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Reading Mike comments on companies being responsive because of competing with Open Source prompted me to send a few links into the blogsphere. Now I don't run a company or anything, so this is theory only, but hey - it's the Internet - everyone's an expert.

Joel (of Joel on Software fame) wrote an interesting piece a while ago called Fire And Motion:

When I was an Israeli paratrooper a general stopped by to give us a little speech about strategy. In infantry battles, he told us, there is only one strategy: Fire and Motion. You move towards the enemy while firing your weapon. The firing forces him to keep his head down so he can't fire at you. (That's what the soldiers mean when they shout "cover me." It means, "fire at our enemy so he has to duck and can't fire at me while I run across this street, here." It works.) The motion allows you to conquer territory and get closer to your enemy, where your shots are much more likely to hit their target. If you're not moving, the enemy gets to decide what happens, which is not a good thing. If you're not firing, the enemy will fire at you, pinning you down.

If you haven't read it, you should.

I was alway impressed by the thinking in that article, and when I found Paul Graham's Beating the Averages article, I though the bit

Sometimes, in desperation, competitors would try to introduce features that we didn't have. But with Lisp our development cycle was so fast that we could sometimes duplicate a new feature within a day or two of a competitor announcing it in a press release. By the time journalists covering the press release got round to calling us, we would have the new feature too.

Very recently, I read an article about John R. Boyd, who invented a concept called the OODA loop (OODA stands for Observation, Orientation, Decision, Action). If you can execute the correct action before your opponent then you are inside their OODA loop, and you win.

From the software point of view, this is instinctivly true. Remember the browser wars? Microsoft got inside Netscape's OODA loop, and pushed new browser versions out too quickly for Netscape to compete with.

I believe that open source projects can have very tight OODA loops, and it can be difficult for a company to gets its loop tight enough to compete with them. However, if a company can get its OODA loop smaller than a competing open source project, it can probably sustain it longer - most open source project rely too much on volenteers to sustain a really tight OODA loop for a long period of time.

If your company finds itself up against an open source competitor then I believe this is the key strategy in winning. Just make sure the competition is not something like Linux, where the workers can actually get paid - You won't be able to compete in that market forever, unless you have very deep pockets indeed. If it isn't a critical market for you, it might be better to join them.