This started as a paper for my Management 310 class (entrepreneurship) and is the first of (hopefully) many revisions, and other documents, to better describe this idea and what I want to do. I will soon be rearanging this page when I get the time, and adding a comment mechanism. Check back from time to time, as I have a couple more papers for this class, and I will be writing more on this subject. Also check out my homepage for some other, somewhat related writings.

(Okay, I lied when I said I'd be rearanging this soon.. mail me and bug me about it, okay?)

Other related links

Following is the original paper. 

Industry Analysis Paper

Troy Benjegerdes

Mgmt 310


The vision I have of the new venture I would like to start seems to me to be a natural extension of entrepreneurial process, and of the free and open source software development models and ideas. The most general explanation is that I intend to start an organization who's goal is to apply as many of the principles that made the Linux operating system such a success to the design and development of computer and other high technology hardware.

The industry I will be analyzing is the high tech electronics and computer industry. Currently, they way business is done in this industry (for the most part) is that someone gets an idea, and keeps it to themselves and tries to follow through and make their idea a success, or gets bought out by a larger company looking for new ideas. What I want to do, is to give my ideas away to everyone, not just a select few, with the only condition being that they must, in turn, give away any ideas they have which are based on mine. What I hope this will do is establish a clear separation between ideas and production of a product for sale. When ideas are freely circulated, they become more powerful (and valuable) in direct proportion to the number of people who are exposed to them. In this way, ideas will be judged on their own merits, and not how well a product was marketed or produced. This will also result in producers being judged by how well they do production, rather than a bad producer surviving because they are the only ones with access to a revolutionary idea. Because I will freely circulate my ideas for all to see, someone may see another way of doing things that I did not, and return the favor that I did them by letting them see my idea by letting me see theirs. This model of doing business has been proven to work extremely well for the Linux operating system. Listed below are two papers on the web which I would recommend reading for more on the ideas that make Linux work.

These ideas have succeeded so well with open source software projects like Linux and Apache because software can be easily reproduced and distributed via the internet. The effort required to make one copy available to the public is the same as to make a million copies available. This is because of the fundamental design of digital information and computers. Computers are designed to manipulate and reproduce ones and zeros with very little effort.

My idea

Hardware, on the other hand, is a different story. To reproduce a hardware design is not within the capability of the average individual. It requires a large initial investment in time, and money to set up a production run for something. However, there are some rather interesting properties of solid-state electronics that are very similar to software. Like software, hardware requires a large investment of time and resources to design, and a small percentage to distribute. Creation a new design of a silicon chip, such as the Pentium processor,  RAM, or any of the support chips on a computer requires a great deal of money and resources. First, an idea must be developed into a design, and then the design must be verified and tested. Then, after that, a great deal of resources will be put into setting up a production line to produce the design. These two steps require anywhere from 75% to 95% of the total resources involved in developing a new chip. Once the design is in production, the incremental cost of making another chip (from raw materials and running the production line itself) is extremely small. Semiconductor makers are effectively "printing money" after they have recouped their initial investment. This is why hardware and software are similiar: the incremental cost of distributing both is very small.

The role the organization I want to create would play would be to act as a focal point for the the exchange of information, and would profit by taking the best ideas and turning them into real and marketable products. Instead of having my organization go through the first step of design, I would encourage entities and stake holders outside my organization to do the design phase of the process. This way, the end customer is intimately involved in how my products turn out in a way that no current company in the high tech industry can match. By doing this, I will eliminate several of the major risk areas in high technology. No one has a better idea of what they actually want than the customers, and if they have a stake in the design of a product, they will be much more likely to buy it than if they did not. My customers for my hardware products will be my suppliers for my 'intellectual property'.

 Competitors & Strategic Groups

I would speculate that in some ways I will be in partial competition with existing hardware companies, like Apple Computer, Compaq, Gateway 2000, and Intel. I may also be indirectly competing with Microsoft, as my products will use open source software, which is in competition with Microsoft. Currently, the combination of Microsoft, Intel, Compaq, and the other large Windows-based personal computers manufacturers and resellers form an extremely formidable strategic group. With their resources and size, I will have no chance whatsoever in direct competition with them. Intel has come to the point of dominating the processor market, and effectively dictates the standards. There are several other processor 'clone' makers that attempt to compete with Intel by offering lower prices or going for special market niches with processors that follow Intel's standards.

Microsoft is a much larger player in computer hardware than what one might first think. By controlling the software that 95% of the PC hardware runs, they have the capability to dictate what succeeds and what fails. All of the current people in this industry are intensely competitive, mostly competing on price of the product. In my opinion, there is also very little innovation going on, as the standards are set by Microsoft and Intel, who are both large, established companies.

For my idea to work, It must be a substitute to what is currently offered. My company should also be able to resist being bought out. There is a very strong tendency in this industry for the big companies (especially Microsoft) to buy anyone that looks to be even a remote threat at being a competitor. I can accomplish being a substitute by using the already well developed Linux operating system, and many of the products available for it. My organization will also be able to resist a takeover attempt by releasing as much information as possible, as often as possible, under the conditions that if it is used and modified by someone else, they must also release the modifications back to the community. One reason that small innovative companies get bought out is so that the buyer gets control of all the ideas and intellectual property of the small company. If I make all my ideas and intellectual property available to the public, there is no way I (or anyone else) can take it away again. This would elimate most of the incentive for some larger organization to buy me out.

However, someone always brings up the point that anyone else can steal now steal my ideas and try to profit from them, or claim them as their own. I believe that this threat can be dealt with by the simple fact that my organization will continue to provide free information flow, and that this will be a very important selling point for any particular products I produce. My organization will be based on the free exchange of all information used to create my products, and not on any one particular product. This way I will be insulated from the dangers of depending on the success of one product or several related products. The only real danger I see is from a large corporation actively trying to put me out of business. This can be avoided by staying far enough from existing product lines to avoid being a threat and concentrate products on unfulfilled niches.

Entry Barriers

There are extremely large entry barriers to immediately starting this organization. First of all, I will be starting with no designs, and getting the first design put together will be the most difficult. Second, most high-tech operations are high volume to make up for high initial costs. Because of this, raw materials are often ordered in lots of 1,000 or more. This usually means an up-front cost of anywhere from $10,000 to $200,000 if my product is based on off the shelf commodity components. If a custom design of a particular part is needed, that can run from $100,000 to $1 million.

To make things even more difficult, I will be using a theory of operation that is many ways diametrically opposed to current business practices. Most people in the industry believe that to be successful, a technology company must hoard its ideas and protect them as their most valuable asset. Since my organization is based on the premise that ideas are only valuable if they are shared with everyone, this will be seen as a threat by organizations with the other mindset. I will find it extremely difficult to get specifications and information from large established companies because they will not want me to share this information.


To be able to succeed with this venture, I will have to start out with a small niche product which uses Linux as a software base. I will also have to find a niche that will have customers who are already familiar with the existing free software culture and mind-set. This way I will not have to deal with the differences in paradigm that will exist in the mainstream market. If I start in an area familiar with the free software culture, I will have a chance to gain the support of the free software community. In this culture, cooperation and sharing of ideas for mutual benefit is the norm. By starting there, I expect to find other individuals who have similar ideas to my own, and realize that by cooperating, we will both benefit much more than by competing. I also intend to use this community to help me decide which product to begin with, as they will be the first group who will be buying it.

I also want to solicit support from new entrepreneurs with ideas they would like to see implemented. The driving force for most entrepreneurs is that they see their ideas to completion. I want to build an organization that will provide the means to turn other's ideas into reality. I believe that something like this has not yet been done because of the state of communications and information technology had not yet reached the point to make this possible. I believe the internet is the sociological and technological means to make this finally happen. The success of the Linux operating system has proved that the concepts I talk about in this paper are valid for software design. Linux has shown that a group of interested people from all over the world, most of which have never even seen each other face to face can create something which is difficult for a multi-million dollar company like Microsoft.

I believe that these concepts that made Linux such a success can be applied to any technological or engineering endeavor. Computer hardware is next natural extension of where these ideas can be applied. I believe that Linux-style engineering development naturally tends to be a self controlling and directing operation, without the need for layers and layers of management that do little real productive activity. I view the process similar to the process of evolution in nature. The best-fit ideas compete among themselves for survival, and cross-pollinate among themselves to create better ideas. This theory only works if ideas and information are shared, and works better the more they are shared. I want to do this because it will create a quantum leap in productivity and allow all of use to do so much more than we can now.

 Troy Benjegerdes /