The future of our open source world by John Hagel III @FortuneMagazine October 26, 2012, 4:49 PM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons The term “open source” was first coined in response to Netscape’s January 1998 announcement that the company would make freely available the source code for its web browser, Navigator. Since then, the philosophies of universal access and free redistribution of source code have revolutionized the software industry.While we have seen how open source communities can foster creativity and collaboration in software (think of the Android app store), open source has not ventured too far beyond this space. This is partly because software is inherently modular, instantly accessible from anywhere, and easily altered.Yet open source ideas have tremendous potential beyond software. All you need to create a successful open source community are participants who both contribute to, as well as benefit from, shared content. Such networks of transparency, collaboration, and trust can be tremendously beneficial in other industries as well, from pharmaceuticals to manufactured goods.MORE: Home Depot knows when to call it quitsWe have already begun to see promising results from applying open source philosophies to hardware development and manufacturing. Consumers have taken the lead in the open source hardware movement, embodied by the popular “Maker Movement.” This subculture of hobbyists and Do it Yourself (DIY)-enthusiasts has driven the rise of collaborative, community “hacker spaces” as well as the hugely popular Maker Faires in cities across the country. The business community has not ignored these makers; venture capitalists are certainly paying attention to the developments.Open source hardware is more than just a consumer movement or startup fad; the business implications for established firms can be significant as well. Arduino, an Italian electronics prototyping platform, has benefitted from its open-source model. Arduino publishes all the designs and schematics for its products, including its popular circuit board, for anyone to use, modify, or sell themselves. How does Arduino make money? The firm makes the bulk of its income from delivering consulting and design services to those looking to build devices based on its circuit board. By building a reputation as a trusted advisor, Arduino has developed a competitive advantage while still capitalizing on third party input to make each generation of its circuit board better. According to a Wired interview, contributors with access to Arduino’s designs have offered improvements to the programming language and wiring, which have significantly boosted sales.Although the open source model has not yet been broadly applied to manufactured goods, there are promising emerging examples — particularly in the not for profit sector. One nonprofit group, Open Source Ecology, is experimenting with ways to cheaply construct from scratch over 50 crucial machines, from bakery ovens to back hoes, with basic materials. Founder Marcin Jakubowski publishes all the blueprints and schematics for each piece of his Global Village Construction Set (GVCS) on a Wiki for contributors from all over the world to access and tweak. Groups throughout the country have developed blueprints for Open Source Ecology, while machines are prototyped and improved on the Factor e Farm in rural Missouri. According to the group’s website, 12 of the 50 machines are in their prototyping and documentation phase, including a microtractor, backhoe, and CNC circuit mill. Through this construction kit, Open Source Ecology aims to lower barriers to entry for farming, building, and manufacturing in rural communities, urban neighborhoods in need of renovation, and developing nations.MORE: Do psychopaths make good CEOs?Despite early signs of success, there are, admittedly, real challenges to implementing open source principles to for-profit manufacturing. For one, open source hardware projects often require participants to have access to tools and space. However, as hackerspaces and hobbyist movements grow more popular, more individuals and groups should have access to these kinds of resources.Branding and intellectual property issues are also more complicated in open sourced projects. If designs are open to anyone, then the owner of those designs cannot ensure uniform quality for the finished products. And it is more difficult for firms to track and monetize the finished goods themselves. Open sourcing requires a fundamentally different attitude than firms typically take towards collaboration. These firms must reconceive how a product’s worth can be captured and distributed, and weigh the tradeoffs between transparency and intellectual property protection.Despite these challenges, we believe open source models have significant untapped potential when it comes to hardware. Imagine, for example, if automakers formed ongoing relationships with hobbyists (like Team WIKISPEED) or even small third parties working on the edges of their industry. These smaller groups, if given access to hardware and designs, could bring fresh ideas to the table. In return, these groups would have access to the larger firm’s infrastructure, machines, and expertise. We believe that such a model could advamce learning for all and encourage the development of solutions to some of the industry’s toughest challenges (for example, creating more fuel efficient cars at affordable prices).This mutually beneficial relationship creates a scenario where each participant can tap into the skills of others in the network while contributing their own skills to the mix. We believe open source hardware is a step towards a model of economic interactions based on trusting relationships, a model which can create valuable results for everyone involved.