Social Business | On Digital Strategy | Dion Hinchcliffe

Ten Aspects of Web 2.0 Strategy That Every CTO and CIO Should Know

September 14, 2008 Leave a comment

Over the last year I’ve worked with organizations around the world that are attempting to grapple with Web 2.0 and the growing external marketplace pressure being exerted for the change and transformation of their businesses. Along the way, I’ve been fortunate enough to be able to identify and assemble a working list of some consistent recurring issues and themes around Web 2.0 strategy. I’ve provided them below at a high level. Your comments and additions are very welcome as we try to frame up a consistent picture of what’s happening in the marketplace.

It used to be a little surprising how long it’s taken for Web 2.0 to begin to have serious impact on or even high-level interest in the business world. However, the ideas have had staying power and have also largely been validated; there are now fundamentally different and very powerful new models for engaging with customers, designing our products, and applying technology in general to our business that are proven and have growing bodies of knowledge. The Web has become the single most important driving force in many fields of endeavor as well as the leading source of both innovation and potent new modes for communicating, collaborating, socializing, and working together. It’s taken a few years but businesses are now feeling the change in the air.

The Web 2.0 Transformation and Change Management Process for Business and Enterprises for CTOs and CIOs

However, as I’ve said a number of times in my various discussions of Web 2.0, the power of the network has deep roots in some profound shifts in society and culture, particularly the singular move from push-based systems (the 1.0 era going way, way back until right around now) to pull-based systems (the 2.0 era from roughly a few years into this century and going forward). That this shift is well under way is clear if you look at the sudden explosion of the blogosphere, social networking, social media, open source software, online communities, and peer production in virtually all things. The good news (or bad news, depending on how you look at it) is that despite the remaking of more than a few industries already — including media, software, advertising — this shift is only just beginning.

This all raises the question of how to make the transition from 1.0 to 2.0 safely and non-disruptively with your business largely intact, perhaps even with a superior competitive position. That this transition can actually be accomplished by most businesses is still far from clear though some early transitions have met with varying degrees of success. This list represents some of what we’ve learned so far about 2.0 transformation but it’s something that strikes at the very heart of most businesses today: The rules for success are not-so-gradually changing and the marketplace is driving it in an often-subversive grassroots, bottom-up way. The question now is no longer about “if” but increasingly about thriving long-term, period: What are you willing to do to adapt to a new business world?

This list is aimed primarily at CTOs and CIOs since they are mostly likely to be located at the convergence of traditional business thinking and the wave of 2.0 change coming in off the network. However these ideas apply to anyone looking at how to embrace 2.0 transformation in their organization and take advantage of it. This is one of the most exciting eras to be in businesses since so many directions are in flux and the outcomes, players, and market leaders of the near future are far from certain. Those who can see the new opportunities clearly through the lens of 2.0 transformation not only have a fighting chance, but are able to seize them with once-in-a-generation ease.

Note: I’ve dropped the “Web” in Web 2.0 for this discussion because one of the big lessons is that many traditional business thinkers turn off when they hear the word, even though Web 2.0 design patterns and business models have truly profound implications across any business today. Consequently, hat the Web is driving most of these changes is being considered incidental for this discussion (though it’s absolutely the opposite when actually executing on these new models.) Instead, this is targeted a discussion about the transformative models themselves (such as who creates the products and where, how they are used, who supports them, how are they remixed, syndicated, franchised, licensed, IP protected, etc) in a strategic businesses sense. At the core of this discussion is how 1.0 business models of the 20th century are very much being eroded, transformed, and frequently dethroned by the immense motive forces that lie in the pervasive, open networked systems we have today, which are taking us deeply into a very new place: the 2.0 era.

Ten Key Aspects of Web 2.0 Strategy

It’s not about technology, it’s about the changes it enables. While technology is a close second (and ultimately makes 2.0 business models possible), the real discussion is about the disruptive new opportunities it creates. Instead the discussion should be focused more around strategies such as harnessing millions of customers over the network to co-create products through peer production, engaging in mass customer self-service, customer communities, and open supply chains to thousands of ad hoc partners with open APIs. These are just some of the examples of using the network to create far richer and more profound results than could be created in the 1.0 era. Don’t get caught up in the technology of 2.0 at first other than to understand the business possibilities it affords. Avoid technology-first discussions like the plague. Premature monetization discussions around 2.0 are also to be avoided, they tend to have a negative impact on process if done too early.
The implications of 2.0 stands many traditional views on their head and so change takes more time than usual. In the 2.0 world customers and partners have a much closer, more sustained relationship because of social interaction and tightly integrated online supply chains, to name just two reasons. The shift of control from institutions to communities of users takes a lot of getting used to. Just understanding how and why intellectual property is better covered by Creative Commons instead of copyright will take the legal department years (if not decades). Each part of the organization will have its miniature 2.0 revolution. These take time to happen and sort themselves out. This means getting these new ideas into people’s heads is one of the first steps…
Get the ideas, concepts, and vocabulary out into the organization and circulating. If you’re trying to affect 2.0 change in an organization, there’s no better solution that exposing people to it. Demographics can be a problem in this situation depending on the industry. Younger workers tend to live and breath 2.0 while older workers may be aware of it but don’t think it applies to them. I use point education where change needs to happen either first or quickly and then internal communities that bring the discussion of change, innovation, and transformation to the entire organization. Either way, learning and education around 2.0 are a vital trigger to begin change and should be started early and non-disruptively.
Existing management methods and conventional wisdom are a hard barrier to 2.0 strategy and transformation. You don’t have to get far into discussions about the Perpetual Beta or Product Development 2.0 before existing management methods seem outdated, inflexible, and ineffective. This is one of the more difficult aspects of adopting 2.0 models and the implications is that we’ll have to do a lot of rethinking how we manage businesses driven by 2.0 models, where the boundaries of organizations are less clear, the ownership is much more community-based, and the outcomes are far more diverse and spread out, making them less trackable, controllable, and directed. Overhauling management practices and techniques will be a core activity in a 2.0 transformation and will be hard to achieve quickly enough due to the Innovator’s Dilemma.
Avoiding external disruption is hard but managing self-imposed risk caused by 2.0 is easier. The great fear than many businesses have is facing a fast-growth competitor that takes these ideas and either wrests away market share rapidly and aggressively or cuts them off at the pass with entirely new products. YouTube did this to the broadcast and cable industry, which responded with Hulu. Apple did this with iTunes to the recording industry and the blogosphere did the same to the newspaper industry. Other industries are next likely including the financial services industry, real estate, and others. Internally, however, risk management is still a challenge but is much more manageable. The big implication for this is that starting internally first with things like Enterprise 2.0 initiatives and prediction markets to learn the ropes on how to deal with unexpected outcomes and results can help organizations climb the maturity curve.
Incubators and pilots projects can help create initial environments for success with 2.0 efforts. Too much contact with the traditional support environment of an existing, primarily 1.0 organization makes it hard for 2.0 efforts to succeed; everything gets done in the traditional way instead of the new ways that are required. The traditional tools, processes, and skills just aren’t there or are just too slow and burdened with unnecessary overhead. Creating dedicated incubators that are designed to use the strengths of the organization while being isolated from its weaknesses can help. Incubators are at risk of becoming too isolated however, and won’t inform or change the greater organization unless care is taken to roll the lessons and capability back in.
Irreversible decisions around 2.0 around topics such as brand, reputation, and corporate strategy can be delayed quite a while, and sometime forever. Most organizations get paralysis around change and transformation because of concerns around decisions that can’t be reversed. Concern over damaging the company’s brand is one of the top issues I run into and it’s a valid concern. The good news is that many organizations are discovering they can safely leverage the advantages of their organization (such as their extensive customer base to drive initial growth of 2.0 engagement and adoption of new products and services) without dragging their brand into it whatsoever. New 2.0 products from major companies are now often released under new brands entirely. This enables serious experimentation with 2.0 while taking little risk to the organization.
The technology competence organizations have today are inadequate for moving to 2.0. This is key if you’re a CTO or CIO today; your organization is almost certainly not ready to handle the development, management, scalability, identity, governance, and openness issues around 2.0. If you’re not sure, just ask your IT staff. Examples include cloud computing, open APIs, mashups, rich user experiences, Web-Oriented-Architecture, community platforms, Enterprise 2.0, 2.0-era computing stacks like Rails and Django, are all disciplines that are considerable in their own right, of rapidly growing importance to organizations in the 2.0 era. These are all likely to be things your staff needs to come up the learning curve on in significant ways and with the rate of change on the network what it is presently, falling behind is too easy to do. Note: The existing technology landscape of most organizations will have to change as well which is where Web-Oriented Architecture (WOA) is getting quite a bit of attention today. And the Web products themselves have moved far beyond the model of the Web page and most enterprises are very far behind.
The business side requires 2.0 competence as well. This includes how to design, build, launch, market, support, and maintain 2.0 products and services as well as the ways that workers should use the tools and concepts to work together. I recently suggested that learning how to be effective in working within and directing communities of workers/users/partners to accomplish large-scale outcomes will be a vital skill in the very near future. All of this requires both a new perspective as well as a hard-headed effort at skill building and a re-orientation of existing work habits and processes.
Start small, think big. We have discovered that the leverage the network can give us is almost unlimited. It’s ability to scale ideas, products, and communities of users as fast as they are able to is one of the aspects that makes it so attractive to business. 2.0 products tends to be very simple at heart, and though there is certainly challenges and complications growing, small ideas can become big very, very quickly. Getting to the right solutions, not-overinvesting (which leads to complication and heavyweight management and processes) and letting customers and partners take the seeds of great ideas and run with them is what makes sudden success turn into a large-scale success. On the Web, starting small, and thinking big can take you a long, long way. Read more about network effects driven by architectures of participation .

Please share your ideas around what else is essential in a Web 2.0 strategy below.

Filed under Social Business, Social Media, Strategy, The Enterprise

Building Modern Web Apps? Better Have A Deep Competency in Web 2.0, Open APIs, Widgets, Social Apps, and More

August 24, 2008 Leave a comment

The Web has an interesting property that those building Web applications and online businesses usually encounter soon after they first launch: It has its own unique and unforgiving rules for success and failure. Appreciating them requires a certain level of understanding of the intrinsic nature of the Web and how it works. Actually leveraging those rules requires an even deeper and more profound understanding of the Web. The challenge these days? The Web competency bar is climbing fast.

To drive the right decisions in what they do product designers, marketing teams, software architects, developers, strategy officers, and other key roles in today's generation of online businesses need to have a solid handle on an extensive array of Web topics. This ranges from appreciating why plain old HTTP is so good at underpinning the Web to more sophisticated topics like modern application architecture, the latest in online user experiences, next generation computing models (grid/cloud/utility/SaaS/PaaS), cost-effective scalability, user identity, network effects, Jakob's Law, analytics, operations, user community, as well as the many compelling new distribution models that are nearly mandatory in the first release of most products.

This extensive set of competencies is what's required nowadays to deliver a credible online product to a receptive user base and it has dramatic implications for both uptake and overall cost/time-to-market. Worse, this body of knowledge has become extensive enough that many Web startups frequently fall far short of what they need to know in order to be successful with these far flung practice areas.

Does this complex body of knowledge mean the era of the two-to-five person Web startup is coming to a close? Not at all, at least not yet. The productivity level of the latest tools and techniques remains almost astonishing though the level of knowledge required of these teams is creeping up and up. And as we'll see, new models for product distribution are pushing the capability envelope of the typical Internet startup team to the point we may very well see the day soon that they won't have all the skills necessary to deliver a fully-scoped modern Web application. It is also one reason why fewer and fewer Web startups have the goods to be all around hits out of the gate.

Certainly, varying depths in subject matter are required depending one's exact role in a Web business, but Web-oriented products are fundamentally shaped the vagaries of the network itself. Tim O'Reilly himself still has the best quote on the subject: "Winners and losers will be designated by who figures out how to use the network." And as we'll see, the Web is driving the evolution of a major new generation of online distribution models.

Why Adopting New Distribution Models Is Crucial

As an example of this, I've been tracking some of the latest discussions around the hot topic du jour in the Web world: Social networking applications. Specifically, it's been interesting to watch the surprisingly low level of industry attention around the titanic competition brewing between social networking application formats from Web giants Facebook and Google. Why is this? Some might say it's because these applications still have largely unproven business models. Others, like Nick O'Neill at the Social Times recently observed (rightly in my opinion) that the struggle may have to do with a deficit in understanding why these new types of Web applications are so important. Nick notes that these widget and social networking style models for packaging and distributing Web apps often "have more eyeballs looking at their products than television channels have" and the challenge is that too many people just "don’t know what any of this means", despite the major players divvying up the online pie for themselves. With the size of these next generation distribution audiences, ignorance has an extremely painful price: failure to produce results and growth, poor engagement with the marketplace, and loss of market share.

An excellent summary of the truly massive, but largely underappreciated scale of these new Web application models was last week's TechCrunch piece on the progress of Google's OpenSocial, an increasingly successful model for creating portable social networking applications that will run on any OpenSocial-compliant site. Erick Schonfeld reported that OpenSocial now has a total reach of an astonishing 350 million users and it will soon be 500 million. There are over 4,500 OpenSocial apps today, a healthy number for the application format but a small drop in the bucket compared to the number of Web sites in the world. But the key is that these applications are integrated much deeper into the social fabric of an engaged audience, interjecting themselves into the daily personal and work habits of the "captive" users of social sites and even have access to the personal habits and data of users of these sites. Facebook's story is impressive as well with over 37,000 applications that have been installed over 700 million times.

And social networking applications are just one of many news ways that applications have to be packaged and distributed, yet far too many organizations persist in a very 1990s view of Web experiences, namely that Web sites themselves are the center of online product design. Many even think that some of these other new distribution models are interesting but not part of their core online product. Unfortunately, that's very much a parochial view in the present era. Federated applications, atomized content and functionality, 3rd party product ecosystems through open APIs, and much more are required to establish a strong and resilient network effect which fends off competitors that are themselves bringing these potent new competencies to bear.

In fact, one of the things we emphasize over and over again in our conference workshops and in Web 2.0 University is that having a Web site is usually the least interesting things about new products. Worse, it makes the customer have to find you amongst tens of millions of other sites. Instead, these new models tend to focus on going to the customer, instead of making them come to you which is a much harder proposition. This can instantly give you the ability to reach millions of potential people with dramatically lower effort and cost, as long as you have something interesting to offer.

Unfortunately, the number of capable practitioners of these new distribution models remains relatively small compared to the large body of experts in traditional Web product development. Demand is also low for these new skills as most organizations have been painfully slow to appreciate how much online product development has changed. A quick search of the job aggregator SimplyHired tells the tale: Nearly a thousand Web designer positions are available while only 36 OpenSocial and 40 open API positions are open, for example. This despite the the latter skills being able to project a product across the Web into hundreds of social sites or create an API that allows the product to be incorporated into countless other products for far less cost per customer than traditional methods.

The lesson here is that these new models still have a lot of fertile, unclaimed territory and many otherwise fierce competitors have not yet become fully aware of these new opportunities. Get your piece of the pie while there's still time.

I also find that the Web development industry has been slow to change, particularly outside the valley, and there is depressingly scarce information on how to deliver well on things like widgets, open APIs, social networking applications, and even syndication. To help with this, I've put together a short primer and some good references for those that want to get started.

Because the good news is that there remains tremendous opportunity for growth and success — for both startups and traditional businesses — if they will actively begin incorporating these new product delivery models into their own online capabilities.

Overview of Online Product Delivery Models

Web sites. This the classic model for Web presence. During the early Web, creating a Web site was just about the only option for engaging with those online (e-mail being the other.) Most early Web sites were used for publishing and not for user participation or peer production. These days, Web sites are still important, though by no means mandatory, and have their content syndicated via RSS and ATOM (pushing the content to where it's wanted), provide an access point to obtain widgets, and maintain user identity, and create communities of users. Upshot: They've evolved a lot but Web sites are only part of an extensive set of capabilities that must be brought to bear in the Web 2.0 era.
Syndication. It took ten years for the Web community to figure out a workable syndication model. Now RSS and ATOM are now the expected models used to distribute content off a single site and across the Web. Countless aggregation services now exist that make a site's information embedded in their services as well as a way to offer users a method for pulling information from a site and experienced in a means of their choosing, from Google Reader and Newsgator to the innovative Yahoo! Pipes. Most sites still heavily underutilize syndication even for notifications and pushing out frequently changed information to draw attention to it much less the strategic ecosystem and integration opportunities it affords.
Web 2.0 applications. You might argue that Web 2.0 itself is not a product distribution model but a set of design patterns and business models and that would be a true statement. However, in this context we're referring to the fact that Web 2.0 apps package up the 3rd major type of networked value: user participation. Before then, Web sites and syndication primarily had only centrally produced content or functionality that they could expose over the network and offer to the marketplace. In other words, user participation its purest form — sometimes known as peer production — ultimately results in products like Mechanical Turk and Predictify that provide direct networked access to user participation, but there are many fine gradations to this. The bottom line, Web 2.0 applications plug the user into the network like never before and are a critical rung in the distribution ladder since it offers access to the largest set of content and information by harnessing collective intelligence.
Open APIs and Web services. This is one of the most important long-term decisions most online businesses can make. Offering an open API lets anyone take the online components of a business, from its data and functional capabilities to the users themselves, and makes them open and accessible over the Web to be incorporated into other products and services, sometimes in the form of mashups and sometimes in the form of entire online products. Amazon, one of the first Web companies in existence and is hence far downrange in terms of the experience curve, has been using this distribution model with notable success recently. So have hundreds of others. The real challenge has been how foreign this model is to the original Web model and thus to the various management and development competencies in most organizations. It's much more an a way to OEM a product and leverage the customers and investments of hundreds of other partners. However, overall, it affords the potential for much larger business outcomes than could ever be created with point Web presence. It's now considered a significant oversight not to have an open API available for the typical online product.
Web widgets. Selecting parts of a Web site and it's data and packaging it up to make it run inside a portable, user distributable widget has been growing more and more popular over the last few years. For example, WidgetBox currently distributes 74,000 different kinds of Web widgets from its partners to over 1.2 million other sites. Widgets lets users distribute a Web site to other places on the Web at no extra cost and it also creates an ecosystem effect, where other Web sites users become the users of the new site. The YouTube badge is a notoriously well-known example of this that also helped drive the extraordinarily fast growth of the site. Like APIs, widgets are now considered a mandatory must-have for new and existing online products. But unlike APIs where it's up to the API users, figuring out users want out of your site's widgets is still an art form.
Social networking applications. Sometimes viewed as an extension of the Web widget model, social networking applications are applications designed to run inside of popular social networking environments and usually have capabilities that tap into and make use of the social graph information resident in a user's social network account. This is an amazingly fast moving field as you can see from a recent post on the latest happenings on the OpenSocial blog, to the extent it's hard even for well-funded companies to keep up. However, despite skepticism that large businesses can be built exclusively through a social networking application, it's become ever more essential for a site to make its capabilities accessible usable in these environments. Not only will users help distribute online products in these formats to their contacts but it also increases the overall usage of the your application including participation and its consequently growth of a site's network effect. While not yet considered mandatory for online products, the ease with which these social network applications can be created and the large numbers of users they make available makes it a smart distribution option for most Web businesses. Like widgets, however, figuring out what users will find engaging in a social networking application featuring your online product takes some research and experimentation. However, the results can be very rewarding and some social networking applications have millions of daily users. See the Plaxo Pulse story on Mashable for the details of how OpenSocial drove a 5x improvement in traffic in only 3 weeks.
Semantic Web and Web 3.0. The Semantic Web, one of the original visions for the World Wide Web, has taken a while to arrive but it's beginning to look like it may hit critical mass in the next 12-24 months. Combined with Web 3.0, which takes the architectures of participation at the core of Web 2.0 and drives it through a lens of Semantic Web capabilities. The benefits can be profound and can greatly increase the value and leverage of information on the Web. While this is very much not prime time yet, unlike #1-#6 above, it likely will be and smart organizations can get ahead of the learning curve and get an early market lead using these techniques. For now, however, I recommend that most organizations focus on executing well on the first six items before tackling this and waiting for the technologies to finish emerging and maturing.

The list above should provide good guidance for starting move into the potent new models for distribution on the Web. I'm seeing, however, that because of the major shifts in strategy and product design emphasis these techniques demand, most organizations take an inordinately long amount of time to become effective with them. The lesson here: Start small now and build core competency. Small investments now can pay off later in terms of valuable experience made from early experiments and pilots. When done right,
these new distribution models can become the dominant channels that the world uses to interact with your business, like they already have with Amazon and Twitter.

I'll be talking about these and other strategic online product design topics in my upcoming Building Next Generation Web Apps Workshop at the inaugural Web 2.0 Expo 2008 NYC next month. I'll have more details about this deep-dive session in an upcoming post.

Filed under Network Effects, Social Business, Social Media, Social Technology & Standards, Strategy, The Web Tagged with distribution models, Jakob's Law, Semantic Web, Web 2.0

Social Media Goes Mainstream

January 29, 2007 3 Comments

While some will dispute what mainstream is defined as exactly — with my own personal favorite being when my grandparents and their grandchildren both are doing whatever is under discussion — the rise of consumer-powered media platforms has all the hallmarks of being something that’s not only here to stay, but something that’s increasingly pushing everything else off the stage. Yes, I’m talking about blogs, but also wikis and every other kind of two-way, user controlled participation tool that is currently proliferating on the Internet in every country and almost all demographics.

Now before I present my case for the mainstreaming of shared, collaborative media, we should more carefully define the term that captures this best: social media. Wikipedia of course has the most easily accessible definition of social media, describing it as “online tools and platforms that people use to share opinions, insights, experiences, and perspectives with each other. Social media can take many different forms, including text, images, audio, and video. Popular social mediums include blogs, message boards, podcasts, wikis, and vlogs.” The key here is that people are the ones that use and control these tools and platforms instead of organizations and large institutions. Further, I would add to this that social media platforms tend to work best in networked environments , particularly on the Web, but also behind firewalls though to a lesser degree. Why is the networked aspect so important? Primarily because it’s a powerful democratizing force due to its pervasive, low cost nature; anyone can get in the conversation with only a small investment of their personal time and access to a network. And since communication is essentially free over computer networks today, combining an architecture of participation powered by network effects makes social media platforms almost certainly the most powerful form of media yet created.

These todays anyone posting anything on a simple blog lets them automatically reach the 1.1 billion users on the Web today. And with syndication, social media content is picked up and spread throughout Internet via feed engines and the entire syndication ecosystem and can be found by anyone looking for information via Technorati, Google Blog Search, TechMeme or dozens of other innovative discovery mechanisms. At long last, hundreds of years after the invention of the printig press, anyone can truly reach a global audience by spending a couple of minutes of their time creating a blog on one of the hundreds of free blog sites. I’ve highlighted in the past how social media has been used in both emergent and deliberate fashion to do everything from locating the survivors of natural disasters to motivating end-users en masse to create online video advertisements for a major corporation.

Of course, any effective technique or phenomenon has those who attempt to co-opt it or copy it, the latter which is the most sincerest form of flattery. The recent Public Relations 2.0 flap, which ostensibly boiled down to whether or not traditional organizations can even conceive of how these new freeform platforms work, was a good example of how institutions firmly grounded in the 20th century struggle to understand the power shift under way. Because these platforms are no longer under anyone’s control for the very reason that the Web is a system without an owner, except all of us together.

Bounding the Social Media phenomenon

But how significant is this really? What are the compelling datapoints that tell use that social media is changing the landscape of communication, collaboration, and personal interaction? David Sifry’s quarterly State of the Blogosphere, most recently updated in October, is an excellent place to start. Taking a look at this, we can tracking over 57 million blogs, with over 900,000 blog posts a day on just about any conceivable subject. 3 million new non-spam blogs were created in just the most recent 3 months of tracking. But blogs are primarily text and there are many other forms of social media and so it’s worth looking at podcasting and video, two important types of social media that are growing rapidly with the spread of high quality, fast Internet connections. Fortunately or unfortunately, unlike blogs, podcasts or video sharing do not have their own syndication system and for the most part they just ride inside the existing RSS/ATOM feed systems. This makes it hard to discern what is really happening and so we can only pull on some individual data points such as Google Trends data showing the rapid rise of podcasting as a search term.

The video side of social media is a bit easier, which Hitwise and YouTube providing enough hard data on the most recent version of the YouTube Fact Sheet to get a general though unscientific impression of what’s happening there. According to this, YouTube has 60% of all online video viewers with up to 70 million viewers in an evening and over 65,000 videos uploaded every day, making it both the #1 online video site and #1 social video sharing site online. This implies that most video consumption on the Web is already based on social media, and that there are over 115 million online viewers of video overall. At least for video, social media is not an edge case and is they dominant model overall. Note: Yes, one can quibble about whether YouTube is truly a social media site and certainly it skirts the concept but in my book it makes the list.

Why is YouTube considered Social Media though? What aspects does it — any many of the most successful media sites — have that make it social and non-coincidentally so popular? To understand this best, it’s worth creating a list of what exactly must an aspiring social media platform actually have in order to be considered such. Here is my take, culling the capabilities and features of the most popular social media sites as well as the consensus of leading thinkiners in this space such as Stowe Boyd, Tina Sharkey, and others.

Defining Social Media: Some Ground Rules
(as we understand them circa January 2007)

Communication in the form of conversation, not monologue. This implies that social media must facilitate two-way discussion, discourse, and debate with little or no moderation or censorship. In other words, the increasingly ubiquitious comments section of your local blog or media sharing site is NOT optional and must be open to everyone.
Participants in social media are people, not organizations. Third-person voice is discouraged and the source of ideas and participation is clearly identified and associated with the individuals that contributed them. Anonymity is also discouraged but permissible in some very limited situations.
Honesty and transparency are core values. Spin and attempting to control, manipulate, or even spam the conversation are thoroughly discouraged. Social media is an often painfully candid forum and traditional organizations — which aren’t part of the conversation other than through their people — will often have a hard time adjusting to this.
It’s all about pull, not push. Like John Hagel and John Seely Brown observed in the McKinsey Quarterly a year ago or so, push-based systems, of which one-way marketing and advertising and command-and-control management are typical examples are nowhere near as efficient as pull systems. Pull systems let people bring to them the content and relationships that they want, instead of having it forced upon them by an external entity. Far from being a management theory, much of what we see in Web 2.0 shows the power of pull-based systems with extremely large audiences. As you shape a social media community, understanding how to make embrace pull instead of push is one of the core techniques. In social media, people are in control of their conversations, not the pushers.
Distribution instead of centralization. One often overlooked aspect of social media is the fact that the interlocutors are so many and varied. Gone are the biases that inevitably creep into information when only a few organizations control the creation and distribution of information. Social media is highly distributed and made up of tens of millions of voices making it far more textured, rich, and heterogeneous than old media could ever be (or want to be). Encouraging conversations on the vast edges of our networks, rather than in the middle, is what this point is all about.

The rise of social media platforms within businesses, often dubbed Enterprise 2.0 , will place a significant challenge on organizations as they try to grapple with the ground rules above. That’s because not following them will tend to reduce the long-term success and effectiveness of social media in business. Also, increasingly, as more and more time and world-wide attention is given to social media, who really owns the discussions online will become a bigger and bigger deal. YouTube recently announced they will begin paying their users for their video contributions (which are the seeds for often virulent conversation on that site), but they still place far too many restrictions on the content that is uploaded including making it belong to YouTube.

Both of these trends show that when users are in control via the highly democratizing tools of the Web, the fundamental ground rules change. Understand them, follow them, and embrace them, this is the pre-eminent media model for the 21st century.

These aren’t the only rules for social software however, just social media in particular. Be sure to check out my Notes on Making Good Social Software for more good ideas.

What else did I miss? What makes social media uniquely what it is?

Filed under Social Business, The Web

Product Development 2.0

January 17, 2007 2 Comments

While the window on using the “2.0” suffix is probably closing, I thought it would be worthwhile to explore an especially significant trend in 2006 that will likely see much more widespread uptake in 2007. Specifically, I’m talking about building highly competitive online products by turning over non-essential control to users directly via the Web. For now, I’m calling this online business trend “Product Development 2.0”, a concept that embodies the use of Web 2.0 concepts such as harnessing collective intelligence, users as co-creators, and turning applications into platforms, three of the most powerful techniques in the Web 2.0 arsenal.

What is Product Development 2.0 exactly? It’s an informal term I’m applying to something that online startups and traditional businesses both are increasingly doing: leveraging of mass user contributions, providing open architectures for others to build on as they like, and even handing control over key product decisions directly to users. The reasoning behind doing this is simple: Satisfied customers have always been essential to having the most successful business, both online and offline. But how best can you ensure that they get exactly what they want from you, as customized and quickly as possible? This is where the scale, new tools, and business models of Web 2.0 have stepped in, giving us the potential to provide our customers with better, rich products, much more quickly, and with more of what they want. Taken as a whole, it’s increasingly clear that there are new business models afoot that are just now being well understood.

Given that any business typically is vastly outnumbered by its customers and potential customers, and that putting a bureaucratic, centralized product development team into the critical path of product creation and ongoing maintenance highlights how little we can actually serve them, especially in an individualized way. And with everyone online, it’s increasingly obvious where the biggest source of talent, engagement, innovation, agility, and worker bandwidth really lies: with your customers. Using the techniques and technologies that have emerged in just the last few years, you can now finally give them the tools and motivation to tweak, tune, refine, and contribute to your products and services. And increasingly, they’ll probably do it. YouTube is still currently one of the best examples of user co-development of a world-class product in its pure form (65,000+ videos uploaded by users per day), but sites like eBay, Slashdot, and many others have been leveraging their users in product development for a long time now. And as it turns out, Product Development 2.0 is not a small topic and starts off at collecting explicit user contributions, leveraging the Database of Intentions, and putting in automated real-time feedback loops to identify the best or most popular new content or capabilities for other users that come along later.

It’s important to note that it’s a fundamental shift for a business to turn over a large part of its product development to its users, becoming more of a mediator and facilitator than a product creator or owner. This is the shift of control from institutions to individuals that the apparently relentlessly democratizing force of the Web has begun exerting on the business models of organizations of every description around the world. As more organizations figure out how to apply Product Development 2.0 to their individual offerings, they will reap significant competitive advantage over those not harnessing the Web to directly connect to customers and begin a rapid and never-ending innovation cycle. This is another aspect of the perpetual beta concept that reflects the fact that increasingly, products and services online are never finished, and indeed, can’t ever be finished as changes and additions seamlessly pour in over thousands of millions of Internet connections.

But enough about the possibilities. Let’s talk some examples, both in terms of what older style product development did vs. what this new style is doing. Finally, let’s talk about some companies actually doing this successfully. Note: Incidentally, though I normally write about services in terms of Software as a Service (SaaS) or Web Services, for the purposes of this discussion I’m talking about non-physical business processes for sale, such as car or medical insurance, tax preparation, etc. and not software.

Like the recently discussed Programming 2.0 concept — a set of software development tools, techniques, and attitudes that is, not incidentally, enabling much of this — and the original Web 2.0 definition, it is examples in lieu of principles that’s one of the best ways to paint a picture of what appears to be happening in the evolution of product development:

The Move to Product Development 2.0

	Product Development 1.0	Product Development 2.0
Primary Customer Interaction Channel:	Telephone, Mail, Face-to-Face, One Way Media (Print, TV, Radio, etc.), e-mail	World Wide Web, e-mail, IM
Source of Innovation:	Organizations	Customers
Innovation Cycle:	Months, Years	Minutes, Hours, Days, Weeks
Content Creators:	Internal Producers	External Producers
Feedback Mechanisms:	Market research, satisfaction surveys, complaints, focus groups	Analytics, online requests, user contributed changes
Customer Engagement Style:	Controlled, well-defined process	Spontaneous and chaotic
Product Development Process:	Upfront design	Less upfront, much more emergent
Product Architecture:	Closed, not designed for easy extension or reuse by others; walled garden	Open, very easy to extend, refine, change and add on to, ecosystem friendly, designed (and legal) for widespread remixing and mashups
Product Development Culture:	Hierarchical, centralized, Not Invented Here, somewhat collaborative, expert-driven	Egalitarian, decentralized, remix instead of reinvent, highly collaborative, Wisdom of Crowds
Product Testing:	Internal, dedicated test groups, hand-picked select customers	Users as testers
Customer Support:	Customer Service	User Community
Product Promotion:	One-Way Marketing and Advertising	Viral propagation, explicit leveraging of network effects, word of mouth, user generated and other two-way advertising
Business Model:	Product Sales, Customer Service and Support Fees, Service Access Charges, Servicing High Demand Products	Advertising, Subscriptions, Product Sales, Servicing All Product Niches (The Long Tail), Unintended Uses
Customer Relationship:	External Buyer (Consumer)	Partner and — increasingly remunerated — Supplier (Consumers as Producers )
Product Ownership:	Institution, particularly executive management and shareholders	Entire User Community
Partnering Process:	Formal, explicit, infrequent, mediated	Ad hoc, thousands of partners online, disintermediated
Product Development and Integration Tools:	Heavyweight, formal, complex, expensive, time-consuming, enterprise-oriented	Lightweight, informal, simple, free, fast, consumer-oriented
Competitive Advantage:	Superior products, legal barriers to entry (IP protections), brand name advantage, price, popularity, distribution channel agreements	#1 or #2 market leader, leveraging crowdsourcing effectively, mass customization, control over hard-to-create data, end-user sense of ownership, popularity, cost-effective customer self-service, audience size, best-of-breed architectures of participation

It’s worth noting a couple of key points about the table above. One is that the Web makes the shift of control possible by putting every business in direct contact with every one of its customers. No small system can remain unchanged by sustained contact with a much larger system, and this means that any business (which is the small system in this scenario) which embraces its customers over the Web in a two-way fashion will likely undergo a move fairly quickly from the first column to the second. The fact is, if you have loyal customers who like the products and services that you offer online, you’re going to have a hard time avoiding the shift of control and opening up of your product designs and architecture.

The second is that those that play to the strengths of the Web as platform, instead of trying to fight it, can exploit the most powerful software platform, or indeed, platform of any kind, that has been created to date. Triggering network effects, building an extensible platform out of our product offerings (whether it’s an online software application or if you’re an insurance company, doesn’t matter), and you can see the advantage to be had in the assyemtric model of business on the Web; all of the potential is on the edge of our networks now (where the users are) instead of the middle. And waiting too long to enter the Product Development 2.0 arena potentially means waiting for your competitors to get their ahead of you. And the longer you wait to get the clock started on collected the Database of Intentions (continuously turning 100% of all customer interaction into enriching your product dynamically), the more likely you will face competitive dislocation and even lock-out. Amazon is famous for collecting user contributions to enrich their product database and they are about a decade ahead of potential competitors of in terms of the enriched, hard-to-recreate database they have built.

Now on to a few examples to highlight what companies are actually doing that has many of the elements of Product Development 2.0. First, the usual preamble about checklists of features; just like Web 2.0, one doesn’t have to implement every one of these in order to deliver better results, just the ones that apply in your situation. So let’s look at a couple of stories of companies — and I have many others I’ll be sharing as soon as I can — that are going part of the way down the Product Development 2.0 path and getting valuable early experience. I selected real-world companies since that’s the majority of companies that have to figure out whether they’re going to play in this space or let others do it for them.

Product Development 2.0 Examples

XM Radio is a satellite radio provider that has recently embraced some of the tenets of Product Development 2.0. Compellingly, the Top 20 on 20 channel is one of the most popular channels XM has yet created. Why? Because control of it has been entirely handed over to its users. Says the Wikipedia entry on Top 20 on 20: “The channel plays everything new from rock to rap, with the songs chosen by online votes to the XM website. One can also vote their favorite songs by calling the station number, or text messaging. The channel is completely automated by listener voting with no DJ interruption. [DH- My emphasis] Top 20 on 20 is also one of the most popular music channels on XM. According to XM’s internal research, the channel achieves 1.8 million listeners a week.” And though the channel was relaunched with some changes in December that have proven unpopular to many (less music, live DJs), it presents the cautionary tale of what happens when you assert bureaucratic authority over something that you’ve co-developed with your users; the possibility that you’ll kill the goose that lays the golden eggs of user contribution and engagement.

General Motors conducted its highly innovative Chevy Apprentice campaign early last year and made quite a demonstration of convincing users by the thousands to generate online video commercials for its new Chevy Tahoe SUV. By opening up the contest to anyone on the Web and only screening submissions for truly objectionable content they were able to elicit a stunning 22,000 user generated commercials exhibiting an impressive variety of creativity with both positive and negative messages. From the beginning of the effort, they realized that in a freeform environment created by Web 2.0 tools, that they would only be able to respond to criticism and not control the message. As expected, environmentalists famously picked up the tools to create ads savaging SUVs in general but GM’s Ed Peper understood that only by engaging in conversation instead of censoring dissent could they gain trust and get more information into people’s hands than they could otherwise. Ultimately, GM created its own ads that highlighted the high amount of recycled parts and the best fuel-efficiency in its class of the Tahoe. A brave piece of Product Development 2.0 for sure and one that many traditional business followers probably viewed incredulously as GM truly let their customers and potential customers co-create their advertising campaign with them on the world stage. For the curious: You can see the many Chevy Apprentice commercials still up on YouTube.

The Potential for Disruption and Opportunity

The Web is a fundamentally different platform from any platform we’ve seen before. Unlike previous general-purpose platforms, the Web is fundamentally communications-oriented instead of computing-oriented. Sure, computing still happens but what the Web does that’s so important is its ability to connect information and people together. The hyperlink is the intrinsic unit of thought on the Web . So, it’s information connected by links instead of programs that operate on data, that’s the basic difference. But why does this hold the potential to put traditional product development on its head and usher in Product Development 2.0? 1) Because the aforementioned information can now truly be generated by anyone. And 2) because we’re all nearly universally connected to this new medium by the devices on our desktops, in our briefcases, and in our pockets. All of us can now be directly and continuously connected to the products and services which we need, which increasingly, is the rest of us and not a handful of large companies. The very best companies in the future are likely ones that will create innovative new ways to facilitate innovation and collaboration by the hundreds of millions of us that can be reached and embraced by effective architectures of participation. The big winners will enable us and encourage us to take control, contribute, shape, and direct the designs of the products and services that we in turn consume.

The good news: Only a few industry leaders and early adopters fully appreciate the significance of these trends as yet or even how to fully exploit and monetize them. There’s still enormous opportunity, and for existing businesses with large investments in existing business models, blowing your business model up before someone else does will be the order of the day. This will prove though very hard for most to do successfully. And therein lies the potential for significant industry disruption in the next 5 years as new players with core competency in Product Development 2.0 push older, slow-to-adapt businesses off the stage.

While this is far-fetched for some, effectively embracing the Web is key to business success today. Why do you think this will or won’t be the ultimate future of how we do business?

Filed under Crowdsourcing, Peer Production, Social Business, Social Media, The Web

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