Sensorica: Self Managed Open Network Innovation

Back at the Peer Value conference last year I had the chance to hear a presentation by Tiberius Brastaviceanu from Sensorica that was really impressive. Open innovation is my passion and I work with my clients finding great ideas around our WeThinq platform. I believe open innovation is often seen very limited where company gradually open up for external expertise to innovate. Instead open innovation needs to be practiced in a network, where people collaborate open and effectively. Sensorica represents such a progresssive form of open innovation. I hope you enjoy the interview as much as I did.

Christian: I'm sitting here with Tiberius Brastaviceanu, who is from the company Sensorica.

Tiberius: It's not a company actually. It's a network. We call it an Open Value Network. That's the model. And the name is SENSORICA.

Christian: Exactly. That's why we're here, because this is a super interesting approach where you're basically having a network instead of a company, if I got it right, about open hardware. You’re having front companies, or legal entities, where you deal with normal contractors or people who are interested to work with you together, but your whole innovation process works within a network, and that's super exciting. Tell me more about it.

Tiberius: The idea here is that the Internet allows people to gather together from all over the world to work on projects. This is what open-source development has demonstrated. How can we take that process and turn it into a very stable and predictable economic system? What it means is that if you go and knock on the door of an open-source community, and you say, "Can you guys build this?" you don't know for sure when they're going to start, when they're going to finish. They might come up with something different because they like that better than what you need. There are these problems of reliability, predictability. Then you have the problems of allocation of resources. If you give money to this community, how are they going to use it? How are you going to trust them that they're going to allocate it in a good way? The whole idea of SENSORICA starts with the observation that open-source communities have demonstrated that they can innovate very effectively. We call that endogenous innovation, meaning an idea comes from the community, and is brought to a prototyping stage or product stage by the community, like Linux, Mozilla Firefox, and all these things. We also have a lot of open hardware projects that are done in the same way. What if a company, a government, or a university comes and proposes an idea? How do you know that they're going to do it the way you want it, and they're going to use a budget in a normal way?

Christian: Or they come with a real problem, and they need a solution.

Tiberius: Exactly. What we have done, we have built some tools, governance, and methodologies, to make these open-source communities more reliable, more accountable, in order to be able to function like any company would function, but without compromising the network and that network dynamic. This is where the secret lies in innovation. They're very effective at innovating. They're very creative. Without killing the goose with the golden eggs, how do you make open networks more predictable and more accountable? This is how SENSORICA has evolved into an economic agent.

Christian: How can I imagine this network to be? How does it look like; laboratories, individuals, groups? How does it look like?

Tiberius: There's a lot of work that is done in a virtual space. A virtual space is a website with some project management tools, with a database where you have your designs or you have your pictures and videos, with communication and coordination tools. Imagine a virtual space where you interact with people and collaborate. Sometimes you need a physical space to do some prototyping if you are into hardware development; do some soldering, some electronic boards and test them, and so on. There is a physical component to the network. We call these physical hubs. The physical hubs look like a fab-lab or a maker-space, where people bring their stuff, or the community buys community stuff. There's a lot of stuff that is owned by people, stuff that is owned by an organization that we have created to own it, which we call the Custodian. It's one of these peripheral legal structures. You have a network of individuals providing resources, some of them are physical, that end up in a space that people use, respecting some rules of access of use...

Christian: You have to be a member of network, or how do you organize who's being part of the network?

Tiberius: It works like an open-source community, meaning that if we have a project, we have project management tools, so we break it down into tasks. We mostly do Agile-type development. There are tasks that are created from these project management methodologies and anybody in the world can take a task, and no one can block someone from doing the task.

Christian: So it's public?

Tiberius: It's public and it's open in that sense. We don't call sensoricans members, because people can get confused as being member of Facebook, of being member of Uber. That membership is something that provides me a service, as a member. We call ourselves affiliates, and we think about our relations as we are affiliated with each other, it's a truly peer-to-peer network, meaning we're not members of..., we are affiliated with each other into peer-to-peer network. Anybody can join and be part of it. It's super open. The definition of a sensorican: somebody that has logged a contribution within our system, the project management system, and has documented something. That's all.

Christian: How does it work if I'm a government, I have a problem, I know that this network is amazing, and comes up with great solutions so I entered one of the entities to have a contract or something, and then this problem enters the network. What are the next steps then? Who's taking over?

Tiberius: First of all, we're talking about interfaces. If you want to engage with a network like that, you have to recognize that there is such a thing as a network that exists, and you have to recognize a point of contact, that is the interface. You recognize that there is something there, and you see a point of contact and then there are mechanisms in place to establish a relationship. In the beginning, we had this interface problem. Somebody comes to you, because you're doing so much stuff that peoples think it's amazing, they see your documentation, they say, "Wow, these guys are really doing something, I want them to do something for me." When they came to us, they were asking, "What are you? Are you a not-for-profit organization? Are you a co-op? Are you a corporation? How can we deal with you?" We used to say, "No, we're a network." It is just a bunch of individuals and we're doing this stuff for us. Once we realized that we do have a market value, and we realized that we could interface with universities as clients, or companies as clients, or the government as a client, we had to build these interfaces. We put in place some corporate structures. We have a nonprofit organization that can, for example, deal with the government. If the government has a project can knock on the door of the nonprofit. That's what they see. Then the nonprofit has a bank account, and can receive some money and distribute it to network affiliates, participants, according to SENSORICA's methodology for re-distributing and allocating the funds to the project. The actual work happens outside of this organization. Network affiliates do stuff, they log their contributions into the project management system, and the money gets distributed to them according to who does what and how well. There is also reputation, and there are quantitative ways to evaluate someone's input to the project. The government deals with the network through this nonprofit organization, but the work is done by the network, which deploys beyond the nonprofit. That's fine, because the government only sees the interface. They see something that they recognize very well and it's now just a matter of trust. How do I know that this network beyond the nonprofit that I see, is reliable, accountable?

Christian: Did you choose for this a cooperative crowdsourcing approach, you mentioned not a competitive approach, so your network doesn't compete about the best ideas, it's about cooperating to find together the best idea?

Tiberius: This is a good question. NASA, for some years now, has experimented with crowdsourcing of innovation, and they have used the XPRIZE. XPRIZE is an organisation that runs a crowdsourcing website, and you can post problems. NASA comes and says, "I have $100,000 for whoever solves this problem." That information is public and people from all over the world work on the problem, they provide a solution, and NASA picks the best one, and that's the winner of the prize. We call this competitive crowdsourcing. There are people that are competing in silos to provide the best solution, and hope to be chosen. There are two major disadvantages with this [process. First, there is a waste. If you have 100 people competing and just one person winning the prize, the work done by the other ones is wasted. That is an externality. NASA gets the solution at a very good price, one-tenth of the normal cost if they would get the solution by hiring experienced PhDs, engineers with high salaries and all the social benefits. NASA sees a lower cost to innovation, but the social cost of that innovation is probably higher than what NASA would pay normally, because there is a lot of people that have done work and haven't gained anything from it, they are the losers. It also generates a sentiment of loss and some frustration. If you participate two or three times and you don't win, I wonder if you are going to go for the fourth time or fifth time? Right? That's one major disadvantage. Another disadvantage of competitive crowdsourcing is... Let's say you have ten propositions of solutions, and you choose the best one out of ten. What you end up with, is the best solution out of ten solutions. You don't get the best possible solution.

Christian: You're still at the idea level, right? You don't know how that idea will be implemented on. If it is the end will be the best solution too, right?

Tiberius: No, no, suppose you are choosing the best solution out of ten. Let's suppose that this project is about building a bridge, and you choose the best design from ten designs of the bridge, and you discard the other nine. Now there's a high probability that the nine others that you have discarded have some good features that the best design you choose doesn't have. Imagine you can put all the best features from all these nine propositions together, you get the best possible design, but in competitive crowdsourcing you end up with one best out of ten instead of the best possible one. If you look back at all these designs it is very hard to say, "Well, I'm going to take the best design but I am going to replace the legs of the bridge with the ones from another design". It's very costly to do a remix of designs, because if you design a bridge, you design a system, and if you change the legs of the bridge in one design, you most probably need to change other things as well, maybe change the construction materials, maybe the layout, maybe the shape, or other structural elements. All structural elements are tied together into a system. It is very costly to do a remix of these designs and get the best possible one, so this is another major setback. Because we have build a system for collaborative crowdsourcing, we can invite all these people to come together at the table, to put their best ideas on the table. These best ideas get into the design process early on, and you have the best chance to get the best possible design out of the process and you say, "I have $100,000 for this project and you will distribute it according to everyone's contribution." So there are no loser, and the guy that contributes more gets more, the girl that contributed less she gets less, the other guy that contributed even much less he gets less. It feels better, nobody walks away with nothing. There is a sense of fairness into the process. Because you're remixing all these good ideas, you have a better chance to get the best possible design instead of the best one out of some, right?

Christian: It's super interesting. The group or the team who started implementing it or the network of people, is there any inexperience, any matter of size? Something smaller or more efficient, or it's not even possible to go beyond 50 people cooperating. Or is it indefinite, so there can't be like super many small tasks, there can be hundreds of people even contributing something as in open-source?

Tiberius: Well that's the key when you move to crowdsourcing processes for design and prototyping, you need to go into these larger scale systems, and the more people you have, the more stable the process becomes. Because you are not hiring people and forcing them to be on the project, or having these powerful incentives to be there all the time. People come in and out, so there is a certain degree of volatility. In order to maintain the project going you need to operate above a certain critical mass. You need to have at least a minimum amount of individuals to take care of the core processes, and if someone leaves now, you have so many other individuals around that the probability for this individual to be replaced is almost 100 percent. If you're operating at a very small scale, you have a lot of fluctuations, a lot of instability. If somebody leaves, because it's a free system, then if it takes too much time to replace the individual the project might stall, might be blocked, if that role is very important. You can break down activity by roles: support orientation, facilitation, coordination (which are like project management functions), administration, accounting, etc. Some are core structural roles. Then you have the little technical roles that can be filled by almost anyone. Any developer that knows how to write a code, or put some hardware together can do a particular technical task. These developers are highly replaceable because they're not very context dependent, they don't need to have information about the project from the beginning and the end. There is no need for institutional knowledge or memory in their case. There are different types of roles and some activity can be broken down into very small tasks that are taken sporadically by individuals. Other roles require more core involvement and sustained involvement by individuals. You set up incentives around these roles... If you contribute to coordination, orientation, facilitation, if you're like a core member of the project, maybe we carve out a bigger portion of the budget for you. Just to incentivize you to stay there more.

Christian: Because it's a key role, to keep the process going to have the predictability that's at one point solved?

Tiberius: Yeah. Now the idea is, how do you design this incentive system in order to keep this thing going for as long as you need it to go? This incentive system can be very complex. It's not just about money. Let's say there is a scientific accomplishment associated with the project. Who's name goes on the paper, and who's name will be first, and second, and third?

Christian: Who's the ideal owner?

Tiberius: Exactly, who gets the spotlight. Who gets to be recognized, who gets the money. You wrap the project into a system of incentives. These are new entrepreneurial skills. How do you set up an open project so that it can become an attractor, so that it can keep on, or continuing attracting people, knowing that people will leave after a certain amount of time...

Christian: Adapt to conflict as well?

Tiberius: ...and keep your key people...

Christian: Adapt to conflict as well?

Tiberius: Well we have governance in place with some rules that we have developed over time, based on the problems that we experienced, with conflict and decision making processes and so on and so forth.

Christian: Super interesting. One more question, which I found interesting in your presentation, you were saying it all works very well for innovation, but the major challenge now is manufacturing. If you can highlight or illustrate a little bit, what is the difference and why is this network approach difficult or a challenge to manufacture or to go into manufacturing?

Tiberius: I'll answer this question, but I think that the answer to the first one was not completed. When it comes to interfaces... Let's say SENSORICA creates a product or a service, and now we have to exchange it on the market. We have built organizations that are essentially corporations, which absorb the liability of the product. It's a bit like Red Hat for Linux. There are these corporations that sell the products produced by the network and they're essentially just interfaces, just empty shells. They put their name on the bill, on the paper, on the invoice. This is another type of interface for networks to market. The example I gave before with the nonprofit organization could be an interface with academic institutions for research projects or with the government. There are different types of interfaces that can build around the network just to plug into what exists, the market, the government, academia, so on and so forth. Now for this last question. Networks don't know yet how to manufacture. Prototyping, we have done it very successfully. An academic institution comes to SENSORICA and says, "I want an open-source scientific instrument..." Note that we only deal with open-source stuff. It's not just a matter of philosophy. It's a matter of trust within the network: if it's open-source you can use the design to make money, but the design is also mine, I can do the same. It's also a problem of being transparent. The more transparent you are, the more people understand what they can do to help and decide to do something. If they don't see, because you're not transparent, they don't come [don't join the network]. In order to sustain a project, you have to sustain this influx of people with good ideas. They need to see you, they need to understand what you do, understand what they can do for you and jump in. It's open-source style development. A University can come to a network like SENSORICA and ask for a prototype, a machine, a device. We have successfully delivered that. When it comes to production of one device, or two or three, we can do that. Small volume, we can deal with it within our own physical infrastructure, the physical habs that I mentioned before. They look like fablabs or makerspaces. We can put together a prototype and make it look very nice. What we cannot do, is design for the mass market... not design, sorry, manufacture for the mass market. In this case you need to put in place supply chains, you need to get your raw materials and components and you need to put in place assembly and manufacturing facilities. These are very expensive, and we don't know how to run an assembly and manufacturing facility in a decentralized way. We don't know how that could be done.

Christian: How does the material arrive, who is ordering it... logistics?

Tiberius: We have never experienced that. Innovation can be done more sporadically. Here's an idea, drop it there, go do something else. Come back tomorrow, drop another idea, tweak the design. Innovation is done. We know it can be done in a decentralized way. It's easy when you deal with non-material things. Wikipedia, this is how it got built, one word at a time. But wow do you manufacture a car? You can do it in a shop, but how do you manufacture 10,000 cars in an open way? That's a big problem. When you go into production of physical things, the costs and the complexity scales with the volume. We don't know how networks can do it. What we are trying to do is build relationships with organizations that already know how to do that, like corporations, or co-op that are tuned for manufacturing and they already have their supply chain. They already have relationships with their suppliers and they get good deals. It arrives on time and they know the quality and they trust. They have the machinery, the equipment, the people that are experienced to work with it. It's funny to say, but the network outsources production to normal companies. The value proposition here is: you're a manufacturer... if you create a relationship with SENSORICA you can forget about innovation, don't break your head with it. Plug into the SENSORICA network and you have a pipeline of innovation. We will supply you with new innovation and you just do what you know how to do best, spinning these machines and produce these products. It doesn't necessarily have to be mass production with supply chains starting from China, it can be local... There are local manufacturers that are using local materials and distribute locally. Open networks don't know how to manufacture.

Christian: They already reached some certain numbers. You're pulling these companies who have manufacturers capabilities into the network, right? You make them part of the network, if it really...

Tiberius: It's obvious now that companies, institutions, are not innovating fast enough. Innovation is accelerating. What drives innovation today, it's open environments, open communities, open-source communities. The way companies try to stay on the front of innovation moving with that speed by ingesting innovation, is by acquisitions. "Here's a new start-up, it's interesting. I'm going to buy it." This is how they keep up innovating... Even Google, they have problems now keeping their engineers and keeping their innovative people. They just go by acquisitions. That's the way they can increase their speed, just ingesting these new start-ups. But that's not enough. The newer stuff, 3D printing, drones, Blockchain came out of open-source communities. Companies have to realize that they don't have the agility to innovate as fast as the innovation goes. There is a new cellphone every six months. The speed of innovation is at the breaking point of the corporation. The structure of that organization cannot sustain that speed. They have to realize that they have to leave the innovation where it's done very effectively and just focus on something that they can do well... They're the ones who really know how to do it [manufacturing] well. We want to create this symbiotic relationships between corporations and SENSORICA and say, "You just do the manufacturing and we're going to be your innovation pipeline." That sort of dependency creates a funny relationship between the peer-to-peer economy and capitalism or the market economy. Essentially you deprive these companies into open networks. It becomes truly a symbiotic relationship, meaning that one cannot exist anymore without the other. Manufacturers cannot stay relevant on the market if they can't innovate. In my opinion, this is a way to subject corporations to the logic of the peer-to-peer. Peer-to-peer has the upperhand on the new gold, which is innovation today.

Tiberius Brastaviceanu is an active affiliate of Sensorica and co-founder. He is an invited expert for European Commission Horizon 2020 and stakeholder board member of the P2PValue Project. He is one of the main architects of the open value network model. For Sensorica he is developing sustainable, self-organizing ecosystems based on open innovation.