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Economics 2.0 Highly Effective Strategies for Putting Your Business on a Recession Diet Dion Hinchcliffe

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Page 1: Economics 2.0 Web 2.0 Expo SF 2009

Economics 2.0

Highly Effective Strategies for Putting Your Business on a Recession Diet

Dion Hinchcliffe

Page 2: Economics 2.0 Web 2.0 Expo SF 2009

Introduction

Dion Hinchcliffe• ZDNet’s Enterprise Web 2.0

• http://blogs.zdnet.com/Hinchcliffe

• Social Computing Magazine – Editor-in-Chief

• http://socialcomputingmagazine.com

• Enterprise 2.0 TV Show

• http://e2tvshow.com !

• Hinchcliffe & Company• http://hinchcliffeandco.com

• mailto:[email protected]

• Web 2.0 University• http://web20university.com

• Twitter: dhinchcliffe

Page 3: Economics 2.0 Web 2.0 Expo SF 2009

The Plan

• 9:00am - noon

• Break at 10:15am

• Twitter tags #w2e and #econ2

• Google Moderator

• http://bit.ly/econ2questions

• Slides at [email protected]

Page 4: Economics 2.0 Web 2.0 Expo SF 2009

Overview

• Exploration of new ways of doing old things

• New economic, social, and cultural models

• With an emphasis on 2.0

• Pragmatic exploration of how they promote resilient, sustainable business models

• We’ll look for evidence that they work.

• Or debunk them.

• Or just confirm they are promising.

Page 5: Economics 2.0 Web 2.0 Expo SF 2009

The Map of Opportunity

Creating new rapid growth online products powered by:• Peer Production

• Jakob’s Law

• The Long Tail

• Blue Ocean

• NetworkEffects

Reinventing the customer relationship to drive revenue:

• Customer Communities

• Customer Self-Service

• Marketing 2.0

Driving costs down through less expensive, better 2.0 solutions:

•Lightweight IT/SOA

•Enterprise mashups

•Expertise Location

•Knowledge RetentionImproving productivity and access to value:

•Enterprise 2.0

•Open APIs

•Crowdsourcing

•Prediction Markets

Business Remodeling and Restructuring

•BPM 2.0

•Employee Communities

•Cloudsourcing

•Pull Systems

Change Management•Transformation Communities

•2.0 Education

•Capability Acquisition

Fostering Innovation

•Internal Innovation Markets

•Open innovation

•Database of Intentions

Leveraging Innovation•Product Incubators

•Open Supply Chains

•Product Development 2.0

•Some Rights Reserved

Innovation

Transformation Cost Reduction

Growth

Current Business

State

Page 6: Economics 2.0 Web 2.0 Expo SF 2009

The major shifts

• In who creates value (the network does)

• How much control we have over our businesses

• How intellectual property works

• Great increases in transparency and openness

• Open supply chains, community-based processes and relationships

Page 7: Economics 2.0 Web 2.0 Expo SF 2009

Avoiding “cargo cults”

• Cargo Cult n. A group conducting rituals imitating behavior that they have observed among the holders of desired objects.

Page 8: Economics 2.0 Web 2.0 Expo SF 2009

Evaluating candidates

• The criteria:

• Cheaper: Less waste, more efficient, and lighter weight.

• Better: Faster, richer, and other intrinsic improvements.

• Innovative: New types of products and services, different lines of business. A future.

Page 9: Economics 2.0 Web 2.0 Expo SF 2009

The challenges

• Cultural “chasms”

• Disruption

• Cost

• Risk

• Difficulty

• Repeatability

Page 10: Economics 2.0 Web 2.0 Expo SF 2009

The biggest challenge is in changing our thinking

However, it’s usually a people problem:

Page 11: Economics 2.0 Web 2.0 Expo SF 2009

Rating the Economics 2.0 contenders

Proven Benefit

RepeatabilityChallenges

Uncertain Results

Ready for Wide Adoption

Strategic Industry Play

Suitable for Experimentation

QuestionableValue

Ideal for Early Adopters

Page 12: Economics 2.0 Web 2.0 Expo SF 2009

The network is abig place today

• All your customers

• All your competitors

• All the ideas and innovation

• Only a few proven strategies for long-term competitive advantage

Page 13: Economics 2.0 Web 2.0 Expo SF 2009

Never before reached level of scale is driving new changes

Page 14: Economics 2.0 Web 2.0 Expo SF 2009

Likely candidates

Product Development

Marketing

Sales

Operations | IT | Back Office

Line of Business

Customer Service

crowdsourcing

onlinecommunity

cloud computingmashups

open APIsSaaS

Enterprise 2.0 &Open Business Models

2.0development

platforms

(social media in the

enterprise)

Product Development 2.0

Page 15: Economics 2.0 Web 2.0 Expo SF 2009

No small system can withstand sustained contact with a much larger system without being

fundamentally changed.

Page 16: Economics 2.0 Web 2.0 Expo SF 2009

The motive forces of 21st century economics

• Network effects

• Peer production

• Self-service

• Open business models

• New social power structures

that we

know of so

far

^

Page 17: Economics 2.0 Web 2.0 Expo SF 2009

What is a Network Effect?

• A network effect occurs when a good or service has more value the more that other people have it too. - Wikipedia

– Postal Mail

– Phones

– E-mail

– Instant Messaging

– Web pages

– Blogs

– Anything that has an open network structure

Page 18: Economics 2.0 Web 2.0 Expo SF 2009

Building Sustainable Value

• Even small network have large potential network effects

• But very large networks have astronomical network effects

• Recent Discovery: Reed’s Law, which say social use of networks are by far the most valuable

Page 19: Economics 2.0 Web 2.0 Expo SF 2009
Page 20: Economics 2.0 Web 2.0 Expo SF 2009

Social Business(aka Enterprise 2.0)

Page 21: Economics 2.0 Web 2.0 Expo SF 2009
Page 22: Economics 2.0 Web 2.0 Expo SF 2009

Modern Social Computing:Enterprise 2.0

• Concieved by Harvard Business School Professor Andrew McAfee

• Defined as emergent, freeform, social applications for use within the enterprise

• Primarily to improve the collaboration problem (discussed shortly)

• The use of blogs and wikis to capture institutional knowledge, make it discoverable and let structure and organization emerge naturally

Page 23: Economics 2.0 Web 2.0 Expo SF 2009

Applying the “Web 2.0 effect” at work

• Enterprise 2.0

– Globally visible, persistent collaboration

• Employees, partners, and even customers

• Leaves behind highly reusable knowledge

– Uses wikis, blogs, social networks, and other Web 2.0 applications to enable low-barrier collaboration across the enterprise

– Puts workers into central focus as contributors

– Case studies of early adoption consistently verifying significant levels of productivity and innovation

Enterprise 2.0 systems adapt to the environment, rather

than requiring the environment to adapt to it.

Page 24: Economics 2.0 Web 2.0 Expo SF 2009

Perceived Benefits Of Enterprise 2.0

• Increased knowledge retention

• More adoption and use of knowledge management tools

• Emergent structure and processes

• Increased transparency

• Less duplication of effort

• Higher level of productivity

Page 25: Economics 2.0 Web 2.0 Expo SF 2009

Why is Enterprise 2.0

different?

• Maturation of techniques that leverage how people work best

• Realization of the power of emergent solutions over pre-defined solutions

• Nearly zero-barriers to use

• Low cost

• Network effect driven

Page 26: Economics 2.0 Web 2.0 Expo SF 2009

The Enterprise 2.0 Checklist

• SLATES

–Search

–Linking

–Authorship

–Tagging

–Extensions

–Signals

Page 27: Economics 2.0 Web 2.0 Expo SF 2009

SLATES unboxed...

Page 28: Economics 2.0 Web 2.0 Expo SF 2009

Enterprise 2.0: Richer Outcomes

Page 29: Economics 2.0 Web 2.0 Expo SF 2009

Push vs. Pull Based Systems

Page 30: Economics 2.0 Web 2.0 Expo SF 2009

Two more important reasonsfor Enterprise 2.0

• Non-interruptive and leveragable...

Page 31: Economics 2.0 Web 2.0 Expo SF 2009

Challenges:The enterprise is not the Web

• We want to replicate the positive aspects of Web 2.0 platforms in the enterprise

• But our infrastructure is usually not very Web-like, creating significant impedance and diluted results

• Requires augmentation and adaptation to reproduce the same or similar results

Page 32: Economics 2.0 Web 2.0 Expo SF 2009

Enterprise 2.0 Ecosystems

deeplylinked

structure

Peer ProducedKnowledge

Internal Applications andDatabases

Enterprise 2.0 Applications

Blogs and Wikis(Social Media)

Prediction Markets(External and Internal)

Enterprise Social Network

Industry Social Network

Other Web 2.0 Tools(del.icio.us,

Flickr,Twitter,

Friendfeed) Enterprise Mashups

Integrated Search

participation

Page 33: Economics 2.0 Web 2.0 Expo SF 2009

Significant Motivation ExistsTo Adopt Enterprise 2.0

• Increased levels of productivity that were inaccessible until now

• Enablement of tacit interactions on a previously unknown scale (Source: McKinsey & Company)

Enterprise 2.0 has the potential to

increase productivity in complex

interactions, where previous attempts have largely failed

Page 34: Economics 2.0 Web 2.0 Expo SF 2009

Enterprise 2.0 Benefits

Page 35: Economics 2.0 Web 2.0 Expo SF 2009

• Hundreds of Enterprise 2.0 projects exist worldwide currently

• Based on aggregation of all known contacts and citations

• Many implementations are not “official” pilots

• Anecdotal evidence and market research both indicate SMBs are slow to adopt

• 1/3rd of enterprises as of this year

• But large enterprises are buying...

Page 36: Economics 2.0 Web 2.0 Expo SF 2009

The majority of Global 2000 firms are now buying Web 2.0 tools

Page 37: Economics 2.0 Web 2.0 Expo SF 2009

• Early success stories emerging

• Case studies now exist from:

• Bank of America, Boston College, Dresdner Kleinwort Wasserstein, IBM, Janssen-Cilag, Motorola, Northwestern Mutual, P&G, Siemens, SAP, T. Rowe Price, U.S. Hospital, Volvo, Wells Fargo, and many others.

• Most results are very positive

• Generally reporting better communication, improved cross-pollination and leverage of knowledge, higher productivity, and few of the early expected problems

• Other results harder to pin down: better innovation

Page 38: Economics 2.0 Web 2.0 Expo SF 2009

Enterprise 2.0:The bottom line

• Repeatable

• Medium Risk

• Proven Benefit

• Rapid ROI

• New Transunion Enterprise 2.0 case study with dramatic ROI: $3.5M recoup in 5 months with $50K investment: http://bit.ly/O74W

Ready for Wide Adoption

Page 39: Economics 2.0 Web 2.0 Expo SF 2009

Open Supply Chainsalso

known as

APIs

Page 40: Economics 2.0 Web 2.0 Expo SF 2009

vs.

The Platform Overtakes the Web Site

:

Page 41: Economics 2.0 Web 2.0 Expo SF 2009

Example: Amazon

• 1st Gen. Product: E-commerce store– No differentiation– Scaling of a single site– Single site

• 2nd Gen. Product: E-commerce platform– 55,000 partners using their e-commerce APIs live– Scaling of the Web

• 3rd Gen. Product: A series of Web platforms– Simple Storage Service (S3)– Elastic Compute Cloud (EC2)– Mechanical Turk (Mturk)– Many others– 300K businesses build on top of what they’ve produced

• 2nd and 3rd generation platforms generate large net revenue

S3EC2

Page 42: Economics 2.0 Web 2.0 Expo SF 2009

Tour

• http://programmableweb.com

Page 43: Economics 2.0 Web 2.0 Expo SF 2009

Open Platform vs. Closed Platform

Page 44: Economics 2.0 Web 2.0 Expo SF 2009

The Market Share Opportunity

• The vast majority of Internet user activity is elsewhere, on 3rd party Web sites and applications

• If firms could reach this traffic, the growth potential is as large as the Web itself

• Reaching this traffic before competitors do can result in successful marketshare “lock-out”

• Businesses able to cost-effectively integrate with a large number of partners to grow

• Access and offer value to existing ecosystems of customers

Page 45: Economics 2.0 Web 2.0 Expo SF 2009

Open API

PartnerPartnerPartnerPartner

Partner Partner Partner Partner Partner

Partner Partner Partner Partner Partner Partner

Partner Partner Partner Partner Partner Partner Partner

Live Web Integration

Tens of Thousands of Dynamic Web Partners

Direct Revenue

AdditionalRevenue viaUsage Fees,

Advertising, etc.$$$Monetization

Boundary

+

+

Opportunity:Going To the Customer

and Open Web APIs

New Business Division:

Interact

Interact

Consumer orBusiness Online Business

Page 46: Economics 2.0 Web 2.0 Expo SF 2009

Platforms vs. Applications

Native App

Web Application

Open Widgets

Facebook/Open Social

Web APISDK, Developer Community, SLA,

Billing

Distribution Models Target Audiences

Consumers

Small BusinessesMedium-Sized Business

Power/Web Saavy Users

Developers

Businesses

existing

Page 47: Economics 2.0 Web 2.0 Expo SF 2009

Platforms vs. Applications

Native App

Desktop Client API

Open Widgets

Facebook/Open Social

Open Web APISDK, Developer Community, SLA,

Billing

Distribution Models

10M Users

Order of MagnitudeDistribution Method

Push

10M Users Pull

10-20M Users Pull

100M+ Users Pull

Page 48: Economics 2.0 Web 2.0 Expo SF 2009

Key API Goals

• Leveraging existing investments as much as possible (reduce rework in design and architecture)

• Protect intellectual property around proprietary capabilities

• Select API model that will result in 1) the most developer uptake and 2) access to the largest possible audience

• Selecting a discriminating factor (rich vs. reach)

• Scope: Graduated capability vs. full initial API

Page 49: Economics 2.0 Web 2.0 Expo SF 2009

The Distribution Opportunities

850 million PCs- windows, mac, linux- medium distribution impedance - anti-virus - admin rights - end-user knowledge- rich runtime capabilities

1.3 billion internet users- ie, firefox, mozilla, safari, opera- lowEST distribution impedance - 99% flash penetration - zero footprint - some run-time limits

3.5 billion wireless users- 40+ hw/sw platforms- high distribution impedance - highly variable run-time - many carriers and rules - limited run-time capabilities

flash 99.9%Silverlight 10%

Java web start 5-50%

Page 50: Economics 2.0 Web 2.0 Expo SF 2009

Long-term future usage breakdown w/API

Existing Web Site or Application

Facebook Apps

3rd Party Web Apps

Open Social Apps

iPhone Apps

Web Widget Apps

Web Mobile Apps

Embedded Apps

Other Apps

• Reach every distribution channel possible

• Leverage 3rd party customer bases

• Cut off competitor’s growth OPPORTUNITIES

• Ride the MAXIMUM POTENTIAL growth curve

• Harness innovation of hundreds and thousands of 3rd party developers

Page 51: Economics 2.0 Web 2.0 Expo SF 2009
Page 52: Economics 2.0 Web 2.0 Expo SF 2009

Reasons Developers Select APIs

• Provides access to functionality not possible to develop internally

• Easy to use and integrate with

• Good documentation and easy to get started

• Reliable, well-known, scalable

provider that is trusted

• Developers can get answers to

questions, support, and

problems fixed when bugs are

found

• Strong user base for 3rd party

developers to tap

Key to initial adoption Key to long-term adoption

Page 53: Economics 2.0 Web 2.0 Expo SF 2009

“Platforming” Your Business

• Requires opening the server-side to 3rd party developers

• Allowing the construction of widgets and Web apps offering some or of all of your functionality by external partners

• Harnessing the innovation on the network

• Generating the greatest potential reach, competitive lock-out, market share, and revenue

Page 54: Economics 2.0 Web 2.0 Expo SF 2009

Open Supply Chains:The bottom line

• Good repeatability

• Can be costly

• Unproven in certain industries

• Proven ROI

Strategic Industry Play

Page 55: Economics 2.0 Web 2.0 Expo SF 2009

Mashups

Page 56: Economics 2.0 Web 2.0 Expo SF 2009

A Short History of Software

Page 57: Economics 2.0 Web 2.0 Expo SF 2009

Connecting people and data

• SOA is a modular software architecture, and the modules are services designed to interact with each other.

– Important Note: SOA also contains higher order constructs such as composite applications, orchestration, coordination, and more exist.

• We tend to rely on open standards to encourage automatic interoperability of services designed separately.

– A good SOA could still violate this rule however

– See Thomas Erl and Seven Principles of SO

Page 58: Economics 2.0 Web 2.0 Expo SF 2009

Key Points

• Gartner has reported that Service-Oriented Architecture is the leading organizing principle in the enterprise space, with 80% of all development using SOA principles in 2008.

– They’ve also said that all organizations should have begun getting their lines of business on a Web 2.0 architecture by 2008

• McKinsey and the Sandhill Group report that Web 2.0 in the enterprise will be one of the major disruptive influences in enterprise software in the late 2000’s.

Page 59: Economics 2.0 Web 2.0 Expo SF 2009

A key Goal of Web 2.0 and SOA:Turning Applications Into Platforms

• Openly exposing the features of software and data to customers, end-users, partners, and suppliers for reuse and remixing

• This strategy requires documenting, encouraging, and actively supporting the application as a platform

– Has serious governance implications

• Provide legal, technical, and business reasons to enable this :

– Fair licensing, pricing, & support models

– A vast array of services that provide data that uses need

– A way to apply these services to business problems rapidly and inexpensively.

Page 60: Economics 2.0 Web 2.0 Expo SF 2009

But existing integration models have been challenged

• Most SOA initiatives are delivering low ROI to the business

• The reasons are many but boil down to:

– SOA technologies have proven to have challenges compared to more successful models.

– Top-down enterprise architecture moves slower than the environment changes.

– Important avenues of SOA consumption and production points were often excluded from participation.

Page 61: Economics 2.0 Web 2.0 Expo SF 2009

The results of a large new SOA effectiveness study:

•“It has become clear to me that SOA is not working in most organizations.”

– Anne Thomas Manes, Burton Group

Page 62: Economics 2.0 Web 2.0 Expo SF 2009

Demand for Breadth Integration

• “48 percent of the CIOs we surveyed said that they plan to implement service-oriented architectures for integration with external trading partners this year.” – McKinsey & Co.

Page 63: Economics 2.0 Web 2.0 Expo SF 2009

And we now have real-world experience with traditional means of connecting to our data

• Traditional Web services was a good first try but has a long list of challenges for the outcomes we desire today.

• The model of the Web has continued to teach us about how to structure information and services.

Page 64: Economics 2.0 Web 2.0 Expo SF 2009
Page 65: Economics 2.0 Web 2.0 Expo SF 2009

Strange Attractors: Similarities between Web 2.0 and SOA

• Web 2.0

– Software as a service

– Interoperability based on Web principles

– Applications as platforms

– Encourages unintended uses

– Mashups

– Rich user interfaces

– Architecture of Participation

• SOA– Software as services

– Interoperability based on heavyweight standards

– Applications as platforms

– Permits unintended uses

– Composite Apps

– Little user interface guidance

– Little prescription of user participation

Page 66: Economics 2.0 Web 2.0 Expo SF 2009
Page 67: Economics 2.0 Web 2.0 Expo SF 2009

Enabling New Consumption Scenarios

• Cut-and-Paste deployment anywhere on the Intranet

• Consumption of the SOA in any application that can use a URL

• Discovery of data via search

• Integration moves out of the spreadsheet

Page 68: Economics 2.0 Web 2.0 Expo SF 2009

Definition: Mashup

• “A mashup is a Web site or Web application that seamlessly combines content from more than one source into an integrated experience.” - Wikipedia

• Content used in mashups is usually sourced from a 3rd party via a public interface (API)

• Other methods of sourcing content for mashups include Web feeds (e.g. RSS or Atom), and JavaScript/Flash “widgets”

Page 69: Economics 2.0 Web 2.0 Expo SF 2009

Mashups

• Strong preference for reuse over coding

– Innovation in assembly is the core value instead of ingenuity in coding

• Disruptive delivery model: Web-based with no install, no plug-ins, no admin rights, etc.

• Design focus is at the glue instead of the functionality

• Emphasis on simple, easy-to-use Web technologies over complex enterprise technologies

Page 70: Economics 2.0 Web 2.0 Expo SF 2009

What’s happening on the Web today

• The growth of Web sites with highly valuable “portable” content and functionality

• Users putting modular Web parts on their blogs and profiles to host the pieces of the Web that they want to share

• By the tens of millions on sites like MySpace and Facebook

• The increasing realization that there is limited business value in being on a single site…

Page 71: Economics 2.0 Web 2.0 Expo SF 2009

Connecting to and making use of our data

• Building open platforms instead of stand-alone applications

• Forming self-distributing ecosystems

• Spreading products far beyond the boundaries of a site

– APIs, widgets, badges, syndication -> mashups

• In other words: Being everywhere else on the network

• Building on the shoulder of giants

• Leveraging widgets, libraries, and APIs from Yahoo!, Amazon, and thousands of others and others

• The automated mass servicing of markets of low demand content and functionality (The Long Tail)

• Which represents the bulk of the demand

Page 72: Economics 2.0 Web 2.0 Expo SF 2009

The Global SOA has surpassed our enterprise IT landscape

• Some businesses have hundreds of thousands of users of their SOA

• Most are using WOA models for this

• Hundreds of companies have opened their SOA to the Web

– Mostly startups or established Internet companies that understand the Web

– But larger companies are beginning to understand this.

Page 73: Economics 2.0 Web 2.0 Expo SF 2009

Examples

• Amazon and their highly successful Web Services Division (with hundreds of thousands of business consumers of their global SOA)

– Over $300 million in revenue last year

• Google and its numerous and varied open Web APIs from Google Maps to Google Data

• eBay and billions of dollars in listings it generates through its public SOA,

• Applications like Twitter.com

– Gets 10 times the use through its APIs than from its user interface.

– A new generation of applications that are primarily used via their SOA presence.

Page 74: Economics 2.0 Web 2.0 Expo SF 2009

With traditional methods, many (perhaps most) software solutions are too expensive to build or buy today

Page 75: Economics 2.0 Web 2.0 Expo SF 2009
Page 76: Economics 2.0 Web 2.0 Expo SF 2009

The Focus: Rapid Business Solutions

• Full resources of the Web and the Intranet

• Enterprise context around management, security, privacy, etc.

• Gives everyone in the organization the ability to leverage the SOA.

• Lightweight, simple model.

• Inexpensive and extremely rapid results

Page 77: Economics 2.0 Web 2.0 Expo SF 2009

Situating mashups in the workplace:

Page 78: Economics 2.0 Web 2.0 Expo SF 2009

Demo

• http://pipes.yahoo.com

• JackBe Presto

Page 79: Economics 2.0 Web 2.0 Expo SF 2009

Mashups:The bottom line

• Excellent repeatability

• Inexpensive

• Good ROI

• Unfamiliar to many workers

Ideal for Early Adopters

Page 80: Economics 2.0 Web 2.0 Expo SF 2009

Online Community

Page 81: Economics 2.0 Web 2.0 Expo SF 2009

Eliciting participation on the network

• Social media: A continuous stream of shared (two-way) conversation and knowledge

• Online community: Groups of like minded individuals creating value for themselves

• Collective intelligence: Shared information built together on the network

Page 82: Economics 2.0 Web 2.0 Expo SF 2009
Page 83: Economics 2.0 Web 2.0 Expo SF 2009

Customer engagement today is much more than products and their marketing campaigns. It's a meaningful emotional connection to a company that helps businesses the most.

The Premise

Page 84: Economics 2.0 Web 2.0 Expo SF 2009

Four levels of community

Page 85: Economics 2.0 Web 2.0 Expo SF 2009

Online community

• Lifestyle products and brands generate strong, highly engaged communities on their own:

• Harley Davidson, IKEA, XM Radio, and hundreds of others have large-scale, vibrant, customer communities

• Many smaller examples: http://www.travellerspoint.com/ is a typical example of hundreds of vertical communities. It has over 150,000 registered users.

• People who deeply care about a product or brand can now meet, share ideas, socialize, and help each other.

Page 86: Economics 2.0 Web 2.0 Expo SF 2009

Example:

Page 87: Economics 2.0 Web 2.0 Expo SF 2009

What do online communities do?

• People find and connect with each other based on a common, shared idea

• Socialize, communicate, and collaborate on topics that they care about

• Share ideas, experiences, stories, suggestions, etc.

• Draw others in by word of mouth

• Becomes an ideal vehicle for collective intelligence and peer production

Page 88: Economics 2.0 Web 2.0 Expo SF 2009

Marketing vs. Community

• Customers and potential customers have the greatest resources to market and sell the product; if they only had the means.

• Traditional marketing and demand-generation is enormously expensive; you have to do it all yourself.

• The Web 2.0 solution: Passionate customers and potential customers are the most powerful resource in the world; tap into them directly.

Page 89: Economics 2.0 Web 2.0 Expo SF 2009

The means and methods

• Platforms:

• Drupal, Joomla, Lithium, Crowdvine

• Community Management

• Tools:

• GetSatisfaction, Buzz Monitoring, Social Networks

Page 90: Economics 2.0 Web 2.0 Expo SF 2009

The Three Essential Strategy Components

Social Media:Continuous Online

Conversations

• Blogs• Facebook Presence• Social Messaging• YouTube Interviews• Sponsored Content• Highlighted Community

Stories and Activities• Other Social Media

Online Community:Centralization of conversations.

Collective Intelligence:

Using the network to make the product

better• Community Site• User Profiles• Forums• Discussion Groups• Social Media Content

(left)• Chat/Messaging

• Community Outreach

• Customer Input• Voting systems• User Recommendations

• Valuable data:• Desired features• New ideas• Actual usage data

Page 91: Economics 2.0 Web 2.0 Expo SF 2009
Page 92: Economics 2.0 Web 2.0 Expo SF 2009

The Story of KatrinaList & XM Radio• Hurricane Katrina

– Survivors emerged and announced where they were on their blogs

– People watching the Web’s syndication “ecosystem” noticed the reports

– A small group collected the reports out of the blogosphere and centralized the listing

– Over 50,000 survivor reports in the first 3 days after the disaster

– Emergent phenomenon

– A critical example for how to rethink solutions to traditional problems in a 2.0 world in which we can actually tap collective intelligence

• XM Radio

• Community for Customer Service

Page 93: Economics 2.0 Web 2.0 Expo SF 2009

Online Community:The bottom line

• Medium repeatability

• Can be costly

• Proven ROI

• Dramatically lower customer support costs (10-30%)

• Better Customer Satisfaction

• New customer relationship

Ready for Wide Adoption

Page 94: Economics 2.0 Web 2.0 Expo SF 2009

Open Business Models

Page 95: Economics 2.0 Web 2.0 Expo SF 2009

Open Data

UGC & Open Content

Open Source

Online Community

Open BusinessMethods

• Richest, most up-to-date, and dynamic products & services

• Lowest cost of production• Greatest degree of

innovation and diversity• Ownership, control, and

monetization challenges

Network-Driven Open Collaboration

Breeding New Business Strategies

peer production

network effects

self-service

pull instead of push

Methods:

Enterprise 2.0

Page 96: Economics 2.0 Web 2.0 Expo SF 2009

Product Development 2.0

Page 97: Economics 2.0 Web 2.0 Expo SF 2009

Open business models are transforming the market

• Product Development

• Marketing and Advertising

• Operations

• Customer Service

Page 98: Economics 2.0 Web 2.0 Expo SF 2009

Examples

• Android

• Gold Corp.

• Crowdspring

• http://netflixprize.com

• Doritos UGC advertising

• http://OpenStreetMap.org

Page 99: Economics 2.0 Web 2.0 Expo SF 2009

Sourcing Models

internally sourced

outsourcedopen

sourced

Methodsdirect

assignmentsubcontracting,

consortiums

peer production,crowdsourcing, open platforms

Participants staffcontractors,

partnersanyone

Central Control high medium to high medium to low

Predictability best good lowest

Richness of Outcome

adequate medium high

Legal structure& IP protection

corporation,copyrights,

patents, etc.

contracts, charters, etc.

open sourcelicenses, Creative

Commons, etc.

Page 100: Economics 2.0 Web 2.0 Expo SF 2009

Open Business Models:The bottom line

• Medium repeatability

• Medium costs

• Significant cultural changes required

• ROI and control challenges

• Major strategic benefits

Ideal for Early Adopters

Page 101: Economics 2.0 Web 2.0 Expo SF 2009

2.0-era platforms and development tools

Page 102: Economics 2.0 Web 2.0 Expo SF 2009

“My Web site is bigger than your enterprise”

Page 103: Economics 2.0 Web 2.0 Expo SF 2009

Today’s Software ApplicationsAre Also Extremely

Sophisticated

• Highly distributed and federated

• Have a social architecture

• Built from cutting edge platforms and partshttp://clickatell.com

• Have to scale globally

• Set with expectations that are very high for functionality and low for the cost to develop/own new apps

• Created with productivity-oriented development tools

Integrating with 3rd party suppliers live on the Web

as well as being a 3rd party supplier is the name of the

game circa-2009

Page 104: Economics 2.0 Web 2.0 Expo SF 2009

There’s A Lot To Master Today To Create Credible

Products:

Page 105: Economics 2.0 Web 2.0 Expo SF 2009

The application “stack” is bigger now

Page 106: Economics 2.0 Web 2.0 Expo SF 2009

Recent technological innovations coming primarily

from the online world

• Cloud computing

• Utility/grid/Platform-as-a-service

• Non-relational databases

• S3, CouchDB, GAE Datastore, Drizzle, etc.

• New “productivity-oriented” development platforms

• RIA: Flex/AIR, JavaFX

• Stacks: Rails, CakePHP, Grails, GAE, iPhone, etc.

Page 107: Economics 2.0 Web 2.0 Expo SF 2009
Page 108: Economics 2.0 Web 2.0 Expo SF 2009

Cloud Computing is just about12 months old but changing the

game quickly

• Provides enormous advantages in terms of cost and agility

• LAMP doesn’t have a solution for providing economies of scale

• Complex governance

• Control, privacy, security

• Regulations

• Has reliability and fault-tolerance implications

• 90% of organizations will have a cloud computing application in pilot by 2010

Page 109: Economics 2.0 Web 2.0 Expo SF 2009

Comparing Two of the Largest “Platforms as a Service”

Page 110: Economics 2.0 Web 2.0 Expo SF 2009

The cloud computing space today

The new platform lock-in?

Suitable for

Experimentation

Page 111: Economics 2.0 Web 2.0 Expo SF 2009

Non-relational databases

• CouchDB: Free, open-source, document-oriented database.

• Derived from the key/value store, it uses JSON to define an item's schema.

• Meant to bridge the gap between document-oriented and relational databases

• These views map the document data onto a table-like structure that can be indexed and queried.

• Like CouchDB, Mongo is a document-oriented JSON database, except that it is designed to be a true object database, rather than a pure key/value store.

• Drizzle began life as a spin-off of the MySQL (6.0) relational database.

• Aim of creating a leaner, simpler, faster database system.

• Drizzle can still store relational data.

• The aim is a semi-relational database platform tailored to web- and cloud-based apps running on systems with 16 cores or more.

Ideal for Early Adopters

Page 112: Economics 2.0 Web 2.0 Expo SF 2009

The New Dynamic Development Platforms

• The Web development industry has moved to a focus on “productivity-orientation.”

• New platforms highly optimized for Web development are emerging.

• These new Web development platforms embody much of what we’ve learned in the last 15 years in terms of best practices.

• However, like all platforms, they have tradeoffs, including performance and maturity.

Page 113: Economics 2.0 Web 2.0 Expo SF 2009

Performance of Dynamic Languages Is An Issue Though

Page 114: Economics 2.0 Web 2.0 Expo SF 2009

Ruby on Rails

• Ajax-ready but works with all RIA technologies

• Automatic Object/Relational Mapping• Sophisticated Model View Controller

Support• Convention over configuration

• Radically-oriented around Web development only

• Very high productivity (IBM verified 10-20x older platforms)

• Open source and free

• Runs major sites like Twitter• One of the most popular new platforms• Has clones in most other major languages

now. SaaS versions too: http://heroku.com Ready for Wide Adoption

Page 115: Economics 2.0 Web 2.0 Expo SF 2009

CakePHP

• Open source Web application framework written in PHP

• Works with all major RIA technologies

• Modeled after the concepts of Ruby on Rails

• Not a port of Rails but extends the ideas to PHP

• Stable, mature, and reliable

• http://www.cakephp.org/

Page 116: Economics 2.0 Web 2.0 Expo SF 2009

Groovy & Grails

• Groovy is a dynamic language for the Java Virtual Machine

• Has strengths of Ruby, Python, and Smalltalk

• Runs anywhere Java runs

• Grails is a Ruby on Rails like framework for Groovy

• Mature, stable, and relatively high performance Ideal for Early

Adopters

Page 117: Economics 2.0 Web 2.0 Expo SF 2009

Changes to the processes that create architecture

• Increasing move to assembly and integration over development of new code

• Perpetual Beta and “extreme” agile

• Community-based development and “commercial source”

• Product Development 2.0

Page 118: Economics 2.0 Web 2.0 Expo SF 2009

The Web’s Version of Agile

• Shadow Apps for real-time feedback

• Customer-Sampling and Live Testing

• Granular Versions (constant evolution)

• Daily, even hourly, releases

Ready for Wide Adoption

Page 119: Economics 2.0 Web 2.0 Expo SF 2009

An extremely competitive environment: Our architectures

must explicitly focus on building network effects

Page 120: Economics 2.0 Web 2.0 Expo SF 2009

New Distribution Models

Page 121: Economics 2.0 Web 2.0 Expo SF 2009

How do were-imagine our products and services for

the 21st century?

Page 122: Economics 2.0 Web 2.0 Expo SF 2009

Challenges to Transitioning to New Architectural Modes

• Innovator’s Dilemma

• “How do we disrupt ourselves before our competition does?”

• Not-Invented Here

• Overly fearful of failure

• Deeply ingrained classical software culture

• Low level of 2.0 literacy

Page 123: Economics 2.0 Web 2.0 Expo SF 2009

What we often see in the marketplace today

• Too many copy-cat products

• Failure of imagination and courage

• New architectural concepts as an after-thought. Or tacked on as a “checklist” item.

• Companies that pay lip service to innovation but are having trouble or unwilling to make the necessary changes

Page 124: Economics 2.0 Web 2.0 Expo SF 2009

The 1.0 world is having its own problems

• The time is right for change now more than ever before

• We all have to learn how to adapt quickly to new marketplace realities

• Something that the (successful parts) of network have been doing for a long time

Page 125: Economics 2.0 Web 2.0 Expo SF 2009

Key Lesson:We now have a

fundamentally new and better set of lenses through which to look at leveraging

value on the network...

Page 126: Economics 2.0 Web 2.0 Expo SF 2009

• Push to pull systems

• Web 2.0 design patterns and business models

• New modes of software, platforms, and architectures

• Productivity-Oriented Platforms

• Web-Oriented Architecture

• New Distribution Models

Page 127: Economics 2.0 Web 2.0 Expo SF 2009

Potential Reach Powerand Network Effect

(Lowest Cost Per Customer/Partner)

Web

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antic

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The new Web 2.0 era distributionmodels remain largely untapped

Page 128: Economics 2.0 Web 2.0 Expo SF 2009

It’s time to changeour DNA

• Moving from the 20th century towards 21st century businesses

• Deeply understanding the network and its profound potential for creating growth and building value

• Putting 2.0 into the core of our lines of business

Page 129: Economics 2.0 Web 2.0 Expo SF 2009

The rewards are considerable

• Products and services that are sustainable

• Successful transition to a rapid evolving new marketplace

• Attaining of new, sustainable competitive advantage

• Resilience to future change and ongoing market evolution

Page 130: Economics 2.0 Web 2.0 Expo SF 2009

Major Opportunities in 2009

• Redesign products and services for the 21st century.

• Strategically move IT infrastructure to the cloud.

• Embrace new low-cost economic models for SOA.

• Reduce application development and integration time/expenditures with new platforms and techniques.

• Open your supply chain to partners on the Web.

Page 131: Economics 2.0 Web 2.0 Expo SF 2009

Questions

Slides: [email protected]