive, the first data provider to deliver open access to the commercial real estate marketplace.
If you ask a member of the business-tech community about the benefits of closed systems versus their open counterparts, one word that will almost certainly come up is “security.” There’s been a long-held belief in the tech industry that closed systems are more difficult to corrupt and, therefore, more secure than systems built on a philosophy of radical openness.
But in recent months we’ve seen this idea of “closed is more secure” flipped on its head. Once concerned primarily with keeping hackers and other “outsiders” from accessing sensitive data, consumers are now more aware of the importance of maintaining personal security and privacy from corporations, governments and other powerful “insiders.”
We’ve seen this trend gain momentum in America following Edward Snowden’s NSA program leaks, and even more vocally in Hong Kong recently with the Occupy Central protests against the Chinese government’s famously closed election system.
Meanwhile, we’ve also begun to see cracks appearing in one of the world’s most popular and fanatically trusted closed systems — Apple’s. While the iCloud celebrity nude leaks reminded us of the value of multi-factor authentication, a fake Occupy Central app that spread phishing malware in Hong Kong poked a few more holes in the perceived security of iOS’s closed system.
So in a world where being “closed” can not only prove ineffective but also raise red flags, it makes more sense than ever for tech startups to adopt a policy of radical openness: transparency leads to trust; collaboration leads to innovation; and decentralization leads to empowerment.
Transparency Leads to Trust
Each year, GMI Ratings releases a list of the 100 Most Trustworthy Companies, inspired by the abuses that led to the financial collapse. GMI’s stance is that trustworthiness comes from transparency — even when the news is bad, the companies on this list are keeping shareholders informed, leading to less investor uncertainty and, in most cases, solid stock prices.
What might surprise you (or might not) is that technology is cited as one of today’s most fraudulent industries along with pharmaceuticals. This means that the opportunity is ripe to distinguish your tech startup from closed-up competitors by employing a model of radical openness with investors and clients.
That may mean providing more performance and financial data, being up front about long-term goals (or your more agile, wait-and-see approach, if that’s the case) and even coming forward to report your mistakes and near misses. It might be painful, but it can actually strengthen your relationships over time.
Collaboration Leads to Innovation
Some of the most talked-about startups in recent years would not exist if not for open data. Wikipedia is an obvious example, but also consider Waze, which was acquired by Google in 2013. Waze uses user-submitted traffic data to recommend the fastest driving route, which adjusts in real time as the user drives. Imagine the efficiencies that would be lost if Waze tried to generate this data by itself instead of tapping into the free, unlimited power of collaboration.
Investors in companies like IFTTT (which stands for If-This-Then-That) are also placing huge bets that the future lies in interconnection and open interaction among a multitude of platforms and devices. While many tech startups were thinking about how to carve a niche, own it and charge for it, IFTTT was strategically positioning itself as the go-to platform for the impending Internet of Things.
This brilliant, long-game strategy landed the company a $30 million investment in August of this year. Imagine if the company had instead built a platform that only functioned with IFTTT-approved devices, following a closed, vertical integration model. It might have enjoyed some early success, but it would have inevitably been unseated by a more open provider.
No closed system is safe from the disruption of a more open alternative.
Even a closed behemoth like Microsoft is now recognizing the value of open-sourced collaboration, recently announcing its decision to open source its server-side .NET Framework and also take it to Mac and Linux. Launching a startup with “artificial walls” in place, such as exclusive partnerships or extensive restrictions, in all likelihood means signing your own death sentence. Hold up Apple as a shining exception if you want, but history shows that tech that doesn’t play well with others gets left behind as collaborative innovation happens outside its walls.
For example, if Apple decides to throw its hat in the virtual reality ring, it will have to do on its own what the united front of Samsung (in other words, Google’s Android OS), Oculus Rift (in other words, Facebook), and the world’s entire network of virtual reality developers are collaborating to create.
Companies that rely on the idea that they’re “completely irreplaceable” need only look at the long list of alternatives that have arisen to even some of our most institutionalized services in recent years: bitcoin for traditional currency; at-home 3D printing for manufacturing; and right now in Hong Kong, Firechat, which is enabling protesters to circumvent Internet service providers. No closed system is safe from the disruption of a more open alternative.
Decentralization Leads to Empowerment
Back to Waze for a moment. Let’s imagine the blowback the company would receive for trying to charge for its user-submitted information. The commercial real estate industry has done precisely that for many years. The largest data providers have served as arbitrary gatekeepers for the world’s commercial real estate listings by asking brokers and agencies for info on their available spaces, then packaging that information and charging for access to it.
It’s unsurprising that free and open alternatives are now arising, threatening the existence of these long-established gatekeepers. (Disclosure, I run RealMassive, one such company.)
The commercial real estate industry lost sight of one important fact — the Internet has made kings of us all. In a Google world, the encyclopedia salesman is a relic, and businesses built around proprietary data have an expiration date.
If your startup is basing its business model on data that another company could feasibly gather and give away for free, you can expect that very thing to happen in the near future. Would you be able to survive? Do you really want to find out?
The Choice Is Yours, And Not Choosing Is a Choice
When it comes to making a choice between radical openness and “closedness” as a business philosophy, the best time to choose is in the early months of your company. A company that starts out with a closed paradigm and later chooses to open up will have a tough time rerouting company culture and also runs the risk of losing ground to more open competitors early on.
Even worse, a company that starts out open and later chooses to become closed will almost certainly make enemies, as Makerbot learned after it suddenly clamped down on its open-source 3D printing hardware after a community of early supporters spent years contributing to Makerbot’s design (it’s worth watching “Print the Legend,” a new documentary that chronicles the whole ordeal, available on Netflix).
Since you must choose one — and you must — openness is simply a better option for tech startups who stand little chance of deploying a successful vertical domination strategy like Apple or Sony built in decades past. When it comes to relationship-building, innovation, and eliminating competition, the best thing you can do to guarantee your company a spot in the future is to employ a philosophy of radical openness.
Schoolyard politics still apply: Secrets don’t make friends and neither do bullies.