The Difference between Code and Product with Adam Jacob

This week on The Business of Open Source, I spoke with Adam Jacob, founder and CEO of System Initiative and formerly the CTO and co-founder at Chef. We had a wide-ranging conversation that at times veered into the philosophical (what is the meaning for ‘strategy’?) but also has plenty of concrete, practical insights.

We talked about:

• The difference between being the CTO and being the CEO of a startup, even if you’re a founder in both cases (and why Adam wanted to try out the CEO role this time)
• How Chef started out open source primarily because Adam and his co-founder really believed in open source values
• How they figured out a business model for Chef, but that it really felt like they were just making it up was they went along — and how he suspects that’s what most people do
• Getting disrupted four times, and trying out many different business models along the way
• We also talked a lot about total addressable markets, serviceable available market and serviceable obtainable market in the context of open source companies.

Three key takeaways:

• The software is not the product. A product is the entire experience of using the software, including how it is installed, how the team is onboarded, what compliance certifications you have, what happens if you have a problem, etc. As a vendor of open source software, you need to focus on creating and selling a whole product and take the focus away from the code.
• You can have 100% open source code and still sell a product, because they want to have a complete experience with support and compliance paperwork etc — and because they value buying those things from the same people who are writing the code.
• The way to calculate TAM is to multiply the number of people who want to buy a product by the average selling price of the product. When you phrase it this way, it becomes obvious that the TAM for any open source software is zero, because the average selling price is zero.

If you enjoy this podcast, please share with other founders and leadership in open source companies!

And if you like the idea of open source lawyer trading cards, reach out to Adam and he’ll start a physical product company next :).