Corporate Web 2.

0: Opportunities and Threats Focusing on Small and Medium-Sized Enterprises (SMEs)

Dr. Conrad Lienhardt npo-consulting.net Ztlweg 7, 4020 Linz, AUSTRIA Published in: Research & Development. Proceedings FH Science Day 6th November 2008 FH O, Linz Campus. Shaker Verlag, Aachen, pp. 454-459
ABSTRACT

Motivation: Enterprises see themselves increasingly confronted with the idea that before long there wont be any corporate division or entire enterprise not affected by Web 2.0. Accordingly, enterprises are investing in Web 2.0 technologies with the intention of using social software, and an increased number of offers on the market will try to serve this demand. The very nature of Web 2.0 is such that everyone has his own idea of what it is, and it has no definite identity. Despite the many opportunities and great potential, there are still associated risks and threats that are either poorly communicated or not communicated at all. Results: Web 2.0 creates competitive advantages especially for Small and Medium Sized Enterprises. To achieve these advantages it is not sufficient to use Web 2.0 technologies while remaining in Web 1.0 economic management, strategy and culture. The challenge for enterprises is to integrate its principles of Web 2.0 and to change to Enterprise 2.0. To gain optimum competitive advantage, it is not simply a question of using special technologies, instruments and tools, but much more a question of culture. Enterprises need to create and establish a social sphere in which participation, collaboration and communication is supported at all levels without restrictions. This however makes it evident that Web 2.0 does not fit to all enterprises, but some principles can be adopted by Web 1.0 enterprises. Kontakt: conrad.lienhardt [at] npo-consulting.net

INTRODUCTION CraigClineandDaleDoughertycoinedthetermWeb2.0in2003/04.Itfoundrapidand

farspreadingrecognitioninconnectionwiththeWeb2.0conferencesorganizedbyTim OReilly,whichfirsttookplaceinSanFranciscoin2004.AyearlaterOReillyformulated a short definition of Web2.0: Web 2.0 is the network as platform, spanning all connected devices; Web 2.0 applications are those that make the most of the intrinsic advantages of that platform: delivering software as a continuallyupdated service that getsbetterthemorepeopleuseit,consumingandremixingdatafrommultiplesources, includingindividualusers,whileprovidingtheirowndataandservicesinaformthat allows remixing by others, creating network effects through an architecture of participation, and going beyond the page metaphor of Web 1.0 to deliver rich user experiences.(OReilly,2005)

WEB 2.0: FACTS Neither in technological regard, nor with view to its collaborative, participative

dimensions does Web 2.0 represent a completely new beginning. The technologies of Web2.0partlyoriginatefromolderdevelopments(e.g.RSS,XML,Blog,Wikis,etc.),but these have been pushed further, and use and accessibility have been simplified. Additional developments, like AJAX, have also been added. The social, collaborative aspects of Web 2.0 may not be understood as a completely new concept, which has precursors dating back to the 1960s such as Usenet, Arpanets, Groupware, Computer Supported Collaborative Works (CSCW). However, on basis of the advanced technologicaldevelopmentsintheInternetalone,inparticularintheWorldWideWeb, thesocial,collaborativedynamics(interaction,participation,networking,sharing)have been able to develop successfully under terms such as social software and Social Networking System (SMS) within the last ten years. (Koch, 2008: S. 3758; Allen, 2004) Web2.0isassociatedwithWikis,Blogs,RealSimpleSyndication(RSS),VideoPlatforms such as Youtube, Vod:Pod, Sevenload; networking platforms such as MySpace, Facebook, Friendster, Orkut, Bebo, Xing; photo sharing such as Flickr, Pod and Videocasting, social bookmarking such as Del.ici.us, Mr. Wong, Digg; search engines suchasGoogleSearch,GoogleBlogs,Technorati,withGoogleAdwords,Adsensetc.pp. Web2.0isoftenseenasaparadigmshift,which,however,isnotreallyarguableyet. Web2.0hasnotreplacedWeb1.0anditwillnotdosointhenextfewyears,ifever.Web 2.0andWeb1.0areoverlappingbythebehavioroftheusersandenterprises. TheHypearoundWeb2.0maskstheviewonthecurentspreadinganduseofWeb2.0 technologies in Europe, particularly in Germany. According to a study of Forrester Research(Q2/2007) in Europe,Web2.0 is usedto a significantly smaller extent than in theAsianPacificArea.Thereareabout373millionusersofWeb2.0servicesworldwide (Strategy Analytics, 2007) and 78 million users in Europe (comScore World Metrix, 2007).ThisisbestillustratedbytheuseofBlogs:In200674%ofJapaneseInternetusers read Blogs, whereas only 15% in Germany. (Edelman Change and Employee Engagement&PeopleMetrics,2006).Otherstudiesreportevenfewer.Thecurrentstudy

of the Deutschen Telekom Deutschland Online 07 reports 7% in 2006 (Deutsche Telekom, 2008) and 11% in 2007. (Gscheidle, Fisch, 2007) This means that in Germany the number of Blog readers is significantly less than the number of Blogwriters in for instanceChina(19,5%).ThenumberofactiveBloggersinGermanyisabout36%.Video platformsandsocialnetworkingsiteslikeYoutube,MySpace,Facebookhaveperformed better.(TNSInfratestForschungGmbH,2008). ThereforestatementsconcerningthespreadofWeb2.0havetoberegardeddifferently. The same applies to the use of Web 2.0 technologies and applications in socio, demo and psychographic consideration. Wiki and Blog users are senior to users of social networking sites, who are often described as Young Hyperactive, Young Strollers or RoutinedGeeks.(Oehmichen,Schrter,2007:S.7)Therearefewerfemaleuserswhoadd content and publish material online than men, and their disposition to collaborative onlineworkissignificantlysmaller:77%ofwomenfindthislessornotatallinteresting versus63%ofmen.(Gscheidle,Fisch,2007:S.399) Since the current spreading and use of Web 2.0 in Europe is much smaller than the hypearoundWeb2.0onecangenerallyassumethattheusewillincreaseandwillgain considerably. 69% of experts questioned in thestudy Deutschland Online 5 estimate the value of Internet forums and communities, especially concerning intensifying customerrelationship,athighorveryhigh.Theknowledgeaggregationanddistribution alsoplaysanimportantrole.TherebytheimportanceofWikisandBlogswillincrease, andfor instance corporatecommunications and human resource marketing will profit. (Deutsche Telekom, 2008: S. 35; TNS Infratest Forschung GmbH, 2008: S. 322; Young, 2008b) StudiesfocusingontheuseofWeb2.0inSmallandMediumSizedEnterprises(SMEs) draw a less consistent picture. A worldwide survey of executives by McKinsey concludesthatenterpriseswithfewerthan500employeesarelessinterestedinWeb2.0 technologies.68%ofSMEsdonotusesuchtechnologies,59%ofthembecausetheydo notseeanynecessityorsenseinusingsocialsoftware.(Ptter,2008)

CORPORATE WEB 2.0, ENTERPRISE 2.0 Theuseoftechnologies,dynamicandsocial,andcollaborativedimensionsofWeb2.0

byenterprisesfortheuseoftheirwebServicesiscommonlycalledCorporateWeb2.0. ThetermsEnterprise2.0andBusiness2.0pointouttheintegrationofWeb2.0principles inpartsoforwholeenterprises. Even during the early beginnings of Web 2.0 the opportunities and challenges of its use by enterprises were already being discussed. In Architecture of Participation OReilley asks, How do you take advantage of the new Web 2.0 landscape to build yourbusiness?Howcanyoumakeyourcustomersyourevangelistsorbetteryet,how can you let your customers build your business altogether? What are the roles of new communicationtoolslikeblogs,RSS,andsocialnetworks?(OReilly,2004).
3.1 Recommendation, Word of Mouth, Monitoring/ Research

Web 2.0 is a challenge for all enterprises, because they cannot simply ignore its dynamicandpotenal.AccordingtorecentsurveysfortheArbeitsgemeinschaftOnline Forschunge.V.(AGOF)inGermany39,87Millioninternetusershaveusedtheinternet togetproductinformation,thatis97,4%ofinternetusersinall.(AGOF,2008)Morethan half of the consumers being asked in a survey by Deutsche Telekom answered that they trusted more in product descriptions and the experience of other consumers communicated especially in Internet forums or communities than they relied on information provided by the enterprise itself. (Deutsche Telekom, 2008: S. 37) In addition to customer systems of evaluation, the exchange of experience and word of mouth recommendations in the social sphere of Web 2.0 is of special importance, in particularforexportorientedenterprisesandagainforthosewhoareengagedinAsian orAmericanmarkets. The 95 theses of the Cluetrain Manifest, formulated in 1999, anticipate significant impact of Web 2.0 on its cultural condition. One of leading key sentences is: Markets areconversations (Thesis1).Thesis 11and 12stress thepower ofconsumers towards enterprises: People in networked markets have figured out that they get far better information and support from one another than from vendors. So much for corporate

rhetoric about adding value to commoditized products. There are no secrets. The networked market knows more than companies do about their own products. And whetherthenewsisgoodorbad,theytelleveryone.(Searls,Weinberger,Locke,2000) Enterprises that do not take this into consideration or ignore this risk face enormous troubles. There are numerous prominent examples out there. (Lang, 2006) Enterprises thereforeshouldmakeuseofaconsistentandsystematicmonitoringoftheirandtheir productsreputationintheInternetandusethisinformationasfeedbackforprosumers. It is important to react quickly and appropriately to critics, negative reports and consumer feedback. Blog monitoring for instance should be as normal as conventional mediamonitoring. Ontheotherhand,Internetforums,communitiesordiscussionsintheBlogsphereor onsocialnetworkingsitescanpushtheimageorpromoteproductsofanenterprise.The effects on the corporate success are evident. Appropriate strategies are necessary to succeed. This requires familiar knowledge of cultures and dynamics of social networkingsystemsandtheircommunitiesaswellasthegardeningofconversationsin Web2.0.Thecommunitiesandtheiruserspunishenterprisesthattrytomanipulatethe social sphere in the Internet. Thus the phrase How to exploit Web 2.0 for market intelligenceiscounterproductive.(Digimind,2007)
3.2 Online Advertising

SomeenterprisestrytoadvertiseonbestfrequentedBlogs,socialnetworkingsitesor sharing portals by using conventional online advertising strategies. But conventional advertisinge.g.viabannersisnotreallyappropriatetoWeb2.0. Many enterprises, including Small and MediumSized Enterprises, prefer advertising via Google Adwords/ Adsense, LinkLift, xAdservice, TextLinkAds, Reviewme, Trigami, Turn a.s.f. to address their target audience. These advertising intermediaries offertechnologiesforcontextualadvertisingnotonlyforWeb2.0butwithgreatsuccess also in the social sphere. Using an appropriate strategy and knowing how to filter out the target markets and audiences effectively can allow these intermediaries to support

enterprises efficiently. Bloggers for instance also profit from this advertising, and their revenuefromthisshowshowsuccessfulitworks. Advertisinginthesocialwebisnotnecessarilyconfinedtothatsortofadvertising.A latest example for another strategy is the cooperation of MySpace (Germany) with Gruner+Jahr. In an separate ContentBox (www.myspace.de/laufsteg) the fashion, bodycare and boulevardaffine users from MySpace will be shown news and advertisingfromthethreeGruner+JahrLabelsBrigitte,GalaandBymtobringthemto fashion,peopleandbeauty.(Pressrelease,Gruner+Jahr,07.07.2008)
3.3 Use of instruments and tools.

The number of enterprises that use Web 2.0 instruments and tools besides online advertising is growing fast. According to a McKinsey survey, 2030% of European enterprises use or plan to use Blogs, Wikis, RSS and social networks. (McKinsey & Company, 2007) Technologies are generally used in the intranet for enterprise communicationwithcontractors,partnersandcustomers,andforcustomerrelationship and knowledge base management Web 2.0 technologies are generally used in the intranet, but the culture of Web 2.0 and its principles are largely not integrated. Enterprise2.0ismoreabuzzwordthanreality.Focusingtechnologies,instrumentsand tools, to exploit Web 2.0 for market intelligence provokes defence on the part of the social sphere and this can cause conflict. Even if social networking sites are hosted by enterprises, users dont accept exploitation and dictation: This strategic denial of authorityresonateswiththeapparentlyfreepracticesofusersastheyengagewiththese sites uploading content, selecting information to retrieve or sharing in community norms.OnWeb2.0sites,theauthorityoftheuserisallowed(atleasttheappearanceof) fullexpressionwhilethatofthecorporateownerisdiminished.(Jarrett,2008)
3.4 Participation und User Generated Content (UGC)

User Generated Content is described by the OECD as i) content made publicly availableovertheInternet,ii)whichreflectsacertainamountofcreativeeffort,andiii) which is created outside of professional routines and practices. (WunschVincent, Vickery,2007)Thedriversofthisdevelopmentaretechnological(e.g.rapiddiffusionof

broadband internet, Web 2.0 technologies), social, economic (e.g. competition, growth, customerretention)andlegal(e.g.flexiblelicensing).UGCbasednormallyonintrinsic motivationanddoesnottargetincomeoreconomicaddedvalue.Apartfromthat,UGC creates a market for businesses offering services such as hosting. This market is currentlyreferredtoasimmatureandvolatilebyForresterResearch.However,Forrester Researchexpectsagrowthofinvestmentsoverthenextfiveyears,reaching$4,6billion globallyby2013withsocialnetworking,mashups,andRSScapturingthegreatestshare. (Young,2008a) UGCnotonlyallowsonetopublishhisowncontent,butalsotoedit,change,remix, recombine,sampleandmashupanycontentwithadvancedlicensingagreements.This allows users to create, detect, and spread trends very quickly within the highly communicative social web. The social web has the potential to be faster and more intelligentthanenterprisesorevenexperts.SurowieckipointsthisoutinThewisdom ofCrowds.(Surowiecki,2004),andWikipediaisagoodexampleofthis. UGC intensifies competition especially in branches like music, photography, video, journalism, TV, parts of retail boosted by open source and creative commons. On the otherhandsomepeoplethinkUGCisgoodforexploitation,tolearnaboutthemarket and its consumers or profit by prosumers. Wikis, Blogs or social networking sites are launched and everybody is invited to join. And some people expect that is enough to motivate social dynamic, high traffic and virulent exchange with other communities through API or other technologies. Obviously some think founding communities or offeringBlogsandWikisislikecreatingaperpetuummobile.Oncepusheditkeepson running,butthisdoesnotwork.JakobNielsenhasformulatedthe9091rule,whichhas beenprovedbyexperienceagainanagain(especiallyinEurope).90%oftheusersareso calledLurkers.Thatmeanstheydontgetinvolved,butread,consumeandstaypassive, 9% publish or engage sporadically. And only 1% of the users can be counted on to produce content. After analysing and interpreting the results of the ARD/ ZDF online study 2007 Gescheidle and Fisch conclude: For the average onliner Web 2.0 is a big

fund of new, free and interesting content, which is produced by few users. It is quasi Web1.0consistingofUserGeneratedContent.(Gscheidle,Fisch,2007:S.405) If UGC is to be implemented in enterprises, for instance by launching corporate Blogging or corporate Wiki, the management has to take Nielsons rule into consideration. Blogs, Wikis, communities and social networking sites have to be gardenedevenifthepointofcriticalmassisoverrun. ThesuccessofWeb2.0 technologies in enterprises dependson thecorporate culture. The combination of strong hierarchies with fixed structures, restrictive communication rules,regulatedaccesstoknowledgeandremainingfixedonfaultless,frictionlesswork does not allow for a breeding ground of Web 2.0 culture. In such an environment it is better to stay Web 1.0. In the environment of Web 2.0, UGC participation and collaborationcreateacompetitiveadvantagewithinaneconomythatisbecomingever moreknowledgebased.ThecorporateuseofWeb2.0especiallyinanEnterprise2.0will boostthisadvantage,butthisdoesnotsuiteveryenterprisebecauseofsecurityreasons for example. Every enterprise has to examine the presuppositions for Web 2.0 and choose what technologies and to what an extent they should be used based on that information. REFERENCES
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