Open Value Network
"An open-value network is a network of open-enterprises that can provide all functions of a corporation in an open-collaboration fashion. Recently, we have seen a rise in open-collaboration in the functions of marketing, communication, value creation, and so forth. Yet, there has never been an open collaboration model that can provide all the functions of a corporation. The structure of open-value network framework provided in this paper outlines a model that could create a true open-collaboration enterprise that would follow the principles of open source.
Open-source models present a tremendous opportunity to tackle social and environmental challenges. Nonetheless, open source models daunting financial and legal challenges since there are gaps in the business model. The open-enterprise framework provided in this paper could help resolve these challenges by providing the required open-legal and governance structures.
From sustainability perspective, an OVN provides mechanisms of non-control and open-access while providing all the function of a corporation. Therefore, I conclude that open-enterprises can truly target social and environmental market needs in efficient way while creating and redistributing the value generated in an ethical fashion. Hence, the OVN model meets the Porter and Kramer’s (2011) criteria for scalable sustainability." (http://sensoricablog.blogspot.ca/2013/11/blog-post.html)
for EXAMPLES of functioning value networks - See Sensorica
This section defines three fundamental characteristics of an OVN network: open-membership, transparency and open-access, and contributions and their governance.
"Open-membership is a major difference between a traditional enterprise and the OVN. In traditional organization, the contributors are employees who need permission to produce use-value, whereas, in an OVN, the employer-employee control relationships do not exist. Instead, an OVN is open, that is, anyone can join and/or leave the network and/or form, join and/or foreclose an open-enterprise at any point. Members can be individuals, or organizations (non-for-profits, governments, open-enterprises or other open-value networks); that is both the OVN and any open-enterprise thereof could consist of individuals, organizations, non-for-profit, government entity and OVNs. This open-membership permits OVN to engage with crowd and operate on a long-tail curve." (https://docs.google.com/document/d/1iwQz5SSw2Bsi_T41018E3TkPD-guRCAhAeP9xMdS2fI/pub#h.xr8z2tjzus2s)
Transparency and open-access
"Transparency is applied in the open source communities to provide access to information, knowledge, and processes. In addition to transparency, in an OVN, open access to participation is also critical to allow an equal opportunity for value creation. Nonetheless, certain contributions could be restricted due to the nature of the contribution. For example, dangerous chemicals may be restricted to chemists. Access to such contributions would be available provided that a certain level of expertise is attained (explained further under project custodian.)"
"A contribution of a member can be any product, service, time spent on tasks or projects, physical space offered for activities, prototype, ideas, data, information, financial investment, social connection, manufacturing, distribution channels, sales, assuming liability of a product, providing insurance, certification, evaluation, and any other tangible and non-tangible input that a community member provides to satisfy a desire, want or need. In other words, any effort that is a part of the use value is a contribution. By allowing “contribution” to be defined in such a wide spectrum, an OVN does not differentiate between financial and non-financial contributions and therefore, all contributions are evaluated and rewarded as per the defined governance of the project and network.
There are three types of contributions: project-contribution, network-contribution, and commons-contribution. Project-contributions are those contributions that are applicable to the scope of the project; the governance of these contributions is defined at the project level. For instance, perishable or consumable materials could only be a part of the project. Network-contributions are those contributions that are applicable to the scope of the network; the governance of these contributions is defined at the network level. For instance: a physical tool can be shared across projects. Commons-contributions are those contributions that are applicable across networks; the governance of these contributions is defined at the global governance level. For instance: use of standards, legal framework and knowledge."
The OVN framework defines the structure at four different levels: project-level, open-enterprise level (or inter-project level), network level (or inter-enterprise level), and global level (or inter-network level). This hierarchical structure is design to create synergies among many open-value networks in a network of network environment (or a network of open-enterprise environment). These synergies can be leveraged to collaborate across open-value networks in order to rapidly address the social and environmental demands of the marketplace. In the next section, we will explain the aforementioned hierarchal structures: the project level structure, the open-enterprise level, the network level structure and the global level structure.
Project level structure
An OVN consists of many open-enterprises that may engage with many projects organized in a non-hierarchical fashion with each project acting as an emergent, self-governing and open structure. Due to the emergent nature, the structure of each project will be different. Nonetheless, there are certain guidelines that each project will need to adopt to enable collaboration at large-scale given under the Collaboration model.
The collaboration model is the cornerstone of the OVN framework designed to support collaboration within projects. Similar to a traditional enterprise, an open-enterprise can undertake numerous projects. However, unlike a firm, both the open-enterprise and any projects thereof could be forked to achieve maximum flexibility (explained further under forking.) This collaboration model consists of two major components: value capture and distribution processes; and value creation and exchange processes.
Value capture and distribution processes
An OVN provides mechanisms to capture value by providing structure and infrastructure required to track each contribution within a project. Finally, once the project reaches maturity, any revenue generated from the project is redistributed based on the respective contributions.
These mechanisms are achieved by implementing the following processes:
* Initiation: A member or members of the network or an open-enterprise thereof can have an idea, which could come from personal interest, a scientific study, or a market study, for a product and/or service that they would like to develop and/or provide.
* Agreement: Prior to engaging in a project, the initiators of a project agree on three aspects: first, a value equation, second, a governance equation; and third, decisionmaking process within the project. A value equation is a set of evaluation criteria used to evaluate members’ contributions; for example, labour market could provide an appropriate parameters for the initial value equation. A governance equation is a set of criteria that give access to contributors to decisionmaking processes. If and once there is an agreement on these matters, the project commences.
* Logging: Once the project commences, each member of the project logs his or her contribution during the course of the project. Logging contribution could be a role that a member can undertake for a project to make the process more efficient (explained further under project tasks and roles) Referencing: Whenever a member uses a contribution of another member, he/she makes a reference in the original contribution. Failure to do so could end up in a bad reputation (explained further under reputation)
* Fluid equity: Each member’s fluid equity in a project is updated frequently (or in real-time) based on the value equation and the members’ contributions. Since the contributions are logged and referenced, it is possible to calculate the fluid equity by re-tracing the contribution chain and applying the value equation to the contributions.
* Reward distribution: Whenever members generate revenue (through a market exchange), they distribute it through the financial custodian (explained further under global custodian), who redistributes the revenues based on the fluid equity system.
Co-creation of value and exchange processes
While the processes to maximize coordination within a larger membership have been realized within the open source communities, the OVN structure provides additional guidelines on processes to ensure that there are synergies among the value creation and exchange processes, and value capture and distribution processes.
1) Project tasks: A project task refers to an action that a member must perform to advance the development of a project. Each task is SMART: Specific, Measurable, Attainable, Realistic and Timely. On the other hand, roles refer to a certain list of tasks that a person is required to perform and the decisions thereof.
Each project will have a combination of tasks and roles. For example, producing a component of a product is a task; distribution, selling and repairing are all tasks that could be logged as contributions. On the other hand, roles consist of a list of tasks that a member assumes the responsibility of. For example, assuming the liability of a product is a role. Additional examples of roles include coordinators, strategists and/or community developer. Roles can be logged as contributions. Tasks and roles within projects are published for members to accept. Any member could be a part of the project by accepting a role of a task even if the role and/or task is currently under-taken by another member by “Forking” the project (explained further under forking.) Moreover, each task could undergo verification, which can further inform reputation mechanisms (explained further under reputation.)
2) Verification: Once a contribution is logged, another member could evaluate the validity and quality of the contribution. Moreover, this verification could take place immediately or after a certain period of time during the course of the project. Verification could be a role within a project.
3) Project custodian: Project custodian is a special role chosen through the decision making process of the project. For example, a project custodian could be responsible to ensure the proper use of an asset, such as fragile, complex or expensive equipment. At any point during the project, members can vote to select a different member as a project custodian. Similar to other roles, project custodianship is a contribution.
4) Decision-making: Whereas members within the context of a task or a role undertake the task-based decisions, certain decisions such as the selection of a project custodian or a communication platform would require decision making across the project. Such decisions can be based on voting, meritocracy, consensus or executive decision (see more on the governance equation). On the other hand, on a disagreement, it would be possible to fork the project (explained further under forking) since the knowledge is open sourced.
5) Conflict management: If there is a conflict among members during the course of the project, members can modify the value equation and the governance equation based on the parameters as per the prior agreement. However, if the conflicts are not resolved, the members can fork the project (explained further under forking.)
6) Forking: During the course of the project, any member(s) can choose to fork a project for any reason. That is, take a different direction on the development of the project than the rest of the contributors to the project. In such an instance, the new project can choose different agreements on the value equation and the governance equation of the project from the time of the forking. However, all the contributions prior to the forking will utilize the agreements at the time of forking.
7) Predictability: If the project is based on a market study or a customer demand, which are both contributions, then a mechanism could be implemented to predict the value received based on the expected input required to finish the task. This mechanism would improve efficiency of the project by attracting the appropriate level of contributions by guiding the development of value equation. For example, a market study could entice financial contribution, which would be evaluated as per the value equation.
8) Reputation: Reputation refers to the detailed track record of a member; for example, tasks delivered and not delivered. During the course of the membership, any member can evaluate another member, which would be visible to all the members. The reputation system could be designed by skill set to create a comprehensive knowledge, skill and attribute profile. Evaluation for reputation could be a role within a project. If coupled to the calculation of fluid equity, the reputation system becomes a very powerful mechanisms for self-regulation.
Open-enterprise level structure
There are two types of open-enterprises within an OVN: brand-based and liability-based.
Brand-based: Any member(s) within the OVN can create a new brand and market any of the products through this brand trademarks. This brand trademark could have any legal structure from a private ownership to a cooperative-ownership. Whereas the brand trademarks could be privately owned, a brand charter would dictate the use of the brand trademarks. The brand trademarks could be open for use so long as the members abide by the terms and conditions dictated in the brand charter; for example, product quality and standards. The management of the brand use is further discussed under the legal framework. Nevertheless, access to the use of brand trademarks is a contribution to a specific project and would be evaluated as per the governance of the project.
Liability-based: Any member(s) within the OVN can create a legal entity to assume the liability of the product including the appropriate use of brand trademarks. This liability could have any legal structure from a private ownership to a cooperative-ownership. Whereas the legal entity could be privately owned, a liability charter would dictate the use of the legal entity name for contractual obligation and liability purposes. This liability entity could be open for use so long as the members abide by the terms and conditions dictated in the liability charter; for example, product verification. The management of the liability entity use is further discussed under the legal framework. Nevertheless, access to the use of liability entity is a contribution to a specific project and would be evaluated as per the value equation of the project.
Network level structure
Network-level structure defines the structure across all projects of the open-enterprise. The guidelines in the network-level structure supersede the guidelines in the project structure. However, in order to minimize control and maximize collaboration, the guidelines within the network-level structure are pertinent only to the network commons. For example, the misuse of the network will have negative consequences for all the members. In addition, since any project can fork, the network governance needs mechanism to resolve any conflicts. Hence, it is pertinent to establish a structure for the network commons.
The OVN framework identifies the commons of the network and then provides guidelines for the governance for the network.
OVN framework identifies five commons with the network: Network Brand, Infrastructure, Contribution-commons, Reputation and Solidarity mechanisms. In addition, any network-contributions are also a part of the network commons.
1) Network Brand: provides value to all the projects by providing trust relationship among the collaborators and potential collaborators of the network. Therefore, it is pertinent to protect the network brand in order to maintain an advantage in the marketplace since the brand value could decrease if misused by a member.
2) Infrastructure: Infrastructure provides the tools to produce, store, transfer, exchange and modify information within and outside of network. Therefore, changes in the infrastructure could impact all projects. In addition, tangible tools could also be part of the network that would be governed as per the network governance.
3) Reputation: Reputation of a member in a given project is carried forward to other projects. Thus, reputation is a part of the network commons in order to main trust among members.
4) Solidarity mechanisms: Solidarity mechanisms are part of the open-value network to ensure two unique aspects: compassion and distribution of risk. Compassion is an important part of human-collaboration and therefore, the network provides insurance mechanism for its members based on the members’ reputation. In addition to compassion, solidarity mechanisms are used to partially reward for unavoidable failures in order to create higher levels of trust and knowledge base within the network; these failures include: process inadequacy, task challenge, process complexity, uncertainty, hypothesis testing, and exploratory testing.
The network governance determines the decisions on the implementation of solidarity mechanisms.
Similar to the project governance, the network governance requires decision-making processes and mechanisms to change the decision-making processes. In addition to decision-making, the network requires roles or network custodians to ensure continuity and compliances. Moreover, network requires mechanism to respond to non-compliances to the decisions. Lastly, network needs to be able to recuperate costs in order to self-sustain.
1) Liquid democracy for voting: Whereas the democracy relies on choosing a representative for a fixed term, liquid democracy allows a member to delegate a trusted peer to vote on the member’s behalf on certain or all decisions. The trust delegate could apply the same principle. This creates a trust-based decision network that can be applied to take network level decisions efficiently and to maintain high level of satisfaction since getting involved in all decisions can lead to stress and dissatisfaction. Moreover, to avoid biases, an individual member can directly cast their vote on a decision if the member does not agree with the decision outcome within a fixed period of the outcome. Lastly, the number of votes delegate to a member is hidden from the delegate to avoid any possibilities of corruption, power and favoritism.
2) Conflicts during the forking of the project: Value equation developed at the time of the forking of the project has to account for the previous contributions at the time of the forking. Failure to reach an agreement at the time of the forking could result in a conflict that could be arbitrated using the liquid democracy mechanism for a faster turn-around.
3) Accountability and Non-compliance: It is possible that a member may not comply with the OVN framework. For example, a member may choose a task but not deliver that causes grievances or worse, a member sells a product and keeps the rewards rather than redistributing it. In such instances, the member may get bad reputation, which will be visible to the members across networks.
4) Low-reputation and retribution: A member with low reputation will be less likely to find collaborators in any OVN since the reputation is shared across networks (explained further under global structure.) Therefore, a member with low reputation will be unable to benefit from the advantages of the OVN model (explained further under the OVN advantages.) Nevertheless, it is important to create mechanisms to encourage members to regain the lost reputation rather than banishing the members with low reputation since it could increase hostility against the networks, which could lead to intentional attacks. Yet, any decisions on banishment could be taken based on liquid democracy.
5) Network costs: All efforts related to the network are considered as projects; for example, the development of the network IT infrastructure is a project. Therefore, the contributions to the network level projects are equally divided among all the projects as contributions to the projects.
6) Network custodians. The network custodians are chosen using liquid democracy process and can be responsible for network-commons: brand, infrastructure, and network-contributions. Similarly, network custodians can take the role strategists for the brand and infrastructure; these roles would be selected through liquid democracy but can the responsibility on any and/or all of the decisions could be revoked at any time.
Global level structure
Global level structure defines the structure across all open-enterprises or networks within an OVN. The guidelines in the global level structure supersede the guidelines in the network structure. However, in order to minimize control and maximize collaboration, the guidelines within the global level structure are pertinent only to the global commons. For example: the flow of information across networks. Hence, it is crucial to establish global governance and a legal structure for the global commons.
Global governance of OVN will provide decision-making guidelines for the change in legal constitution of the OVN including the selection of the custodian of the global OVN constitution. This selection could be done through liquid democracy process, as previously described, with participants across OVN.
Legal framework of OVN would consist of global structure, network structure, and enterprise structures. The purpose of the legal structure at the network level is to create a platform for open-innovation. For example, Airbnb provides a platform where the crowd can rent their homes to strangers. Similarly, the OVN provides an ethical and legal framework to create a platform for open source based innovation. Hence, an OVN acts as a platform that consists of many open-enterprises, supported through legal structure at the enterprise level for both brand-based and liability-based entities. In other words, the OVN network provides a platform for the Peer-to-Peer (p2p) liability structure to create a many-to-many relationship between brand owners and liability owners.
In addition to collaboration within an OVN, the legal structure also provides support for many platforms or open-value networks to co-exist. This is accomplished by sharing reputation, value and knowledge across networks while safeguarding the infrastructure and brand of the network.
Permanent global legal structures:
1) Global OVN Constitution custodian: will serve as the umbrella organization for the legal framework and will hold the Global OVN constitution. This constitution will provide guidelines on the roles and responsibilities of the other legal entities and voting mechanisms on how to change the constitution and any of the custodians including global custodian, as per the governance defined in the constitution. Further the constitution defines that each custodian must have its own decision-making mechanism and policies on how to change its decision-making mechanism.
2) Personnel Information custodian: will be responsible for the information infrastructure including holder of private information to keep records of the reputation across OVNs. This custodian will have an agreement to share information required for reputation purposes within and outside of the Open-Value Network with the holder of the constitutions as per the rules of the constitution.
3) Standards custodian: will hold the global standards in order to ensure the flow of information, contribution, value and reputation across the OVN.
Network level legal structures:
1) Network custodian: would be responsible to hold the constitution of the network. This constitution will provide guidelines on the roles and responsibilities of the other legal entities within the network and voting mechanisms on how to change the network constitution and any of the custodians within the network including the network custodian, as per the governance defined in the network constitution. In addition to the network constitution, the network custodian will have an agreement with holder of the global constitutions as per the rules of the global constitution.
In addition to the constitution, the network custodian may hold the brand of the network as well as the responsibility of the any physical and virtual infrastructure, although, these function could be assigned to a separate custodian. For example, one network brand custodian for the network brand, one virtual infrastructure custodian for the virtual infrastructure, and several physical infrastructure custodians for each or some of the local physical hub.
2) Contract holder custodian: will be responsible to hold the contract among all enterprise level legal entities (elaborated under enterprise-level legal structures). This custodian will have an agreement with the network custodian as per the rules of the constitution. A network may choose to merge this role with the network custodian.
3) Financial custodian: will be responsible to conduct all financial transaction across the OVN. This custodian will have an agreement with holder of the network custodian as per the rules of the network constitution. A network may choose to merge this role with the network custodian.
Enterprise level legal structures:
1) Brand custodian: Any member(s) that wishes to form a brand could initiate an open-enterprise within the network with its unique brand name and provides a charter for the brand use. This custodian will have an agreement with the contract holder of the network as per the rules of the network constitution. For example, the open-enterprise can use the services of the network as long as it allows for peer-based audits to ensure transparency and ethical behavior as defined in the network constitution.
2) Liability custodian: Any member that wishes to assume the liability of a product can form a legal entity. This custodian will have an agreement with the contract holder of the network as per the rules of the network constitution. Thereafter, any member that abides by the terms and conditions of the liability custodian would be able to transact directly with the market while forwarding the liability to the custodian."
The above material is sourced from the document under construction: Open Value Network: A framework for many-to-many innovation. Authors: Yasir Siddiqui (main author), Tiberius Brastaviceanu.
Creative Commons (BY NC CA) licence granted by the authors. First published on December 25th, 2013
See also the Open Value Network wiki
"We need to make the distinction between co-creation of value and value exchange. These are two important processes but very distinct ones. Sensoricans are working hard to solve the value accounting problem, which is meant to support large scale co-creation of value. The value accounting is a way to capture individual contributions that blend into a unique product, to evaluate these contributions, and to compute equity in the end product, a % for every member.
NOTE the value accounting system is NOT a system that objectifies value and it is not a bean counting system! It is a contract, a method to which all contributors adhere to reassure every contributor about how the future revenue will be redistributed. That's it! It preserves the subjective nature of value, it can take, in theory, into consideration all types of value, tangible and intangible.
Once the product is made it is exchanged, and this is where you need currencies, or systems of value exchange.
Again, value accounting for co-creation of value and value exchange are two different things in my mind. These two systems must interact with each other, but we need to see them as separate. One is designed to manage the amalgamation of value from different agents into one product, the other one is designed to facilitate value exchange between different agents, with no value added in the process."