By: Marta Domínguez
The impact of Web 2.0 has lived up its early technology buzz, and has produced a new ‘economy’ based on sharing. Many firms are seeing these new technologies as facilitating innovation, but are unsure about how best to exploit them. This article is the opener to a series of pieces on how to achieve innovation using the enablers offered by Web 2.0.
Web 2.0 epitomizes the success cases of ventures such as Wikipedia, Flickr, Google, Facebook and Twitter, and movements such as open source software. It has changed the rules of Internet business and is living up to the hype, with offerings that are very different from those generally available at the beginning of the 2000’s.
Web 2.0 –A promise of innovation and success
The new economy is based on three pillars. These are communities, collective intelligence and collaboration. A major breakthrough in technology has made it possible. Harvard Professor Andrew McAfee describes it thus: ‘the www put a multimedia printing press and a global distribution network in the hands of everyone’. Managers often associate Web 2.0 with the use of platform tools such as blogs, wikis and social networks, and the work with terms such as tags and RSS (Real-time Syndicated Service). Whilst the principle behind the concept of Web 2.0 needs some explanation, the popularity of the Internet firms above is attracting managers from all industries to exploit its potential benefits.
Linking Web 2.0 to business
When considering Web 2.0 in business there are two areas where to look for impact. One considers the new opportunities regarding improved commercialization of products, Another sees the benefits on collaboration and knowledge diffusion among employees and also from outside the company. In addition to the Web 2.0 enabled companies referred to above, other companies in industries such as the so called FMCG (Fast Moving Consumer Goods) sector, and the banking and technology sectors are seeing increased innovation. According to a study by Forrester, one in four companies (mainly big companies) in 2008 set priorities with regards to Web 2.0. A recent global survey by McKinsey, shows that among companies that have tried and implemented Web 2.0, 22% were dissatisfied with results. Why?
Web 2.0 in practice: a call for failure
A common misperception among organizations and enterprises is that it is not necessary to have a formal strategy to exploit Web 2.0. Many firms have tried to introduce Web 2.0 by bringing the topic in the agenda of a directors meeting and then, either the marketing or the information technology department, taking ownership and launching blogs and wikis first for internal company use before extending them outside the firm. Results will be mixed, and especially if goals have not been established. Despite the hype surrounding Web 2.0 and its tools, the greater participation they enable solely can not be used as a valid argument to drive a successful adoption in business. This is because blogs seldom will function as self managed entities.
The success cases of Dell and Wells Fargo
When the computer maker Dell introduced its community www.dellcommunity.com it had clear goals in terms of the information and services that would be made available to its customers and how employees, experts and other people, outside the company, should operate within this community. It had clear ideas about norms, community policy and liabilities. Dell customers could find support to problems, and queries about Dell services, through its online forums. Of particular interest is that it is Dell’s thousands of volunteer community members that are providing this support. They constitute a virtual help desk manned by intelligent experts outside of Dell. The level of satisfaction among Dell customers appears high; they are able to skip the often prolonged phone conversations with Dell’s customer help desks. On the part of Dell, the company can exploit the cost savings elsewhere.
In other occasions, firms are interested in using Web 2.0 to know more about what clients need from the company. The US bank, Wells Fargo, has four corporate blogs that have become examples of good practice in corporate blogs. People trust the information provided in them as much as they trust emails from trusted friends.
Both Wells Fargo and Dell have coherent policies on participation in on-line communities and social networks although they exploit the tools differently. Wells Fargo understands that it is only selected managers and particular experts that can usefully interact with customers and through this interaction, refine the bank’s offers.
Expanding the knowledge market: Procter & Gamble
Web 2.0 tools have huge advantages over other collaboration technologies that have failed to work in unleashing knowledge. Although many are encouraged to participate, only a small fraction is actually a content contributor. And getting people to participate is crucial for identifying new and interesting ideas. At the beginning of the 2000’s, Procter & Gamble launched a programme called Connect and Develop, aimed at connecting its research centers and engineer across the world. It currently has participation from over 9,000 developers.
A few years after this programme was launched, they introduced blogs and wikis in the flow and the idea of open innovation, with a goal of 50% of their innovation ideas from outside the company. Connect & Develop is used intensively by Proctor & Gamble’s research centers, as well as by innovators outside the company who contribute with solutions and ideas, many of which are exploited by the company’s marketing and business units.
Example of a short innovation path
Including Web 2.0 in the flow of processes and programs of a company provides a credible argument for directors who have taken the lead of Web 2.0 initiatives in their firm. It also helps companies’ managers establish goals in terms of how blogs and wikis fit with their business strategies. The so called path of innovation can be short term with innovation related to changes to customer service (e.g. Dell’s community) or branding, or fostering customer loyalty (e.g. Wells Fargo’s blogs). On the other hand the innovation strategy may be a long-haul path involving decisions made based on their strategic significance. For instance, about transformations to the core business or business model.
Long term innovation strategies: BBVA
Banks, traditionally, have not been threatened by innovations introduced by other organizations trying to enter their sector because of the barriers imposed by security requirements and regulation. However, the Internet is opening opportunities for firms keen to enter the sector, e.g. PayPal, CheckFree and Amazon, which are offering new payment models that are becoming popular with customers.
Many on-line start ups are providing tools to enable customers to manage their personal finance. Some of the larger banks, e.g. BBVA in Spain, have responded to these evolutions in the market and are rethinking their on-line banking models. They are experimenting with how to combine Web 2.0 capabilities, such as personalization and information aggregation, with financial services that make the customer experience simpler and more relevant.
Goals and beyond…
Yet there will be so many companies that try Web 2.0 because setting the goals alone is not the sole thing to achieve success like the examples mentioned above. Companies must anticipate what their innovation path will be and manage it accordingly through each of these three levers: technology, managers and employees.
By Marta Domínguez
About the author
Marta Domínguez founded i-Thread Consulting. She acts as a strategy advisor and technology expert to start ups, technology companies and telecoms. She has more than 15 years experience in new product development and technology-enabled innovation in large companies. She has held several executive positions in Vodafone Spain where she worked closely with the executive teams in other countries within the Vodafone Group, on new mobile business developments. Early in her career she worked in the Netherlands on software engineering, eventually becoming a technical team leader in Lucent Technologies Bell Labs. Marta is a professor at the IE Business School in Madrid, Spain, where she leads their Technology & Innovation Forum. She has authored a number of reports on ICT´s and innovation strategies at corporations focusing on banking and financial services companies. You can read her blog at www.the-i-thread.com