Tuesday, June 15, 2010

Business Impact of Web 2.0 on Cisco

Web 2.0 and its Business Impact

Web 2.0 is a philosophy and not a specific technology. Web 2.0 is a term that describes “the use of Worldwide Web technology and Web design that aims to enhance creativity, information sharing, and most notably, collaboration among users.” Tim O’Reilly defines Web 2.0 is a set of economic, social, and technology trends that collectively form the basis for the next generation of the Internet—a more mature, distinctive medium characterized by user participation, openness, and network effects.


Exhibit 1: Definitions of Web 2.0

Web 2.0 offers three main benefits:

1. The do-it-yourself (DIY) Web: Wikis for information publishing, blogging for expertise sharing, Web syndication for information delivery, tagging and folksonomies for information categorization and enterprise search for information.
2. A richer Web user experience. Rich Internet applications (RIA), AJAX and Adobe Flex.
3. Lighter-weight Web development models. Scripting languages such as PHP and Ruby, mashups and the REST Web services protocol.

Web 2.0 Framework

Web 2.0 is founded on seven key Characteristics: Participation, Standards, Decentralization, Openness, Modularity, User Control, and Identity. Web 2.0 is expressed in two key Domains: the Open web, and the Enterprise. The heart of Web 2.0 is how it converts Inputs (User Generated Content, Opinions, Applications), through a series of Mechanisms (Technologies, Recombination, Collaborative Filtering, Structures, Syndication) to Emergent Outcomes that are of value to the entire community.


Fundamental Concept of Web 2.0

The fundamental concept of Web 2.0 is maximizing the collective intelligence. The interactive exchange of information and the continuous development and maintenance of a group opinion is described as the process of collective intelligence. The result of collective intelligence can be a commonly accepted opinion or commonly accepted content (that is not modified or criticized) but it can also occur indirectly as a presented selection of information.

Maximizing the collective intelligence requires a self-regulating community. Since there are now specific regulations regarding the selection of contributions, Web 2.0 services have embedded quality assurance mechanisms or alternatively a formalized reviewing process. The value of a Web 2.0 application is the source of significant value, for instance eBay`s user recommendation system is a crucial success factor - similar to Amazon`s reviewing system.

Another characteristic of collective intelligence is the transparency of the information creation and sharing process. Users can observe the historical development of the information (e.g. Web-Blogs) and can also see how the information is distributed (e.g. via bit torrents). Based on linking of content, the original content is enriched and the transparency of the process is supported.

All the above described fundamentals are highly depending on the size of the supporting community. Web 2.0 services are in many cases a classic example for network effects. The intrinsic value of Web 2.0 communities itself is very limited. The benefits for the users are evolving over time and the number of interactions. Content or in other words value generated through the supporting community can be internalized and represents the value of the community itself.


Exhibit 3: Information transformation Process

The more users participate, the more users are attracted. Therefore the quality of the content improves and the service gains more relevance.

A remarkable fact is that the above described mechanisms are not initially formulated, but they do emerge over time. All the provider of a Web 2.0 can do is to facilitate the development process.

How Businesses reaping benefits from Web 2.0?

Based on the McKinsey study on the internal and external operations of businesses for three years, 69% of the respondents reported measurable benefits in terms of, increased communication and productivity, more successful marketing strategies, and—surprise—even better products. Web 2.0 also helped them in gaining better access to knowledge, lowering the cost of doing business, and producing higher revenues. The Exhibit 2 below illustrates the tangible benefits and the value driver for the business pertaining to some of the key Web 2.0 technologies.



Exhibit 4: Web 2.0 for Business

Success Stories




This section explains the key benefits to an organisation in adopting Web 2.0 technologies and relevant illustrations.

Technology Company: External Blogs to Foster Improved Intimacy with Customers and Partners

This leading technology infrastructure company created an external Web site, separate from its corporate site, for customers, partners, industry experts, former employees, and current employees to foster free-form communication, collaboration, and innovation between the different participants. Free blog accounts and related tools were offered to everyone. In addition, the initiative received public support from the CEO. The result was an enhancement of the company’s brand and reputation as an innovator among its peers and customers, as well as the creation of important new product support and idea resource centers for customers.

Consumer Goods Manufacturer: Community Intelligence for Product Innovation

This global company has more than 9,000 employees in its research and development (R&D) department. The CEO tasked the organization with doubling its product development success rate by 2010 by leveraging customers and other contributors for ideas. Overcoming significant internal resistance from the status quo, the company’s leadership was ultimately able to create new product innovations by collaborating with external scientific communities and social networks. The result is that more than 35 percent of ideas now come from outside the R&D department and productivity has increased by 60 percent. The product success rate has soared to 80 percent, compared to less than 20 percent prior to this initiative.

Insurance Company: Blogs to Enhance Corporate Communications

This insurance company wanted to proactively manage reputational risk in the emerging and increasingly influential blogging community (the blogosphere). Initially driven by its public relations department, the company eventually deployed blogs and RSS notifications to all 5,000 employees. The result has been improvements in corporate communications, team productivity, and worker productivity, with more than 70 percent of the firm’s active blogs focused on project and team management.

Retail Bank: Blogs to Target Emerging and Existing Customer Segments

This top U.S. bank uses several external blogs to target various customer segments. Blogs are written by dedicated employees who are domain experts. They deliver the latest information on everything from student loans and how to manage money to new loan products and community risk management. With these blogs, the bank is able to target all demographics: from Generation Y members to baby boomers. As a result of these blogs, the bank has enhanced its reputation as an innovator, gained access to a large pool of Generation Y prospects, and improved engagement with existing customers.

Bank: Social Networks for Small Businesses Build Customer Loyalty

One of the world’s largest banks with more than 6,000 retail branches is using Web 2.0–based collaborative communities to serve small business customers. The community site is free and consists primarily of user-driven content. Users can ask questions and get answers from others in the community or from industry experts. Users also can post success stories and tips, rate expert supplied articles, and search member profiles for potential customers, suppliers, partners, and investors. The result is that customers get access to success stories and expert knowledge sharing while the bank improves its standing as a trusted partner to small businesses.


Web 2.0 Strategy Framework

The different types of organizations with differing requirements, characteristics, and objectives require a different Web 2.0 strategy. Therefore, an independent Web 2.0 strategy formulation is necessary to be performed for specific organization situation. Based on the research (Webstrategy Formulation: Benefiting from Web 2.0 Concepts to Deliver Business Values by Senoaji Wijaya1, Marco R. Spruit, and Wim J. Scheper, 2008) Web 2.0 strategy is defined within the context as “The plan of action, involving important elements, revolving around a web environment with regard to Web 2.0 concepts, designed and implemented in order to achieve organization’s business goals”. The important elements include: goal, clients, products, time, resources, and tools/channels.

In this research, the Value Disciplines introduced by Treacy and Wiersema is used as an organization typology. Value Disciplines categorizes organizations into three types: Customer Intimacy, Operational Excellence, and Product Leadership.

The web strategy framework shown in exhibit 5 incorporates five phases, one additional activity, six web strategy elements, key tools, and optional supplementary tools. These phases function to guide through the whole web strategy formulation in search for a good solution. These should include internal and external aspects. The Web strategy formulation phases are:



1. Awareness
2. Anticipation and Assessment (as-is)
3. Formulation of Direction (to-be)
4. Web Strategy Development
5. Evaluation


In the Web strategy framework shown in exhibit 5, we can see the one additional activity that is performed throughout the whole web strategy formulation process:


• Feasibility Check: Feasibility check is performed continuously throughout the whole process in order to identify potential problems at early stage, thus, save time from analyzing and formulating ineffective or inefficient web strategy.




Exhibit 5: Web Strategy Framework

A more detailed explanation on the Web Strategy Framework is available in the research documentation



Is Web 2.0 appropriate?

It is very important for IT managers to justify the implementation of the Web 2.0 technologies. Some of the factors that drive Web 2.0 are as under,


1. Several-to-Many people involved
2. May cross functional or organizational boundaries
3. Members may be geographically dispersed
4. Need to share collateral
5. Need to work together on deliverables or transactions


Scenarios that require distinct types of collaboration


1. Project-based
2. Process or transaction-based
3. Personal


How to implement Web 2.0 in organisation?



The challenges and recommendations for the IT managers of organisations to implement Web 2.0 and social networking within the enterprise are as under,


1. Assess cultural fit: Companies planning to communicate with customers or staff through social networks or blogs shall understand how social networking will fit their organisation's corporate culture. Tightly controlled, top-down organisations may struggle with the open and unmediated nature of collaborative media.

2. Personalise it: Blogs and social networking tools can enable often faceless corporations to develop or initiate new, strong relationships with customers, creating greater brand loyalty. However, communication must be personalised and not written in dry corporate-speak that nobody will read. Developing a "voice" for your communication is important in building and maintaining trust.

3. Take the rough with the smooth: Facebook and Twitter allow customers and staff to offer honest opinions about a company's products or services. But interacting through social networks means companies must expect negative comments will be made. Accept them and be ready to learn.

4. Avoid "astroturfing": Do not establish blogs or social networking sites for any "inauthentic" marketing. Organisations that develop blogs using fake personas, or which are ghosted by professional blog copywriters run many risks. Getting caught writing a fake corporate blog goes beyond embarrassing the CEO: it damages consumer trust and brand reputation.


5. Understand the threats: When staff joins professional social networking groups, information about who employs them and what their job function is becomes available to anyone on the network. This leaves users vulnerable to criminals seeking company information. Training can help raise awareness of this threat. Remember that employees' social networking communications can be traced back to a company IP address leaving the organisation liable for the messages and material posted. This is especially relevant if a company has set up its own social networking site.



Barriers for Enterprises to be Web 2.0


Some of the issues pertaining to the implementation of the Web 2.0 in the firms are as under,



1. Security and identity are compromised.
2. Social networking APIs don’t take into account enterprise needs.
3. Exposure to the consumer social networks actually leaves a negative impression, people fear that it’s just about socializing, rather than collaborating.


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