The increasing use of “Free” in business models, as described by Chris Anderson in his book by the same name has created a lot of debate. This is important as it clearly illustrates that the logic behind ‘Free’ as a concept is not understood intuitively by many. As a result most business will not, unfortunately, realize the potential of this revolutionary concept and adapt in time. Very few organizations will really understand the true potential and adapt. However, the unused potential will leave enough room for incumbents.
The Book
As he did with “The Long Tail” Chris Anderson has once again stirred the hornets nest and created a debate. His principal thesis is that due to the ever decreasing cost of digital production “Free” is becoming increasingly relevant in today’s time as a part of business model.
The book also describes how “Free” has been a part of successful business models for some time now. While “Free” is not new, it is undergoing a metamorphosis and the emerging version of Free has and will leave a lasting impact on different industries across the board.
The reason for this change is ‘digital production’ and the ever decreasing cost of computing power. Physical products will always have a certain marginal cost of production. However, products based essentially on ideas like music, journalism, and video can be digitally reproduced. Recent technological advances, a continuous process, have rendered the reproduction cost to almost zilch, thus, bringing the marginal cost of reproductions of such products to near zero.
Once a piece of music is produced the cost practically remains the same whether 10 or 10 million people have a copy in MP3 format. This technological development creates a competitive situation that is radically different in a lot of industries, while at the same time it also creates a host of new opportunities.
The Debate
The genesis of the debate can be traced to the ideas espoused in an article ‘Wired’ Feb 2008. The debate has only intensified since the release of the book earlier this month. The intensity of the debate can be seen by the number of high profile bloggers and a writer. It all started when Malcolm Gladwell expressed skepticism in his review of ‘Free’ in the New Yorker. This elicited response from Seth Godin followed by Mark Cobin, Chris Anderson, Chris Borgan and Mike Masnich.
There are many who believe that Mr. Anderson is right in his thoughts and observations and some who do not agree that we are at the mercy of technological progress.
In the weeks following the release of the book, I have and a chance to read it and think about the debate that has been happening in the blogosphere. Some of the comments are very valid and to the point, however, a majority of the debate still concerns the basic premise of the book, whether Free will indeed change business dramatically.
An overview of the debate in the blogosphere points to an underlying trend which may have bigger ramifications. The debate has thrown quite a few interesting tendencies.
Interestingly most critics do not disagree with the points made in the book; however, it is evident that they have misunderstood the argument. Some of the criticism regarding the style and priorities can be called valid but bulk of the criticism revolves around the main premise of the book.
This tendency can be taken as an indicator of a trend that shows few people really understand the structural changes that will affect a lot of business. The idea of Free is not difficult to understand on a logical level, this is amply demonstrated by the group that thinks what Mr. Anderson is saying is just stating the obvious. However, the concept of Free is difficult to understand at the intuitive level.
This lack of understanding is illustrated by the lack of conversation on how to deal with the change as suggested by Mr. Anderson. The entire conversations on the blogosphere is about if ‘Free’ will play a bigger role in business models and not about how to deal with it or shall we say what to do about it.
This can be a very negative thing for those involved in promoting free and P2P, as they now realize how difficult it is going to be for organizations to adapt to the changed circumstances. Having said this it can also be taken in a positive sense, as the lack in response time will leave a huge opportunity gap in the market that can be exploited to our benefit.
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