By Christopher Rollyson Case Studies Presage Imminent Adoption of Social Technologies—Emerging Markets Prize In Balance
 A who’s who of global marketing executives convened on the Hilton Chicago October 11-12, 2007 for two days of cramming on social networks, emerging technology and transformation. It certainly felt like an inflection point: analysts’ insights and technology pioneers’ zeal were tempered by corporate stories in the trenches. Based on my experience with previous adoption curves, I predict a significant jump in Web 2.0 adoption by corporations next year.
Depending on your industry, the next six months will be your last chance to be early to market. As success stories become more widespread and executives realize that Web 2.0 has very low barriers to adoption due to the social Zeitgeist and a relatively low price point, the use of social technologies will rapidly become mainstream. The main barrier to adoption is cultural resistance and organizational inertia.
Although this was not a technology conference, in my conclusions, I will provide some insights about why and how Web 2.0 represents a fundamentally new technology value proposition that makes it disruptive—and imminently practical. If you don’t understand this, you may make erroneous assumptions about its applicability.
This article is Global Human Capital’s overview of and conclusions about the forum as a whole, but we will have several other in-depth articles in the days ahead. You can be notified as to their publication by subscribing to the RSS feed of our Forrester Consumer Forum tag.
Agenda
These are the tracks I covered:
Setting the Stage
The introduction by Carrie Johnson and Christine Spivey Overby suggested the fact that social computing is a global phenomenon with plenty to say to the stewards of global brands:
- The percentage of consumers that use various social networking sites is widespread: UK 34% (Facebook), Sweden 31% (Facebook), South America (Orkut), Metropolitan India 69% (Orkut), South Korea 53% (Cyworld) and USA 20% (MySpace, Facebook). Moreover, Cyworld’s penetration among Gen Y and Gen X (broadly, 19-35) is estimated at 90%.
- The percentage of trust (confidence) that online consumers have in four sales-influencing sources:
- Opinion of a friend who has used the product: 83%
- Consumer reviews on retail site: 60%
- Consumer reviews on third party site: 52%
- Online review by editors of third party site: 49%
- The vaunted “marketing funnel” used by marketers for the last several decades is broken beyond repair. It held that marketers communicated with consumers, who turned into buyers along a more or less linear path of touchpoints. Today’s buying process looks more like a (networked) maze, with many unpredictable twists, turns and jumps before the customer turns into a buyer. Energizing this network is the new marketing vision, not controlling messaging and information to pull customers along a linear path.
- The theme of the conference was “People build great brands and products.” (i.e. your customers)
- The conference was organized to answer three key questions:
- How are social technologies changing consumer behaviors towards brands and media?
- Which competencies and tools will companies need to succeed in this new social structure?
- How will Social Computing evolve over the next decade, and what are the radical implications to companies?
- They gave a glimpse of Forrester’s approach to success: assess what your customers are doing; decide what you want to do; plan how customer relationships will change; decide what technologies to use. this is pretty fundamental, but they pointed out that too many companies approach it the other way around: “We need to be in Second Life because our competitor is.” This is a recipe for disappointment.
Your Customers Are Revolting 😉
- Charlene Li, Vice President and Principal Analyst, Forrester Research
Charlene Li briefed the conference on the disruptive character of consumer empowerment, which she and Josh Bernoff call “groundswell.” She explained why customers were revolting, a “ladder of participation” to describe who is driving the change and some suggestions for turning revolt into reform.
Customers are revolting because marketers are “shouting at them” and not listening. Even more important, they can talk to each other now. Their conversations with each other as individuals make companies’ communications seem inane by comparison. Social technologies are tools that enable customers to act collectively.
The “ladder of participation” was useful and interesting. From least to most engaged are: Inactives, Spectators, Joiners, Collectors, Critics and Creators. Notably, 39% of youth are Creators and 43% are Critics. 58% are Joiners and 66% Spectators. She gave an excellent overview of each profile.
She succinctly explained how to turn “revolt” into “reformation”: instead of being unhappy with customers’ negative comments, enable advocates to answer them on your behalf. Don’t complain when customers magnify your shortcomings with product, service or other. Ask them how they would improve what they’re unhappy about and act on it. Perhaps the hardest for marketers: accept that they will take your ads and messages and twist them in video, pictures, audio and text. Allow them to create relevant messages for each other. Remember, their messages refer back to yours.
Read our more detailed analysis of this track.
Social Networking and User-Generated Content in Today’s Media Environment
 Christie Hefner, Chairman and CEO, Playboy Enterprises
Christie Hefner gave a doubly-valuable presentation because she addressed her company’s journey to online customer engagement and explained how Playboy’s transition was affecting its advertisers. It was obvious that she is a leader who rolls up her sleeves and understands her business.
Hefner’s advice for senior marketers was to remember that human beings are not fundamentally being changed, even though the way in which they relate and communicate may be changing dramatically. Our humanity, desires and impulses are a constant. Moreover, the value that your company offers to people must be focused on their humanity. The mechanics of how, where and when you deliver the value are crucial “implementation details.” If you are in touch with your customer’s human desires, you can see beyond the product and the technology.
Playboy has been transforming itself since the 1990s, when Hefner decided to embrace Web 1.0, and Playboy became the first major magazine with a Web presence. Changing or broadening your reach via different media requires rethinking what your value is and how you can deliver. Embracing cable in 1982 and online in 1994, Playboy has always had a significant social and community element. Understanding how your customers want to use emerging social technology to connect with your value proposition is what you need to understand.
Read our more detailed analysis of this track.
The New New Media: How the Rise of User-Generated Content Will Change the Way You Target Prospects and Customers
Kevin Johnson’s presentation was another reflection of the discontinuous change that Web 2.0 represents. In the Web 1.0 world and pre-Web, advertisers used a similar strategy as flowers: content drew the bees, and their ads were the spores. Advertising was passive and appeared next to the content that was of interest to the target demographic.
This truism is changing completely. With Web 2.0, Johnson urges marketers to target the customer, not the content. He zealously promoted Acxiom’s approach to targeting online customers: ask for permission to track their navigation (“volunteered” information) from one site to another. Build trust by being trustworthy. Even for surfers that don’t agree, by taking the user’s IP address (“derived” information) and quickly comparing it to usage and geographic data, Acxiom and show more relevant ads. In fact, combining demographic information with usage information is the nirvana. He credited this approach with reducing Cost Per Application from $10 to $1 and Cost Per Approved Account from $40 to $5.
UGC (User-Generate Content) is risky for advertisers because it’s unbridled and inconsistent. As its popularity grows, advertisers will feel the pressure to try it. Video will grow as a portion of all online content, and this increases complexity. User data can help.
In general, advertisers are very out of synch with users, especially CPG (consumer packaged goods) companies. Citing Forrester’s Consumer Technographics and the Internet Advertising Bureau, he compared actual advertising expenditure against the “percent of total media time U.S. households spend per media type”:
- TV: 43% expenditure against 32% of time spent
- Newspapers: 30% expenditure against 8% of time spent
- Radio: 13% expenditure against 20% of time spent
- Online: 6% expenditure against 34% of time spent
He didn’t give an historical view of this data, but we all generally know that online is growing while TV and newspapers are shrinking. This trend, along with how Web 2.0 is reforming the online world, means that there will be significant innovation and disruption.
Another key point of advice: break down silos: consumers experience and share content across the “three screens” and others. to be effective, you have to design for their experience.
Corporate Image in the Age of Social Technologies
 Richard Edelman, President and CEO, Edelman
There are few industries that have been as affected by consumer empowerment as has PR (public relations). Richard Edelman, leader of one of the world’s largest independent agencies, explained the Web 2.0-driven transformation through the lens of PR. Everyone is familiar with the phrase, but it’s worth revisiting: PR has quintessentially been the spin doctor and influence peddler of institutions, the intermediary between client and “public.” It puts the best face on whatever situation is at hand and tries to pitch the media on telling certain stories, in certain ways, if possible. It studies probable impact of various scenarios and advises clients on how to act to maintain a positive image. Positive image too often has a higher priority than truth.
By now, you can see that the age of Web 2.0 represents something more than a fly in the ointment—a turkey maybe.
Edelman shared his point of view on how corporations, institutions and PR must transform. He echoed several themes and introduced others:
- Authority is dispersing, and business has tenuous credibility; more media is shifting to aggregating content (it doesn’t only focus on creating original content).
- Citing the Edelman Trust Barometer, he showed that “a person like me” is the most trustworthy source of information in 2007, 51%. Academics are second, at 48%, and employees are third (36%). CEOs are last (22%).
- PR used to influence within a pyramid of influence; now its focus is shifting to participating in “the conversation” with networked individuals.
- He introduced a framework for the new role of public relations. Implicitly, he suggested that institutions would parallel PR’s journey:
- Get involved and have an opinion about big ideas like improving the environment, alleviating poverty, confronting the beauty industry with its use of over-thin models and dealing with obesity.
- Showing clients how to listen to consumers. This is not trivial because enterprises are not accustomed to such “unstructured data.” Also, how to engage customers and empower employees.
- Public advocacy will still be a major focus, although the means will change. Blogger outreach and how to manage issues honestly.
- Edelman has had its share of gaffes: two of its employees served as “lead bloggers” with one of Wal-mart’s campaigns, which was subsequently discovered. The firm has implemented new controls to avoid this. Edelman emphasized that adequate disclosure is a must.
- Treat bloggers as you used to treat journalists.. with respect. He pondered whether bloggers should have a “code of ethics.”
- All companies are media companies. Everyone has a story to tell.
- Some observations:
- I wasn’t sure I understood his remark around the blogger code of ethics, but I found it to be curious. In the peer to peer world, one’s integrity and ethics are all one has; it’s the default setting, for all the reasons he mentioned (i.e. “Google doesn’t forget”). Transparency is only going to continue to increase, so telling the truth becomes both ethical and the only practical alternative. People will find out anyway.
- “Public” relations as a term smacks of communicating with the minions beyond the castle walls. I can imagine that having some catharses like the Wal-mart fiasco can show PR leaders that transformation is necessary—and as quickly as possible. It could then be very difficult to advise clients, some of whom would undoubtedly want to play by the old rules. It calls for truly gutsy and persistent leaders.
- I don’t believe that Edelman’s talk was as broadly applicable to companies as he might have thought. PR’s core function has been to make its clients look good. That looks like a buggy whip manufacturer in the era of the Model T. Institutions’ core functions are to create value for customers through products or services. Yes, they must learn how to relate to customers differently, which will affect how they conduct their businesses, but it won’t change their businesses. It will change the PR business.
How Social Computing Can Help Sell
 Sucharita Mulpuru gave a very useful summary of how executives can apply blogs, tags, wikis, customer ratings, user videos and shopping communities to aid direct and indirect sales. Moreover, she provided a framework to help think about these vehicles in terms of complexity and the degree of “directness” and “indirectness” of the sale.
- Direct Sales: customer ratings and reviews are “point of sale” aids in which most online customers have high confidence, and they are low complexity. Recommendation engines are software solutions whose algorithms match patterns among customer behavior and purchases (amazon.com is the pioneer) to “recommend” purchases. They are high complexity. Podcasts are between the two in complexity.
- Indirect sales: blogs are low complexity and most direct (of the indirect), and they are indirect because they usually advise on the topic area and are more unstructured and further from the sale. Highest in complexity and most indirect are virtual worlds. Social networks and wikis are in between. Having a framework like this can help you to set goals appropriately.
- You can make reviews more useful by:
- Instituting “reviews of reviews,” a feature that enables customers to rate reviews’ usefulness.
- Incorporating tagging into reviews to structure the data more: rather than only giving reviewers a text box in which they provide unstructured data, also give them tags with which they can describe the item or service. More on tagging below.
- Giving reviewers very simple, yet anonymous ways to profile themselves. For example, when rating hotel rooms, backpackers will rate hotels differently than young couples or retirees. That will allow customers to qualify ratings.
- Executives’ fear of negative reviews is understandable, but negative reviews are crucial to credibility, and they won’t damage your franchise as much as you might think because customers are smart. Citing Forrester research of amazon.com, she showed that, only 13% of “top ten” items received negative reviews, and only 39% of customers found the negative reviews helpful. Non Top Ten products received 19% negative reviews, but 64% of customers rated these negative reviews helpful. Moreover, negative reviews often have helpful suggestions for improvement, and they can represent opportunities for you to respond and deepen customer relationships.
- Customer-created video is an emerging possibility. You can allow customers to make their own ads, testimonials or demonstrations of your product. This can have high credibility but it can also be expensive. It’s best to consider video for high-value offerings.
- Recommendation engines work best when you have a large product assortment. You also need to be willing to constantly tweak the algorithm.
- Communities are indirect, brand building initiatives that can be expensive but, if done right, they can help to build fierce loyalty. She gave examples of Weber Grills, Mini and DelMonte’s pet division. Of course, one of the most innovative out there is Chicago’s own skinnyCorp, which operates several communities. The most famous is Threadless. The community submits designs and votes on them monthly. Winning designs are made into t-shirts.
- When considering indirect efforts, realize that quantifying ROI will be difficult. Also, before implementing these, make sure that your customer service, merchandising and databases will withstand additional customer scrutiny.
- Some observations:
- Saying that blogs and blogs are indirect overlooks possibilities. I agree that, in practice, most wikis and blogs seek to inform, but the tools themselves could easily be used for direct sales support.
- When you are interacting with individual customers in forums, the benefit of resolving conflicts is multiplied significantly.
Always in Beta: How big Business Can Benefit from “Little” Innovation
- Moderator: David Armano, Vice President Experience Design, Critical Mass
- Stan Joosten, Innovation Manager, Holistic Consumer Communication, Procter & Gamble
- Manish Mehta, Vice President, Global online, Dell
David Armano led this high energy session on innovation in the age of social technologies. Stan Joosten and Manish Mehta have been in the innovation trenches, and their comments were extremely valuable. Manish has been in the midst of launching and growing Dell’s “Direct to Dell” customer outreach community, and he shared the personal, organizational and marketing aspects of inviting customers to be in your face while white water rafting, as Dell has been doing lately. His was an inspiring story; as you may know, Michael Dell is another “returning CEO” and has been very supportive. Listening to Manish, I really felt that Dell was going to succeed in turning difficulty into strength—by reaching out to customers.
Stan Joosten shared many insights that show how much in a class by itself P&G is in terms of innovation. Their attitude is using marketing to add value to the offering, and they are extending their focus far beyond the product. Another pearl: innovation is about (discontinuous) process, and ROI is an effective approach (and mentality) when you’re dealing with stable processes. Don’t get these confused; don’t treat one like the other.
Read our more detailed analysis of this track.
Coffee, Tea or a Blog? A Case Study on Delta Air Lines’ Use of Social Computing
- Moderator: Henry H. Harteveldt, Vice President and Principal Analyst, Forrester Research
- Laura R. Hunnicutt, General Manager, Customer Experience, Delta Air Lines
- (Jacob Morris, Web Product Manager, delta.com)
This session was another inspiring story about how a company under pressure is doing the right thing by taking the risk of reaching out to customers and allowing them to share their thoughts and feelings in public. It was plain that Laura was very passionate and committed to customers and Delta, and she shared numerous insights very openly.
When you “go public,” prepare to be overwhelmed because you certainly will be. You have to make time to communicate, and it means long-term commitment, which can be difficult when you’re not sure where you’re going. Listening to her remarks, I wasn’t sure whether customers or Delta executives were more the cause of the pressure. She was very open about how difficult it has been to convince executives to take the risk of opening up to customers, and she shared what had worked for them. Two surprises: legal was one of the most supportive, and the costs have not been much thus far.
Delta’s story also showed that social computing can have a powerful strategic impact at inflection points in companies’ histories. As everyone knows, Delta is recently out of bankruptcy, and the airline business is difficult on a good day. They are in a period of high risk-high reward, and Laura Hunnicutt gave the audience a behind-the-scenes look at their Web 2.0 efforts. Part of the way through the session, she invoked Delta’s social computing guru, Jacob Morris, who added some insights.
Read our more detailed analysis of this track.
 Connected Entertainment: Delivering New Ways to Bring People Together
Robbie Bach shared his insights about building a social computing business from within an established enterprise. Gaming is very social, and his insights into customers and marketing were very interesting. Given his business, he lives and breathes GenY and GenX.
- Microsoft has made several transformations in its history, and it’s undergoing another right now: they came to rule the desktop in the 1990s, expanded to the enterprise in the 2000s, and now they are moving aggressively into consumer entertainment. Along with Apple, Google and Yahoo, Microsoft is increasingly referenced as a “media company.” He thinks explicitly about “changing Microsoft’s DNA.”
- Bach focused his customer insights around three themes: interactivity, personalization and socialness.
- GenY is hypersocial, and Yers are also frenetic multitaskers. He explained how his son (17) and his friends do everything in groups, even “dating.” Prom dates are often with multiple couples. They are group-oriented in everything they do. Their multimode communication habits are legendary. Homework is a multi-threaded, multimedia activity involving myriad chat windows, Facebook, IM, music. People like to comment (or razz) on how someone’s playing a game.
- Personalization is key. Microsoft thinks about it all the time. It is easiest in services, which are most pliable. Software is somewhat more difficult, but hardware is hardest. They offer faceplates for the Xbox game console.
- Gaming is very group-oriented. People compete, but they also collaborate in virtual environments.
- Marketing to GenY is difficult using conventional means. This generation is the most skeptical, and they hate advertisements. They are very difficult to reach. But Microsoft learned, when its launch of “The Gears of War” took an unusual turn. Recognizing the ineffectiveness of advertising, they had no ad campaign (that might have even gained them more cred). They posted the trailer on Xbox Live. By the end of the day, it was up on YouTube and, in the following days, numerous versions, complete with different soundtracks, were everywhere. Hacking the trailer became an activity in itself. It got massive attention and was a very successful launch.
- Part of changing Microsoft’s DNA is becoming more collaborative (laughter from audience). They realize that they must shift from domination as a goal to “facilitation.” He pointed out that everyone in the Xbox ecosystem has made money—except Microsoft, which he projects to cross into the black this year.
- It’s a global market, he pointed out, sounding much like Christie Hefner. Content is very cultural: you can’t release games in foreign markets and expect them to catch on. Music is culture-specific, too, of course. In China, everything is different, and the regulatory environment is complex. Xbox has few games in China.
- However, he added that socialness cuts across cultures. The way that people are social varies. Engaged communities can be extreme, so you must be prepared for that.
- When asked which companies he admired (or feared), he mentioned Sony and Nintendo. Nintendo is executing very well in defined areas. They are very disciplined. Samsung is a partner, but their growth in quality and innovation is admirable. Apple is amazing for design. At Microsoft, they don’t fear companies, they compete.
- Apple’s 80% market share with iPods isn’t sustainable. Microsoft is looking to find a place from which to compete. They tried the DRM (Digital Rights Management) tack, but that didn’t work because it made life difficult for consumers. Zune Social is the latest tack.
- If you want to think about connecting with GenY, music has the broadest reach, appeal. The culture and language change, but not the appeal. You do need different music and marketing.
- Gaming is far more widespread than many people think. More women and girls now play games than boys and men. The latter like to blow things up, while women like to figure things out and solve problems. For PC gaming (vs. game consoles), you will have older players who have shorter attention spans. Design games that are thought provoking and that can be played in 15-minute increments.
- Observations
- Gaming companies have an advantage because they understand interactivity from a unique perspective that marketers don’t have. In many cases, they collaborate with customers to create games (I would guess that Microsoft does not collaborate with customers in a Second Life sense, but they certainly solicit suggestions).
- Kevin Johnson’s remarks are very applicable here. He admonishes to target the person, not the content. That makes sense because companies are losing control over content, so it loses relevance as a primary “magnet” for demographics. People are creating content.
You Don’t Know Chat
- Donna Cohen, Senior Vice President, Customer Experience, inQ
Donna Cohen shared best practices around incorporating chat to enhance customer experience.
- Beware your graphics! She showed several examples in which stock photos of CSRs (customer service representatives), smiling, were displayed next to messages, “Sorry, we aren’t available.” Think before using ubiquitous stock images. Create a unique image to enhance your brand.
- Think carefully about how to introduce chat. Do you want to use “proactive chat,” which presents itself to the customer? Reactive chat is invoked by the customer. Be careful to not interrupt the customer with proactive chat. You can arrange it based on clickthrough, if a customer keeps returning to a page, etc.
- Scripts must be realistic yet human. Don’t be afraid to ask for the sale.
- Make sure your chat reps know the website; a surprising number do not, and they say inappropriate things.
- Certainly, they must know the buying process, or whatever process they’re supporting. Guiding a customer through a process can be very effective.
- Observations:
- Social technologies raise the bar for all types of communications, and chat is no exception.
Business Strategies for Success in “the Groundswell”
“Groundswell” is a forthcoming book about the social impact of Web 2.0 by Forrester analysts Josh Bernoff and Charlene Li, and Bernoff outlined some of its key tenets in this session. “Groundswell” denotes the bottom-up potential of social technologies like blogs, wikis, Facebook, Twitter and YouTube. Senior marketers should have five key objectives, according to Bernoff: listening, talking, energizing, supporting and embracing customers. Finally, he offered two ROI scenarios.
- Listening—blogs and forums enable customers to directly communicate with your company and with each other. These communications enable insights to emerge. You can develop a customer sounding board that is continuous and self-sustaining.
- Talking—let customers help you spread the message about your offerings, either on your online spaces or on MySpace, Facebook or others. Once customers feel that they have a place to communicate, they will invite others to get involved. It can be very viral.
- Energizing—”energized” customers are also known as raving fans. They become active advocates. Think about Apple or Harley-Davidson customers. Bernoff’s examples showed that customers often become energized when your company takes their advice and makes a change that they care about.
- Supporting—here, customers begin to help each other because you have created an environment in which they communicate with—and thank—each other. His examples included one man on Dell’s community forum that had made over 20,000 posts in eight years. “I actually enjoy helping people. That’s what got me hooked: when you help people and they say, ‘Thank you’.”
- Embracing—in this stage, you actively solicit, cultivate and harvest customers’ ideas in a public forum. It’s like real-time collaborative innovation.
- Executive blog ROI—obviously there are many variables here, but generalizing, you might spend a little under $300,000 on an executive blog the first year, but you would reap over $350,000 in returns.
- Support Forum ROI—general numbers for a support forum were $750,000 and $1 million return the first year. These numbers improve significantly each year.
MTV: Defining the Next Generation
MTV has been a transformational force and (U.S.) pop cultural icon since its launch in 1981, and Christina Norman shared her vision for how social computing was affecting culture and media. She also described how these social forces were affecting media and offered suggestions about how senior marketers could respond. Her prescriptive remarks revolved around four themes:
 Focus on the content, not the medium—TV, like all media, has led a siloed existence, and executives must think beyond the distribution method. Like many media executives, Norman wants to create value with content, which should flow seamlessly to any screen or venue. But she sees beyond the three screen strategy: she wants to layer community and connection on top of content.- Make sure there is a strong emotional connection—the content has to be relevant. For example, MTV reallocated 11.5 hours of advertising time so that emerging artists could appear. They want the audience to discover emerging artists on MTV. MTV’s increasing political content also creates emotional connection.
- Give the audience the ability to find each other—through the content and through activities and participation. They launched activist community, think.com to instigate change. Video Music Awards encourages the audience to create and remix content, which can then be featured on MTV.
- Allow the audience to help shape the brand, and own it. For example, the audience is involved with voting for acts that go through a culling process before appearing on MTV.
- MTV recognizes that “the audience” is splintering rapidly, and people want increasingly unique experiences. The music industry as we have known it is dying. People have control, and they won’t give it back.
- Some attendees asked how they could apply these insights to their (non-media) businesses. Norman seemed stumped at that one, but let me offer these restatements of her four themes:
- Focus on the experience, not the product (service)—enterprise silos don’t help customers in any visible way. Customers want to have better experiences, and products and services can help them.
- Make sure there is a strong emotional connection—As Delta’s Laura Hunnicutt and P&G’s Stan Joosten reflected, you can add value around the product by enabling customers to take ownership of how they use it. Let them share their experiences and reflect each other’s experiences.
- Give customers the ability to find each other—any product has its geeks and enthusiasts, who will be the first to give suggestions, help and criticisms. If you do it right be creating a community or participating in a third party community, you can encourage this. The sharing and knowledge exchange itself becomes valuable to customers.
- Allow customers to help share the brand—solicit and honor their ideas publicly.
People Who Are Changing the Face of Media
Shar VanBoskirk served up a knowledgeable and spicy panel to discuss the pressures facing media and how alternative media trends were affecting the market. The focus was on the impact of social computing. Selected remarks:
- People are the network now, not media.
- Media is now anything you can put advertising against (any content).
- Behavior around content is as important as the content itself.
- Reviews are positive in general. People want to love you.
- Try new things, or you’ll get caught by the pack. Just do it.
- Social media is neither positive nor negative. It’s here. Deal with it.
- Brands add value in a fractured world. They provide context (but they have to be alive, that is, interacting with customers in a visible, public setting).
- Google innovates very little; they buy media (YouTube). Their $180 billion market cap is a lot to lose if they change too much.
Why the Convergence Culture Matters
In this session, MIT’s Henry Jenkins addressed the cultural shift that’s packaged in social computing and Web 2.0:
- Jenkins stressed that convergence was a cultural process, not technological. Distribution is the cloud; the “black box” is an outmoded artifact.
- The participatory culture has relatively low barriers for engagement and a propensity for sharing creations. Moreover, it has an informal membership in which members believe their contributions matter and care about others. Every member must believe that they can contribute whenever they want and be appreciated.
- Jenkins then contrasted “old consumers” with “new consumers”:
- Old: predictable – new: migratory
- Old: isolated – new: socially connected
- Old: silent, invisible – new: noisy and public
- Old: compliant – new: resistant
- When asked whether copyright was obsolete, Jenkins responded, “No,” but posited, “Control is counteracted by culture now. You have the right to control but every reason to let go.”
- An historical point of reference: whenever the equilibrium between landowners and peasants was upset, there was conflict until it was reestablished. Both sides need to understand the new rules. (content owners are the landowners).
Mobile’s Role in Social Computing
In North America, 80% of consumers own a mobile phone, and it should be strongly considered by marketers as a vital part of the mix, especially when addressing GenX and GenY. Charles Golvin led the presentation and discussion:
- Mobile is unique because it is intimate: it combines velocity and physicality.
- Four of five North American households have one or more mobile phones, and 44% of people use messaging in some form.
- Mobile advertising is the prescription for what ails carriers. Citing Forrester research, Golvin acknowledged that 79% of consumers complain that ads on mobiles would be annoying. However, they also dislike ads in print and on broadcast media. Most people will not pay to use multimedia services, so ads are the answer to providing it for “free.”
- He showed several examples of mobile advertising: text, banners and search.
- Although the mobile advertising landscape seems complex, let’s not forget that (Internet) online advertising seemed complex and risky in the early days.
- He cited some interesting statistics regarding “intimacy” (among users who have mobile Internet):
- “Youth” have 58 friends in their social networks – “Adults” have 74
- Youth have 43 IM buddies – adults have 45
- Youth have 35 people in their mobile address books – adults have 60
- For more on cutting edge mobile trends, see our Digital Hollywood coverage of mobile and social networks.
Virtual Worlds—Payback Time?
Virtual worlds like Second Life have intrigued many marketers for the last couple of years, and many who have rushed to create presences there have been disappointed. A long-time follower of gaming and virtual worlds, Paul Jackson gave a fascinating and valuable session on the status and best practices for how marketers could approach this new medium. He also gave a rough ROI picture of investing. Just like anything, if you approach virtual worlds with appropriate goals, you can benefit significantly:
- Most people in these worlds are creators and builders, and they are very excited about their space. If your offering is introduced appropriately and respects what they are trying to accomplish, you can gain strong supporters, both “in world” and out.
- It is a relatively inexpensive platform for experimenting; it will also be increasingly mainstream, so understanding how it works could have major ramifications for your overall communications.
- On the other hand, the numbers of people involved are very small, from most marketers’ perspective. The worlds themselves are quirky and frustrating. Media backlash is already underway.
- Advertising opportunities exist “in world” and “in game.” Several major companies are there: Coca-Cola, Adidas, Nike, Toyota and Nokia.
- High-tech companies are running events and media conferences. Several corporations run recruiting campaigns.
- To get involved, you can join a world like Second Life or build your own as MTV did with Virtual Laguna Beach.
- Developing a full presence, including subscriptions, buying/renting land or space, a creative agency to build your space and staff to run it typically costs $100-200,000. Coke spent $1-2 million on its Second Life presence, but that has been the largest campaign thus far.
Read our more detailed analysis of this track.
 Social Tagging: How It Can Help Your Online Sales Strategy
This was one of the most strategic sessions of the conference: tagging is a relatively unknown, simple yet transformational Web 2.0 activity and technology. Rosenblat and Shaffer represented companies that offer tagging solutions, and they all shared numerous examples. Companies can use social tagging to increase their average online sale, organize and monetize user-generated content and drive repeat visits. Here’s how it works:
- You can think of tags as collective bookmarks on steroids: users tag things to make them easier to find. Users visiting your site have the option of “tagging” or “labeling” content (pages, pictures, videos, podcasts) with a combination of existing tags and their own tags. Creating or using a tag is a one-click process, so it’s easy.
- Search engines use software algorithms, but they are limited in “seeing the forest for the trees.” There were some humorous examples of this, like Marriott’s number one suggestion for a North American user for a “romantic hotel” was in Armenia. With tagging, real people have viewed the content, reacted to it and categorized it for other people.
- Where this becomes really transformational is that website navigation can rely on tags to adjust navigation on demand, so it makes sense for more people. Site navigation can be emergent.
- Some major sites that use social tagging are: ACE Hardware, Amazon.com, Brookstone, RadioShack, Sheraton, Staples, Toys “R” Us, Walgreens and Yahoo! Travel.
- Tags do not interfere with site navigation, but they offer alternative navigation. They can lead people to find what they want more quickly.
- Yahoo! recently added tagging as a way to make its one million user-created Trip Plans more organized and accessible. It recommends destinations based on Trip Plan tags, combined with user profiles and behavior.
Read our more detailed analysis of this track.
Analysis
- Web 2.0’s “social” technologies have been around for years, but I predict that global enterprises will ramp up their adoption significantly in 2008. Experiences shared by Dell, Delta, Playboy, Procter & Gamble and Wells Fargo clearly show solid progress by early adopters.
- From an enterprise technology perspective, Web 2.0 is a completely different animal than “enterprise 1.0” solutions to which executives are accustomed. Once executives discover this, as they will in earnest in 2008, adoption will increase rapidly in 2009:
- The cash outlay for blogs, wikis, social tagging, podcasts and “Facebook-like” applications are minimal compared to enterprise 1.0 solutions like ERP and CRM.
- Less is more: these tools are simple, and they have emergent qualities that enable users to mold them to the work process while maintaining flexibility and scalability. This is possible because their architectures are distributed, their complexity is encapsulated and many are available via the software as a service model. They are truly another generation of software. All these characteristics mean that training costs are minimal.
- They tend to play well with service-enabled enterprise software, so large-scale “systems integration” is rarely an issue.
- There are few barriers to adoption, and Generation X and Generation Y workers will insist on working with these tools because they have used them through school.
- This conference was insightful and well-run. It had a good balance of enterprise speakers, technology innovators and analysts. It could move into exceptional territory by integrating the voices of customers who are heavy users of digital spaces in which they interact with company employees and other customers. It would be very helpful to marketers to have a panel that included someone like Dell’s Manish Mehta, along with three customers that have been active in Direct to Dell.
- Media and technology companies were well represented (Microsoft, Playboy, MTV, CBS), but there was a distinct gulf between them and products companies with respect to “social technologies.” Product companies’ DNA involves bits more than bytes. Customer relations is a second suit for them: the way that they compete has more to do with raw material prices, sourcing, manufacturing and distribution. That said, media companies’ challenges and transformation process (Playboy, MTV) offer valuable lessons learned if listeners abstract away from the business.
- Christie Hefner’s insight about humanity being a constant was simple and on-point: too many leaders can get distracted by what’s new (the technology) and lose perspective. Although everyone says that their brand promise transcends products, consumers will challenge that and reward those who really know what their value is (and deliver it according to the new rules, i.e. let customers deliver it to each other). Her point that changing modes of communication (media) confronts the business to reexamine its identity and relevance to customers was right on and widely applicable.
- The public relations industry is at a major turning point, and its challenges eclipse those of almost any other industry. The entire PR concept (and PR firms’ value proposition) is predicated on an “us and them” separation between customers and companies, for which PR serves as a buffer. Gunpowder is flowing into the market, so castle walls are looking irrelevant. Richard Edelman’s themes of “serving as an advocate” rang true and will remain so in the new environment, but the trend to direct communication will probably remove much of the intermediary role. Fortunately, this will not happen overnight, so the industry will have some time to adjust.
- Globalization was invited to the conference but was not a keynote. The global social technology trend and market coverage of most attendees were mere facts. However, the most interesting customers in emerging markets are hyper-social, so this significantly increases the stakes in the race to understand this environment. It will pose additional complexity for U.S. multinationals that are often prone to stumbling on cultural differences (vs. European multinationals). See conclusions below for more on this.
- As I wrote in my recent Advertising Transformation Report, social computing trends also wreak havoc with the advertising industry, which is still oriented to reaching mass quantities of people. Kevin Johnson showed that advertisers were way out of synch with media consumption: companies spend 43% of their budgets on TV, when consumers spend only 32% of their media time there. The mirror: companies spend 6% of their budgets online, where consumers spend 34% of their time.
- Target the person, not the content.
Conclusions
- As consumer empowerment approaches critical mass, companies with robust collaborative communities will begin to dominate late adopters because customers will perceive open companies are more relevant and rewarding to do business with. This will begin to happen in 2009-2011.
- A fundamental truth of this emerging “social era” is that customers feel deeply gratified by helping—and receiving help by—other customers. By encouraging customers to share and help, companies will not only lower their costs to serve, they will increase satisfaction of those helping and those being helped. Customers are by default customer-focused, and they are often better equipped to help other customers than employees.
- But this is not a zero-sum situation: by working with customers, companies will increase the value and leverage of employees and company experts by enabling them to focus on their unique area of expertise.
- Carrie Johnson’s mention of social networks’s penetration of metropolitan India was 69%, and this reflects a strategic reality in emerging markets: knowledge workers are fast adopters of social technologies, lifestyles and sensibilities. These are precisely the people that represent the global growth for many (most?) consumer products. This fact raises the stakes significantly for marketers. Penetration in North America was 20%, which could lull them into a false sense of security. Global companies that delay adoption risk losing their relevance in emerging markets in which culture is already a high barrier for U.S. firms.
- As if that weren’t enough, mastering social computing will be critical to introducing brands in global emerging markets. The disruptive force of social computing may be magnified in emerging markets, where brands do not have the brand capital to which their executives are accustomed. Their successful entry may well hinge on developing relationships according to the new social computing rules, especially since younger people in these markets are often the first in their families to enjoy markedly higher consumption levels.
- Paul Johnson was visibly intrigued by my question about using virtual worlds in emerging markets to connect with customers. He and Robbie Bach both emphasized that members of gaming clubs and virtual communities were very passionate and committed—and that games and worlds would have a huge impact on digital communications as a whole. Members could be excellent partners for learning about culture of both digital worlds and the geography.
- Gaming and virtual worlds are a rich soup of interactivity,
collaboration and entertainment. Microsoft’s Robbie Bach and
Forrester’s Paul Jackson showed some of these spaces’ potential, but I
recommend mashing their insights up with Playboy’s intent in Second
Life: more of all communication will trend toward gaming and
virtual worlds, so gaining an in-house understanding of how people act
in these spaces may well be a strategic imperative for your company. If
this is your goal, make sure to set expectations accordingly.
- Like PR, advertising will have to reinvent itself completely. Of course, mass messages will continue to have a place, but the industry’s focus on large, consolidated buys and carpet bombing will meet increased resistance and decreased returns. Marketers need to return to the core of what they do: communicate with customers to inform in a relevant way. Mass advertising is widely perceived to be inane because it doesn’t speak to individuals. Consumers are increasingly accustomed to being addressed individually. The good news for the industry: social computing changes the economics of communication: mass advertising was about Industrial Economy efficiencies, which are increasingly off kilter in the Knowledge Economy. For more on this, see The Knowledge Economy: The Ultimate Context for Understanding the Future.
- Consumer empowerment is disruptive due to the readjustment that must happen among Jenkins’ “landowners” and “peasants,” which was his eloquent metaphor for struggle for intellectual property and customer communication itself. Enterprises have owned most of the knowledge, the communication (only they could afford mass communication) and the customer relationships. Now customers are co-opting all these things. It will be an uncomfortable transition for some, but for astute executives with a taste for risk, it is a rare opportunity to leapfrog competitors.
By Christopher Rollyson Over-Publicized Problems and Unusual Opportunities—A Way to Monetize Collaboration?
 Financial Markets World held its conference, Web 2.0/Enterprise 2.0 in the Capital Markets Industry, in New York City on 17 September 2007. Invited as a panelist on the bleeding edge track, “Web 3.0: Where Are We Going,” I nonetheless had time to scribble some notes to cover some of the sessions.
Enterprise 2.0 is being adopted by investment banks and the capital markets industry, but adoption is being dampened by two flies in the ointment: 1) the industry is highly regulated, and compliance forces firms to have control of their data, which means CIOs are hesitant to try new technology that may introduce risk; 2) enterprise 2.0 doesn’t yet have a locked and loaded business case. It’s early, and all conference sessions reflected that.
The Global Human Capital Journal’s coverage comprises summaries of all the sessions, as well as more in-depth coverage of three of the sessions. To access all the articles in one click, use the Financial Markets World tag. This article contains the summaries as well as my analysis and conclusions of the conference as a whole.
Matt Nelson’s Opening Remarks
Matt Nelson is Senior Analyst with the TowerGroup’s Investment Management area, and his keynote provided the audience with some Web 2.0 fundamentals:
- He opened with the “Laws of consumer Web 2.0”: use the network as the platform; employ a rich, interactive and user-friendly interface (read “simple”); develop an architecture of participation and democracy; let users own and control the data; incorporate social networking.
- He also pointed out that Web 2.0 was about new tools like Ajax, Flash, Ruby on Rails and Silverlight.
- As far as enterprise 2.0, you can think of it as the next generation intranet.
- Likely applications of enterprise 2.0 for securities firms are: information distribution (RSS, pod/videocasts); client interactions via portals; information gathering; business partner interaction; support and service; knowledge management and collaboration.
- Key challenges are: building a business case, data control; corporate politics; market conditions; adoption and compliance.
- He had some screen shots of enterprise 2.0 in action: RSS to subscribe to investment information; self-servicing your account; investment research/real-time data; collaborating with other investors (Covestor); new business development (showed Wells Fargo’s Second Life space).
- Key takeaways were: Web 2.0 has already transformed consumer experience, and enterprise software is feeling its disruptive pressure; CIOs should embrace the movement; securities firms should look for internal and external opportunities; enhance portals with Web 2.0 type tools.
Flight schedules regrettably prevented me from seeing the presentation, but I’ll hazard these comments:
- I’m sure that Nelson tempered his intranet remark because looking at enterprise 2.0 from an internal perspective would miss most of the potential. True, from compliance and security perspectives, firms have to have control of data, but the enterprise firewall is becoming outmoded as the main defense. The strength of these tools and work processes is that they traverse all kinds of boundaries with ease. Also, intranets were not directly client-facing, and Web 2.0 can get much closer to clients—and revenue generation.
- On the “likely applications” slide, I would add the fact that, in certain conditions, clients can service each other, but this will be further out than the things he mentioned.
 Web 2.0/Enterprise 2.0 in the Financial Services Industry
This session gave the audience an overview of Web 2.0 themes and ramifications for financial services. Stephane Dubois, CEO of Xignite, a leading provider of financial Web services, moderated a diverse panel:
- Penny Herscher, CEO of FirstRain, which helps institutional investors to evaluate information. Some of her insights: investors are extremely competitive and ambivalent about sharing information because information often drives stock price. Some investors try to influence the market by “sharing” incorrect information. She has doubts about the relevance of social networking to investment. The research world, however, will completely change within the next five years.
- John Mahoney, CTO of InfoNgen, is a long-time senior technologist. He sees that Web 2.0 is following a standard adoption cycle: the edges of the ecosystem develop first, and therefore social networking is developing among edgy individuals and consumers much more quickly than in the enterprise. Like PCs during the 80s and 90s, the value will emerge, but it isn’t yet obvious what it will be exactly. The B2B ecosystem is set on “big buys” of services, and they are out of sync with the megatrend, which will call for RSS, mashups and granular chunks of knowledge (for more on this, see GHCJ’s report on Advertising Transformation). Also, email is definitely broken. On collaboration software, realize that Microsoft SharePoint is a central application (vs. emergent, edge-driven): don’t fool yourself that it’s the real deal. Enterprise wikis are emergent.
- Stephen Leung, a Senior Manager in BEA’s Financial Services practice, added that enterprise IT is currently engaged in (still ,^) making the proverbial “single version of the truth” actionable and is hesitant to embrace leading edge solutions like Enterprise 2.0 that it feels aren’t ready for enterprise adoption. I can confirm that my investment banking clients are definitely in the mode of consolidating applications. Enterprise 2.0’s mantra of enabling a seamless flow of information between employees inside the enterprise with clients and partners outside is a huge task for IT. Meanwhile, service-oriented architecture’s adoption is enabling the growth of mashup (since a growing portion of enterprise data is exposed and consumable as services). Another problem for IT is that the gap between its adoption and adoption by clients and individuals is widening steadily (for more, see Gartner Throws Web 2.0 Gauntlet to CIOs at ITxpo and Chris Anderson’s funny but on-point The Black Wire and the White Wire).
Rich Internet Applications and the Client Portal: Using Web 2.0 to Improve the Client Experience
This panel compared and contrasted enterprise 1.0 with enterprise 2.0: in my opinion, some social networks, especially Facebook, are increasing becoming portals due to the rich list of user-configurable features they offer. The “portal” was enterprise 1.0’s attempt to aggregate information from the enterprise and present it to employees. It served its purpose fairly well, but like all enterprise 1.0 apps, it was as easy to configure as pushing a queen-sized sofabed over shag carpet. Configuring Facebook, on the other hand, is moving the same sleeper over an air hockey floor. It glides.
John Mahoney (see above) changed chairs and moderated while Stephen Leung (see above) stayed on and was joined by Kaj Pedersen, COO of Pendo Systems. Pedersen is a veteran of several software companies and had significant financial services experience. Their insights:
 From an enterprise software perspective, the next wave will be “participation-oriented architecture (POA? 😉 and it will feature user-configurability (presumably it will at least get to a linoleum floor level of frictionlessness). People will create their own expert networks easily. They will fully interact with enterprise systems.- Ad-hoc applications and mashups are some social tools that make sense. They will integrate information from anywhere (inside and outside the enterprise).
- Panelists discussed benefits and weaknesses of folksonomies (vs. Google’s relatively fixed algorithm) and defined taxonomies. The strength of the emergent organization is that it’s flexible.
- Experienced people know that “implementation details” can break a good idea. Case in point: mashups will push firms toward single sign-on, but that introduces its own risk; if security is breached, hackers get access to everything. Having multiple sign-ons can serve to contain the damage.
- It seems obvious to me that portal 1.0 vendors will meet social network, blog and wiki vendors, and they will synthesize (definitely will be an exit for many entrepreneurs). From an enterprise perspective, panelists discussed the next generation of permissions features: individuals need control over who can read their blogs: when they are writing about material that some people need to read but not others, granular permissions will enable them to share selectively. This will also be on tap in the next generation of enterprise wikis; granular permissions will enable people to see different things on the page. These are fine grained, role-based permissions. Moreover, IT must delegate to employees, who will manage the permissions for their content. It’s already there: Microsoft Active Directory and IBM Websphere, for example, already have very fine grained permissions.
- Stephen Leung predicts that the number of enterprise portals will fall significantly although they would not go away. Increasingly mashups will allow users to roll their own. (Spend some time on Facebook if you want to see it now).
- Another tidbit: Web 1.0 constructs like websites will also fall in number because the Web 2.0 construct of import is not Websites but channels (i.e. RSS feeds of tags, blog categories). This implies that the subscription (pull) model will prevail.
- Finally, enterprise IT must become a tool vendor (now that employees roll their own apps). I would go further: Facebook is showing the future of software in that they provide the framework and the people. Add-ons and functionality emerge based on what’s happening in the community.
Instant Messaging in Financial Services: Technology and Compliance Issues
Instant messaging (IM) got the headline in this session, but it served as a proxy for all enterprise 2.0 applications. They are all digital, (mostly) real-time, open and collaboration-focused. They increasingly incorporate rudimentary roll-your-own presence functionality (i.e. twitter). This was one of the most important sessions of the conference because it dealt head-on with the risks posed by enterprise 2.0.
My take: compliance risk is very real and must be managed with the utmost care—but it will eventually be trumped by the drive for profit. Enterprise 2.0’s value proposition for investment banks will begin to emerge over the next 3 years, and firms that adopt will become more profitable due to higher levels of innovation, deal performance and levels of execution—all due to the broader and deeper collaboration that will result from enterprise 2.0. That will force firms to become more open. Please read our coverage, “Growing Collaboration Culture Will Force Compliance Breakthroughs—Moving to London.”
 Enterprise 2.0: How Financial Services Institutions Can Use Technology to Foster Collaboration
Lou Eccleston, CEO of Pivot Solutions, moderated a discussion with Eran Barak, Head of Strategy for Reuters and Lynne d Johnson (sic), Senior Editor of Fast Company. Eccleston has more than 20 years of experience in financial services, in Thomson Financial, Siebel and Bloomberg. Barak leads Reuters Communication Services’ global initiatives (and serves global financial clients). Johnson has been deeply involved with the cultural aspects of technology for years and has been at Fast Company since 2006. Their selected insights:
- In Web 2.0, presence may be crude (twitter), but it’s actionable and easy. People are showing their willingness to broadcast all kinds of information about themselves.
- Web 2.0 is really Web 1.0 with new tools. Tellingly, the reasons that people use the tools are the same.
- Consumer-based applications or Websites are often not appropriate for the enterprise because they aren’t built to generate returns (in a traditional software sense).
- As always with new technology, business models are emerging. Facebook is a current poster child for the business model struggle.
- Regarding banks’ private (wealth management) clients, they are terrified on communicating digitally; they don’t want their conversations with their counselors recorded, and everybody knows that, if it’s digital, it’s locked and delivered.
Sourcing Deals with Web 2.0 Technology
David Teten is co-Managing Director of Nitron Circle of Experts. He is also an expert in online marketing, a former investment banker and a serial entrepreneur. In this session, the most in-depth application session of the conference, he showed how to use Web 2.0 to source deals. Specifically, he demonstrated how Web 2.0 tools make all phases of deal-making more efficient. Here is one example, using the three stages of private equity deal sourcing:
Stage One: Raise funds
- Helps in showing the credibility of a private equity firm in terms of articles, comments and opinions
- Helps in identifying important personnel in the institutions or high net work individuals
Stage Two: Target identification
- Helps in reading about emerging industries, sectors and companies
- Helps in knowing the target company better through various comments and opinions
- Helps in identifying important personnel in the institutions or high net work individuals
Stage Three: Exit
- Helps in monitoring the company’s performance through comments, opinions and blogs
- Helps in understanding market sentiments about a sector, industry and economy and knowing the right time to exit the investment
In general, Web 2.0 diminishes the transaction costs involved with research, evaluation and negotiation, which are paper and telephone-bound processes in the traditional method.
Also notable is his Network Valuation Formula, which can be used to determine the value of Web 2.0 processes and networks. To learn more, download David’s presentation.
 Web 3.0: Where Are We Going?
David Teten took a chair and moderated the conference’s “bleeding edge” session. Panelists were Matt Mahoney, VP Professional Services of enterprise wiki company Socialtext, Jeff Stewart, Chairman of Monitor110, which serves investors by finding investible information on the Internet, and yours truly Chris Rollyson, Managing Director of strategy boutique CSRA as well as Editor of the Global Human Capital Journal. Some of the panel’s insights:
- Web 3.0 is more loosely defined than Web 2.0 but it is generally associated with the Semantic Web in which machines begin to have a simulated ability to “reason” by making inferences from data. This will enable “the Web” to proactively service people. Imagine a software (Web) agent that makes all your travel arrangements to San Francisco (you do this now on Orbitz, and it can take anywhere from 20 minutes to several hours). Agents will increasingly do work like this.
- Another key thread is the idea of converging digital and physical worlds in the form of a GeoWeb. This means “tagging” physical objects so that they have URIs on the Web. Once that happens, people can begin to add content to them: reviews, blog entries, photos, interesting facts. Statues, buildings, cars, bridges, trees, etc.
- Web 3.0 as currently described generally refers to technology changes: it means algorithmic software functionality that recognizes highly sophisticated patterns in complex data sets. The world is its database. The panel agreed that Web 2.0 was mostly about social change, even though it is enabled by technology. But I would venture that its technology changes are continuous, not discontinuous. They are an evolution of object-oriented technology and distributed architectures. However, the social changes of finding ourselves in a global P2P world are discontinuous. It may well be that Web 3.0 will end up being about social change as well, but it’s so far out that visibility is limited.
- Web 3.0 is already in use by most banks to discern patterns for investing, and for fraud detection. Its use will increase steadily.
- Meantime, so that we may eventually get to Web 3.0, the panel paged into the Web 2.0 trenches to discuss developments and give the audience advice on adoption. Developments:
- Socialtext is working on a wiki spreadsheet, which should be released soon. It will enable collective creation, collaboration and editing of spreadsheets. Obviously, this is of tremendous interest to the capital markets industry.
- Monitor110 has a fascinating value proposition, and it’s somewhat of a semantic idea, although purists may not agree. The company’s algorithms comb reams of online news, including wikis and blogs (which are not on the radar screens of investment houses) and look for patterns that are “investible.” Imagine a Google that is tuned to find investment patterns. I believe that we will increasingly see these types of offerings, and that is how we will iterate our way to the Semantic Web.
- Investment banks can encourage enterprise 2.0 adoption by:
- CIOs need to complete due diligence as soon as possible, put needed policies in place, and let people innovate. These tools are far easier to use than “enterprise tools” and, although people will need support, it will be minimal. See the DrKW/Socialtext case study for some excellent tips on how to do this.
- Choose pilots carefully: to encourage adoption, pick business initiatives that are important so that success will attract attention when it occurs. However, do not pick bet-the-firm initiatives, which would burden the team with unnecessary pressure.
- An excellent place for CIOs to explore using wikis is managing IT projects that require extensive, real-time communication with (business) customers. This will make project coordination more efficient, but it will have the additional benefit of educating business users, thereby driving adoption.
- Investment banks’ biggest obstacles are their siloed structures, hierarchial cultures and individually-oriented reward systems. Minimize their effect by selecting 2.0 pilots in which stakeholders are committed to cross-boundary collaboration. Make sure their business drivers are significant.
- Appreciate that Enterprise 2.0 tools are different, and usage usually increases rapidly through word of mouth. Experiment: put the tools out there and observe what happens.
- For more advice on adoption, see Enterprise 2.0: Game-Changer for Investment Banks.
- For more on this session, see my speaker notes.
Applying Enterprise 2.0 and Web 2.0 in Financial Services: Early Notes from the Field
Dion Hinchcliffe, the well known Web 2.0 journalist and consultant who heads Hinchcliffe and Company, commented on Enterprise 2.0 in financial services. Please read our coverage, “Adoption Weakened by Compliance risk and “So Obvious It’s Invisible Value Proposition.” Our take: Enterprise 2.0 presents a disruptive opportunity that will catch most chief executives and CIOs by surprise—because it’s masquerading as continuous change and thus appears innocuous.
 Building an E2.0 System Employees Will Actually Use
Tom Steinthal is an investment banking and Wall Street veteran, and he gave a passionate, amusing and insightful talk about Enterprise 2.0’s cultural ramifications—and how leaders can lead their organizations through the change needed to reap the benefits, namely much greater productivity. His depiction of the “knowledge worker 1.0” and the “knowledge worker 2.0” was as on-point as it was funny. Our take: It is easy to overlook culture, but in the Knowledge Economy, how people collaborate is the cornerstone of productivity and competitiveness. Saying that employees should collaborate more is easy to say, but it is difficult to communicate the profound change that this represents. Much discontinuous change will happen around it because it’s under the radar. Please read our coverage, “A Glimpse Inside the Emerging Divide between Wall Street Professionals—How Many Goldman Employees Are on Facebook?”
Analysis and Conclusions
Business Case
- Enterprise 2.0 will enable executives to monetize collaboration by sharply reducing very expensive transaction costs among employees. Banks, being service businesses, have huge costs that are driven by relatively inefficient employee transactions (interactions). For more, see “Another way to think about the money” under “Implementation Details” below.
- Enterprise 2.0 significantly reduces the cost of communication and administrative processes among people. Consider using a wiki when a group needs to prepare a major presentation. Most firms do it now with desktop applications. On a project like a merger, thousands of documents are emailed around, and hours are lost when people update the wrong version; delays result when numbers from someone are delayed because she’s on a plane. Tens of thousands, or hundreds of thousands, of transactions are involved. Communication and administration threads are interwoven into deals that earn millions for firms, but they are largely invisible because there has been no alternative; they are a “cost of doing business.” No one has measured them. Therefore, wikis, blogs, tagging and RSS don’t have a baseline, and the business case is very difficult to make in strict quantitative terms.
- For investment banks, consider the case of Cisco’s acquisitions of Scientific Atlanta and WebEx. John Chambers compares them all the time, using these numbers:
- Cisco has been a well-oiled M&A shop with a reputation for doing deals very efficiently. It closed Scientific Atlanta in 45 days in 2005, using “traditional methods” (desktop applications).
- In early 2007, the team used the Cisco Wiki to do WebEx, and they did the deal in 8 days. Chambers attributes the performance jump to Web 2.0 collaboration tools, the Cisco Wiki.
- Just think about those figures—and what they could mean to an investment bank, which does hundreds of such deals every year. And hundreds more deals that have similar work processes. Enterprise 2.0 proposes to improve core competencies several times over. I venture that the productivity increase is analogous to electrifying factories in the early 20th century.
- Banks that get this stand to drastically improve their competitive position if they adopt before their competitors. Pushing the envelope is a strategic imperative.
Adoption Factors
- Conference speakers thoroughly discussed the benefits of enterprise 2.0 and the difficulties of adoption for the capital markets industry. However, the industry is clearly at the earliest stages of adoption. Speakers mentioned very few definitive examples of capital markets firms blazing the trail with these technologies.
- Compliance risk is the industry’s poster child for its lack of adoption, but its shadow cousin is even more powerful: the fact that information itself has an inordinate impact on competitiveness—in virtually all areas of the business. Information moves price. This is a structural, pervasive dampener of collaboration because it incents people to hoard information or, even worse, to misinform.
- The most practical way for the industry to reconcile these difference in the short to medium term is to focus its efforts internally; however, this carries an important risk: stakeholders may choose backwater “support” projects to support with enterprise 2.0 rather than front line, revenue-producing initiatives. That would be a grave error.
- Beware the enterprise 2.0 paradox: from a technology perspective, enterprise 2.0 represents continuous change, the evolution of object-oriented technology and distributed architectures. This can lead CIOs to underestimate it, delaying adoption. However, from a people and process perspective, it represents discontinuous change. The tools have fewer features than “desktop” applications, but the features are better utilized, and they don’t prevent people from participating. Extensive features often serve as barriers to participation due to their ability to obfuscate.
- Corporate structures depend on control and limiting movement, and allowing “emergent” phenomena is not in their DNA. CIOs need to put necessary policies in place but allow people to create emergent organization and processes.
 Culture
- As I’ve written for years, Information Technology is continuing to evolve to the point at which it’s disappearing from our consciousness—the same way electricity did before it. People, ideas and innovation will drive value far more in the Knowledge Economy than efficiency, the plow horse of the Industrial Economy from which we are emerging.
- A generational divide is looming on banks. Over one-half of employees at many banks are under 35 years old, and they are native with Web 2.0 tools. Are banks going to ask them to use tools with which they are less productive? Many executives tell me off the record that they are far more productive at home than at work; in the office, they’re hamstrung by the restrictions. The stakes are high to attract and retain a diminishing pool of top employees.
- Along with the new generation is a sense of openness and collaboration, and it will be interesting to see how this resolves itself in investment banking, which never lands on collaboration’s top ten industry list. Part of the Zeitgeist is enabling people to allow solutions, work processes and ideas to emerge. Micromanaging control-oriented management is a real turn-off.
- Banks have very hierarchial cultures, and this trait will face increasing pressure in the years ahead.
Implementation Details
- Many firms will be seduced to accept big software vendors’ “enterprise 2.0” solutions that have bolted on 2.0ish front ends. Microsoft SharePoint 2007 was most often mentioned. CTO speakers—to a person—warned the audience that, although some of the functionality in these packages is an improvement, it’s not the real thing, and depending on it for your firm’s enterprise 2.0 projects will likely compromise your efforts. It’s kind of like buying a Ford Mustang and telling yourself you’re in a Cobra.
- Enterprise 2.0 works because it sharply reduces the transaction costs of collaborating. For example,
- RSS enables you to subscribe to very granular bits of information, say, the “Enterprise” category of Global Human Capital, by hitting the RSS button. Unsubscribe just as easily. Virtually all Web 2.0 apps have RSS. Want to subscribe to a Delicious tag? Hit its RSS button, and whenever someone tags something with it, you’ll be notified. Note that it’s easy and free on the other end, too (for the distributor). Subscribe to the wiki pages that are important, and you’ll drastically reduce email and always be looking at the latest version.
- Tagging is multidimensional, emergent organization of content. In 1.0, I may like this article, so I print it (digitally or on paper) and put it in a folder. If it’s in one folder, it can’t be in another, unless I use a separate process to create an alias for it. I can tag content with several tags, thereby enabling people to find it for different reasons. I’m not restricted. I could tag this article with “enterprise_2.0,” “e-business,” investment_bank,” “portals_2.0,” “Wall_Street,” “Generation Y,” “Culture Clash,” or “twitter.” I can tag it with all of them. Tags aren’t mutually exclusive as folders are. And I do it in one click, which means that I do it more often; it’s not a separate process.
- Use Blogs, counsel David Teten and Scott Allen in The Virtual Handshake, as ways to organize your own thoughts, but leverage them in public. When you attend a conference whose material is very important for your personal goals, increase your retention by writing something about it, and share with others at the same time. In the enterprise, project managers have their word documents or project management logs. That sit on their machines. And they send out copies to everyone periodically. Those people have to check their attachments folder to determine what is the right version. By using a blog, the project manager enables people to page in on demand, to the live, real-time document. By the way, anyone can comment or ask questions using the comment feature, and the project manager is free to accept (publish) it or not, separately. With fat client applications, someone would have put in a comment and emailed to the 24 people on the team.
- Wikis give the team a collective desktop, and they drastically cut transaction costs of managing meetings, creating spreadsheets, proposals and presentations in a group, and brainstorming. Each page has a discussion page behind it. It’s a single version of the truth, a collective version. Oh, yes, each page is available for RSS subscription, so you’re notified in real-time when changes are made.
- Another way to think about the money. We have all read case studies in which customer service, when fulfilled by a person over the phone, costs about $10 per call. If the issue can be fulfilled over the Web, the cost is about $1. These are transaction costs. Keep in mind that your average customer service representative is paid far less than capital markets employees. So when you call your colleague to find that file, work through document versioning, coordinate how you will merge the data in the two spreadsheets you’re working on, you are spending a lot of money. Imagine all the transactions that take place during a deal, and based on the value of people, they are worth an average of far more than $10. The firms that adopt early will reduce costs and enhance performance.
By Christopher Rollyson Adoption Weakened by Compliance Risk and “So Obvious It’s Invisible” Value Proposition
 The Global Human Capital Journal’s coverage of Financial Markets World’s Web 2.0 in the Capital Markets Industry conference continues. In this session, Dion Hinchcliffe, a leading writer and consultant in Web 2.0 and Enterprise 2.0, described how capital markets firms were adopting Enterprise 2.0. After some general points on enterprise 2.0 adoption, he referenced early work of Dresdner Kleinwort, AOL, T. Rowe Price, Wells Fargo and JP Morgan. As usual, I’ll summarize his remarks before sharing my analysis and conclusions.
Dion has collaborated repeatedly with O’Reilly, the folks who officially coined the term “Web 2.0” and hold one of its most well attended conferences. He began his presentation with the definition of Web 2.0: (using) “networked applications that explicitly leverage network effects.” In my view, that means purposely leveraging P2P (peer to peer) technology. They scale exceptionally quickly because they are easy to use, people who like to use them do so on their own time and for their own passion, they leverage the Internet and the cost to use them is negligible.
Enterprise 2.0 Adoption Factors
- In general, the enterprise is moving away from “central production” to “peer production” and from an internal focus to an external one. YouTube receives 65,000 videos per day.
- Blogs have developed into a platform; it is now very easy for most users to add widgets to their blogs (incorporating video and audio content). To have cred, they must have comments.
- Adoption of Web 2.0 is sometimes spontaneous, and we still have little insight into what form it will eventually take. Within days of Hurricane Katrina in 2005, 100,000 people had used blogs (and social network sites) to report on their whereabouts, as other forms of communication were unavailable. The enterprise lacks imagination about how to use these technologies. The tools must be simple to encourage adoption.
- Is social networking part of Web 2.0? O’Reilly has not addressed this, and the two must be reconciled. Facebook is definitely for business (even though it did not start that way).
- Consumers are way ahead of the enterprise, which is generally in the pre-definition phase. Consumers are emergent. One example is tagging (emergent) vs. defined taxonomies and analysis paralysis (enterprise).
How Is Enterprise 2.0 Different?
 It is an order of magnitude easier to use. Hinchcliffe calls it SLATES:
- Search- being able to find content and people very easily
- Link- automated features for connecting content according to personal preference
- Authoring- creating content as (or often more) easy than using a word processing program
- Tag- one-click functionality for identifying and sharing content
- Extensions- adding features very easily, extending functionality of your space (blog, wiki)
- Signals- automated distribution; chiefly refers to RSS, Atom
He contrasted Enterprise 2.0 with conference calls, many of which have dozens of people participate. However, this is largely wasteful since only one person is able to speak at once. The tools are getting increasingly sophisticated. For example, wikis and blogs can display different content depending on reader permissions. This is emerging functionality.
Pioneering Uses of Enterprise 2.0 in Financial Services
- Dresdner Kleinwort—Then led by the indefatigable JP Rangaswami, DrKW launched its first wiki in 1997, and it has scores of wikis in use today.
- T. Rowe Price—during tax season, 1,200 call center representatives began using a wiki to manage the knowledge base that they used when servicing clients. It features tagging and comments, and permissions enable experts to change content, while all representatives can log comments and tag. This has enabled the knowledge base to “learn” very quickly. The company credits it with saving an average of two minutes per call.
- Wells Fargo—the bank has an impressive series of firsts, led by Steve Ellis, EVP of its Wholesale Solutions Group. It was the first bank with a business banking blog, the first on MySpace and the first in Second Life. It has an active customer-facing blogging program.
- JP Morgan—is using innovative applications of Web 2.0 technology such as AJAX to quickly build new mash-up solutions for the bank’s traders.
Parting Shots
- Putting on his CTO hat, Dion’s mentioned that Microsoft SharePoint 2007 was missing several key features and may lack scalability for certain applications. (Be prepared to be behind the curve when using it).
- Firms do not have to develop an enterprise 2.0 strategy. Make the tools available, and people will build the ecosystem. Approach it as a “perpetual beta” endeavor.
 Analysis and Conclusions: So Obvious It’s Invisible
- One of enterprise 2.0’s main problems is SLATES. Looking at the list, there’s nothing that is obviously different, that suggests discontinuous change and a big upside. This fact gives enterprise 2.0 its challenge and opportunity. It looks like continuous change, a matter of degree. I’ll risk sounding cliché here, but the way that SLATES combine delivers a tipping point for widespread collaboration. The tools are easier to use, and they deliver one-click features for identifying and sharing content, which will cause people to share much more, more often. Overlay Gen Y’s penchant for collaborating as well as the tools’ native handling of metadata, and the whole thing resonates. This will catch most executives off guard.
- Investment banks, as illustrated earlier in the day by the compliance panel, have clear reasons to hesitate before adopting enterprise 2.0 and they don’t yet see a value proposition that compels them to face the compliance risk. Another twist: everyone’s experimenting, but it’s under the radar. They don’t know what their competitors are doing and how they stack up. It’s wait and see.
- Enterprise 2.0 is practical for CIOs—from people, process and technology perspectives:
- It does not call for reorganizations or implementing complex, expensive technology solutions. It overlays an emergent web of relationships onto existing enterprise systems and processes. Moreover, it is not an all-or-nothing proposition. Due to the nature of networks and the technologies, CIOs can enable open collaboration in areas that do not harbor conflicts of interest. The technology is rapidly increasing in sophistication, and it will increasingly automate access and permissions. It is an emergent proposition, not a big bang, like enterprise 1.0 (read ERP) was.
- Wikis, tagging and blogs are highly distributed, and many are built on light, evolved platforms.
- Enterprise 2.0 tools are exceedingly simple, transparent and real-time. If using proprietary enterprise software solutions is like driving a Ford Model T, Enterprise 2.0 tools are like hopping into a Ford Focus: instead of tweaking the carburetor, turning the crank and fussing with the choke, you just insert the key and go.
- Current enterprise software solutions generate extensive resistance because they impose highly structured designs and processes.
Because people think and organize thoughts differently, structured systems alienate some while accommodating others. Their training and learning costs are high.
- Enterprise 2.0 underlying technologies like Ajax are highly evolved and object-oriented; they are robust and interface easily with SOA-enabled enterprise systems. Enterprise 2.0 coexists easily with existing enterprise systems like email, document management and ERP.
- I agree with Dion that an enterprise 2.0 (big technology) strategy is not required to succeed with enterprise 2.0. Monolithic big bang IT projects (read “expensive”) were a different animal. However, my experience indicates that vision and strategy will be critical for investment banks and other hierarchial firms to succeed for a different reason: they will need to remove cultural and organizational constraints to collaboration. To be done quickly and effectively, this will require executive understanding and support. Firms that have it will, all else equal, succeed more quickly than those who let it bubble up in isolated pockets, in spite of the organization.
- Web 2.0 and social networking are dizygotic twins. Web 2.0 largely refers to technology, where social networking focuses on connecting people with each other. The technology enables the discontinuous change that is emerging, but people make it happen, and social networks are a vehicle. In a more abstract sense, online social networks make explicit the kind of networks that have been crucial to humans’ success, even predating the emergence of homo sapiens. Social networks are a medium for people to focus on using the technologies to change behavior and generate opportunity. In a sense, social networks are key customers of Web 2.0 technology.
- Picking up on Dion’s conference call example, my research shows that chat is giving conference calls a new lease on life. Participants listen to the conversation while they spin off into chat rooms to discuss nuances or related topics. Smart banks analyze the chat conversations, thereby getting a much clearer picture of what “the crowd” thinks about the topic. Prior to chat, the crowd’s thoughts were largely invisible.
By Christopher Rollyson Growing Collaboration Culture Will Force Compliance Breakthroughs—Moving to London
The Global Human Capital Journal’s coverage of Financial Markets World’s Web 2.0 in the Capital Markets Industry conference continues. In this session, Eran Barak, Global Head of Strategy for Reuters, moderated a discussion with panelists David P. Olener, Director Legal Discovery Solutions at Orchestria, and Warren Roy, President & CEO of Global Relay Communications. They are well qualified to discuss this topic: As a former litigator, Olener has extensive experience with complex discovery and has consulted to numerous Fortune 100 clients in compliance, security and risk management. Roy’s company is a hosted compliance archiving and messaging suite used by over 1,200 financial and legal firms for regulatory purposes.
Their consensus was that enterprise 2.0, notably IM (instant messaging, chat) introduces significant issues with highly regulated financial services firms. Although this is widely known, many of the details of how the technologies can pose problems were illuminating. We will provide a summary of the panel before adding our insights.
Enterprise 2.0 Technologies and Regulatory Issues
- IM is widespread throughout capital markets. Professionals value its specificity, leverage and timeliness. In being digital, however, IM is easily machine-readable, and regulations specify how information is to be treated. Numerous software solutions analyze IM, email and other digital data, including real-time chat functionality in Bloomberg terminals and other services. They are looking for unethical activity, say, investment banks collaborating with their analyst divisions. All this data is subject to e-discovery.
- The Enron fiasco put discovery under the microscope, and extensive legislation was passed. There are strict compliance guidelines for all communications (and digital data is most actionable, as it’s easiest to analyze and use).
- As all three speakers are providers of communications and e-discovery solutions, they then turned to client service. From a compliance perspective, the challenge stems from the fact that firms are complex, and compliance in general is only as strong as its weakest link. Providers struggle to understand firms’ technology and communications ecosystems, which are constantly changing. What devices does the firm have? How are they used? How are they connecting to the network? Connecting from a hotel room in Singapore is not necessarily as secure as connecting from a trading floor, even if the device is the same.
- Gen Y employees use social networking sites, especially Facebook, to collaborate on their work. As Facebook continues to enable the developer community to introduce widgets, Facebook is rapidly evolving as a full-fledged, user-configurable portal, complete with IM, email, twitter and other capabilities. What a potential compliance nightmare.
- Small firms are typically more free-wheeling than the majors, which are typically very restricted with respect to technology policies. (They also have deeper pockets and therefore are be bigger legal targets ,^(
- As with any type of security, human error is usually the Achilles heel. Therefore, employee (and contractor, partner) education is crucial. When there are lapses, employees usually mean well but are unaware that they are doing something that puts the firm at risk. Education and impressing the importance of compliance on employees is key: because the technology and concomitant processes evolve constantly—and regulations and compliance solutions are also moving targets, the firm, employees and related parties must be constantly vigilant. They must appreciate the ramifications of failure.
- Enterprise 2.0 staples like wikis and blogs pose special challenges because they are designed for openness and idea exchange. Moreover, the 2.0 culture is open and collaborative, and the tools have terrific leverage. If a wiki member invites someone who shouldn’t have access (and the reasons for access can be quite esoteric), it can compromise key information quickly. They same holds true for blogs, podcasts that may contain a key nugget of inappropriate information, or video shot from someone’s Blackberry of someone commenting on something. From a compliance point of view, these tools’ leverage, speed and openness present special problems. This is an access issue.
- Then there’s the content challenge. Firms can run afoul of compliance by introducing inappropriate content to employees. For example, if someone IMs some inappropriate content, or posts on a wiki, that gets exposed to an entire division or project team, that can compromise a large number of people. Firms are bound to document the information to which employees are exposed.
- Digitization is creeping into all modes of communication. “Unified messaging” solutions transport all modes of communication over the same network, and courts have tended to decide that, when voicemail is digitized (as when included in unified messaging solutions), it must be archived according to the same rules as email. That imposes a huge storage cost on the firm or its proxies.
- Most firms do not archive properly, thereby exposing themselves to risk. They need to appoint a champion who constantly manages the firm’s efforts.
- By definition, information can be a “smoking gun” or a secret weapon when firms find themselves in litigation. Panelists discussed some nuances of archiving. Various types of information have their own rules for how long they must be saved. Theoretically, information should be destroyed after it is no longer required to be kept, legally.
- However, firms are incented to keep it because it is often imminently usable in court even when no longer required by compliance. Panelists said that, if one side in a dispute has the chats/emails/IMs, the side that destroyed its data may be significantly disadvantaged: they no longer know what they said. Panelists admonished, “Remember, there are two sides (at least 😉 to all communications.” For example,
Quite often, discovery evidence is either delayed or never produced, many times because of the inaccessibility of the data. Backup tapes cannot be found, or are erased and reused. This kind of situation reached its apex during the Zubulake v. UBS Warburg LLC lawsuit. Throughout the case, the plaintiff claimed that the evidence needed to prove the case existed in emails stored on UBS’ own computer systems. Because the emails requested were either never found or destroyed the court found that it was more likely that they existed than not. The court found that while the corporation’s counsel directed that all potential discovery evidence, including emails, be preserved, the staff that the directive applied to did not follow through. This resulted in serious sanctions against UBS. (from Electronic Discovery, wikipedia)
- Technologies are often introduced by end users, and this is a special area of risk if they haven’t been vetted properly. Due diligence is not easy; even if you get 99% right, that 1% can be very unforgiving. Consumer technologies are usually not appropriate for capital markets firms.
Analysis and Conclusions
- This panel would have been strengthened by the addition of some users with revenue bogeys. All of these points are extremely important because they open firms to significant risk if not managed appropriately. But risk boils down to reputation and, ultimately, to money. As the enterprise 2.0 value proposition is proven, users will push to be more open because those who collaborate more efficiently and with more leverage will outperform others. That will built up extensive pressure in the system.
- The compliance vs. profit pressure will be relieved in several ways, many unsavory for capital markets firms: star employees will continue to leach out into private equity firms, which currently have a much smaller compliance burden. Or, firms will list in London, where Sarbox is not such a factor. Or, firms will go private, where their compliance burden and visibility are far lower.
- Firms should choose their compliance champion very carefully. If s/he is too much a curmudgeon, s/he will be far less effective. Firms will have to optimize compliance with profitability, and enterprise 2.0 and the new collaboration will increasingly drive profit. Look for this issue to emerge in the years ahead. The compliance champ should actively collaborate with business unit executives and appreciate (although not too much) the pressure to drive profit through innovation.
By Christopher Rollyson A Glimpse Inside the Emerging Divide between Wall Street Professionals—How Many Goldman Employees Are on Facebook?
The Global Human Capital Journal’s coverage of Financial Markets World’s Web 2.0 in the Capital Markets Industry conference continues. In this session, Tom Steinthal of the BSG Alliance wrapped the conference by crystallizing several Web 2.0 concepts with passion and panache. Tom is Managing Director of BSG Alliance’s Financial Services practice. Previously he has managed equities technology teams at Goldman Sachs, Donaldson, Lufkin & Jenrette, Credit Suisse, JPMorgan Chase and Prudential. Further back, he led Nasdaq technology teams and designed and implemented Nasdaq trade order management and market making systems. He has been a member of various Nasdaq and NASD technology committees and has been Series 7, 3 and 55 licensed.
Wall Street firms will increasingly get caught up in several threads of culture change, but he emphasized two: the generational divide and, related to it, collaboration vs. control. In this context, “building an enterprise 2.0 system ’employees’ will use” must take into account very different styles of working and sensibility—and they must be able to play together well. As is customary, we summarize Tom’s remarks before adding our analysis and conclusions.
Broad Themes
- The push economy is over; the new way to collaborate is to iterate (in the sense of fast software development). Set expectations, put ideas or information offerings out there (on a blog) and let stakeholders comment and contribute to fleshing out (or trashing; kill losers fast) the idea. Tom also pointed out that productivity is shifting from personal (read “in a cube”) to group (read “social”) productivity.
- Eye-opening stats from his presentation: How many employees are using Facebook at Goldman Sachs?
- Goldman Sachs – 5,510 or 19.7%
- Deutsche Bank – 7,636 or 11.3%8
- Lehman Brothers – 2,951 or 10.4%
- UBS – 8,101 or 10.4%
- Morgan Stanley – 5,689 or 10.3% (Adam Carson is probably responsible for many of them)
- Tom pointed out that the “junior staff” is native with Web 2.0 tools. They are wired completely differently in that they work by “social collaboration.” Echoing this, Adam Carson puts it bluntly, “Basically Morgan Stanley faces the choice of forcing the younger generation to learn the old way of doing business or adapting to new models of work and organization.” This shift in generational sensibilities will be an interesting cocktail when consumed within investment banks, many (most) of which are not very group-oriented today.
- Referencing Anne Truitt Zelenka’s seminal “Busyness vs. Burst article,” Tom described the “new knowledge worker” (somewhat too predictably the “knowledge worker 2.0” ,^):
- The Knowledge Worker 1.0 (picture balding man, wire rims slipped halfway down nose, holding a dictionary) is defined by: limited location and role, stuck at a desk using email and standard tools, custodian of information (read “monger”), inside the wall, sees knowledge as a process (light on brainstorming), and uses rigid ways of organizing information. Behaviorally, he expects immediate response to emails, he’s always available, believes that Web surfing (probably still uses the phrase) is a waste of time.
- The Knowledge Worker 2.0 (image 20-something, edgy but not too chic glasses and coif) has these characteristics: all over the organization, broad skills on a solid base, uses many tools, no particular age, connects with colleagues, peers and client in communities everywhere, understands how things get done, is knowledgeable, engaged, and contributing, and shares and distributes information freely. Behaviorally, she may not respond to email at all; she’s probably chatting with 1.0 and has attached several files and links, but 1.0 has forgotten his login and never thought to check in the first place. Many 2.0s don’t use email terribly often; one speaker recently even reported having to have “email classes” for new hires!
- 1.0 was “busy” and concerned with face time, 9 to 5 (and defined benefit), while 2.0 is “bursty”; she’s on Facebook and other social network sites all the time, but management doesn’t get that students use Facebook as a collaboration platform, and ideas come from anywhere, especially social places. To 1.0 colleagues (and bosses), she doesn’t seem to “work” but “somehow” produces excellent work.
- Tom pointed out that organizations need 1.0 and 2.0 workers; it’s all about balance.
- Organizationally, we’re shifting from hierarchical, closed, managed companies to peer-oriented, open, self-organizing enterprises (sounds familiar).
Leading the Transition to Enterprise 2.0 at Capital Markets Firms
So how do enlightened managers make this shift happen gracefully? Here are Tom’s observations and suggestions. Use several approaches to driving change:
- Top down: blog what’s on your mind, let people respond to it and turn it into a conversation. This is leading by example, and executives of capital markets firms should take note. Encourage people to use wikis to manage meetings. Drastically reduce email volume by using RSS for employee and reporting processes.
- Bottom up: mandate teams to jettison (fat client) office suites for creating project documents. Use wikis because they are much more efficient. Try zoho online collaboration software, google docs and twitter. Of the latter, Tom said that, although it has been mostly known for cell phone SMS blogging, it’s invaluable for global project teams because they stay in touch and become aware of work rhythms.
- His message to MDs (managing directors): encourage top down and bottom up as fast as you can.
- Leadership needs to adjust incentives, away from superstar individualists to group. People can compete very effectively in groups, too, but incentives must resonate with group collaboration, and they don’t now, at most firms.
- Mashups aren’t ready yet; IT must step on it to build APIs (I think he meant “pedal to the metal SOA so you can expose everything as services”).
- Obviously, Wall Street poker is a major deterrent to collaboration and sharing; since information can make or break deals, the industry’s DNA is to play cards close to the vest. That will be hard to change.
- Tom’s the second person to say this recently. You don’t have to show people how to adopt enterprise 2.0 because it’s so easy.. but you have to show them why because it’s counterintuitive for knowledge worker 1.0s.
- When you can, turn people loose and let them solve real problems with the new tools; that way, your firm can understand the potential.
Analysis and Conclusions
- Enterprise 2.0 will happen, and firms will be well served to adopt as early as is feasible. In a different but highly congruent context, I have seen quantum leaps of performance improvement when making transitions like this. For example, in enterprise software development, going from long-cycle, waterfall development to short-cycle, iterative development is an incredible leap that people can’t possibly appreciate until they do it. Waterfall development features a long, upfront requirements phase, which is followed by a much longer development cycle. In iterative development, requirements are done in short bursts that are followed by development and extensive client communication. This works much better because change in the business world is constant, and shorter cycles accommodate change much better because they’re in sync. All these enterprise 2.0 tools work on a similar principle: bursty, frequent communication that’s highly leveraged.
- Saying that employees should collaborate more is easy for anyone to say, but it is difficult to communicate the profound change that this represents. As I have written extensively, for most of human existence, information has been scarce, and people derived power by hoarding it. In the Knowledge Economy, information is everywhere, and it ages quickly; people gain much more leverage by sharing and collaborating, in fast cycles. This is a profound change that few people and workers appreciate. Much discontinuous change will happen around it because it’s under the radar.
- Picking up on Tom’s comment (and passion) for blogging, “putting things out there and iterating”: customers increasingly love this type of engagement and participation. Give them the choice to participate. I would go a step further by saying that they will increasingly expect the ability to collaborate with you; being part of the process actually gives them more utility. This is hard for product-centric companies to understand; the value will, especially for the Web 2.0 generation, migrate away from product and service to the collaborative process and relationship with you. No, it won’t happen overnight, but this will increasingly be a factor in winning and retaining customers.
By Christopher Rollyson Just Released—CSRA Market Advisory Highlights How I-Banks are Using Web 2.0 to Drive Competitiveness
![Enterprise 2.0 A Game-Changer for Investment Banks [Market Advisory]](http://rollyson.net/wp-content/uploads/2007/09/Mkt_Advisory.gif) This summer, “Enterprise 2.0” began to get legs as the new moniker for applying Web 2.0 to the enterprise, reflecting that pragmatists are raising their eyes for an exploratory glance. The market advisory shares how global investment banks are using Enterprise 2.0, and it suggests action steps for executives to take this year and next. Here is the executive summary and a few choice concluding points:
Enterprise 2.0 Enables Executives to Digitize and Monetize Collaboration for the First Time
This is so simple that many will miss it and open themselves to disruptive competition…
- Banks increasingly use wikis, blogs and other Web 2.0 tools for mission-critical processes, as shown through the examples of Citi, DrKW, Morgan Stanley, ING and JP Morgan..
- Enterprise 2.0 is a new term that denotes corporate adoption of Web 2.0 and social software tools. It offers investment banks an unusual opportunity to reduce risk and improve their earnings and profits by increasing returns on process, human and knowledge capital.
- However, Enterprise 2.0 also confronts banks with changing some of their assumptions, approaches and sensibilities. It represents an emergent, self-organizing network of relationships, so the formalized, restrictive cultures of many banks will serve as a significant barrier to adoption.
- Enterprise 2.0 is not your father’s enterprise software. The tools are relatively open, inexpensive to deploy and manage, and an order of magnitude easier to use; however, they are also robust and secure. They enable unprecedented collaboration.
- Technology is giving collaboration new teeth. Everyone has always praised teamwork, but when communication and administrative processes were so inefficient, monetizing collaboration was excessively difficult. Enterprise 2.0 is a discontinuous change for the better.
- Jaded executives will muse that Enterprise 2.0 is another technology buzzword in search of a home. However, they should ask their CIOs about the transformation of enterprise software, and they will answer that technology is steadily emerging from its legacy cage. Service-oriented architecture and Web services are enabling more responsive IT, while virtualization offers a quantum leap in flexibility. Enterprise 2.0 technologies natively enable people and process to adjust to changing requirements. People who do not recognize this distinction will regret it later.
- The adoption of Enterprise 2.0 will unfold over the next four years, but may well be faster due to the technologies’ and processes’ relative ease of use, affordability and interoperability. The term began to get traction this summer, and more case studies are emerging every week.
- Enterprise 2.0 adoption will likely produce some disruption in the market. As a group, global enterprises tend to be fast followers. If one/more competitors adopt more quickly, it could have a disruptive impact on your business.
- Think about Cisco’s results with the WebEx acquisition. We can assume that investment banks would, at a minimum, achieve a fraction of Cisco’s results. Now multiply that by how many acquisitions the bank does. Obviously, results would be similar in many other bank transactions and services that require discussions among far-flung team members, extensive information exchange and negotiation with myriad parties.
- Read the pdf here.
- By the way, I’ll be speaking about this at Financial Markets World’s Web 2.0/Enterprise 2.0 in the Capital Markets Industry conference in New York on September 17. Hope to see you there!
By Christopher Rollyson Converged Experience Presages Telecoms Transformation—Reexamining the Value Proposition
 CTOs Chris Rice (AT&T), Pieter Poll (Qwest), Mark Wegleitner (Verizon) and Matt Bross (BT) agreed that the discrete services that telecoms now offer would morph into a seamless, hyperavailable cloud of communications services. The converged experience will be seamless, feature-rich and accessible when, how and where consumers want. Telecoms’ ability to deliver will drive their stock prices in the near term and was the focus of the discussion.
From an operational perspective, telecoms have been too focused on product/service P&L. Now they have to eliminate barriers between products, so the customer can have a context-appropriate, seamless experience. The first phase of this transformation is bundling existing services; however, the real value will come from innovating new services. All applications will be unified around an IP (Internet Protocol) infrastructure. Telecoms don’t need to integrate networks; they need to build networks that interoperate.
Between the lines and longer term, telecoms must reexamine their value propositions because we are coming to the end of the era in which custom applications and proprietary interfaces were necessary to integrate networks’ “islands of automation.” Network-centric software and distributed applications increasingly interoperate natively.
Panelists
-
 Chris Rice, Chief Technology Officer, AT&T—Chris Rice oversees the Network Planning and Engineering Group for the new AT&T Inc. His responsibilities also include overseeing the development and deployment of advanced access, switching, and routing technologies for the company. Prior to being appointed to his current position in March 2004, he was responsible for SBC Communications’ enterprise-wide technology direction, new technology introduction, platform development and network regulatory.
- Pieter Poll, Chief Technology Officer, Qwest—Pieter Poll facilitates the strategic technology direction of the company. In addition, he directs network planning and engineering functions. Dr. Poll started his career at AT&T Bell Laboratories where he contributed to the architecture and evolution path of the 5ESS Digital Switch. He helped develop network evolution plans for the AT&T long distance network and product requirements for that network. He was a strategic and portfolio planner for what is now Lucent Technologies. Pieter joined the former U S WEST Advanced Technologies organization in 1994 to develop switching and network intelligence evolution plans for Qwest.
- Mark Wegleitner, Chief Technology Officer, Verizon—Mark Wegleitner directs technology assessment, network architecture, platform development and laboratory testing for the local and long distance wireline communications businesses, as well as network planning for local wireline communications. His organization supports all wireline business units in the management of technology and network matters. Formerly, Wegleitner served as vice president, Technology & Engineering at Bell Atlantic Network Services, where he handled all technology and engineering functions, as well as CTO at Bell Atlantic Network Services.
- Matt Bross, Group Technology Officer, British Telecom—As BT Group CTO, Matt directs technology strategy, vision and innovation across BT. He is the leading force behind BT’s 21st Century Network transformation program, and he heads up a global BT technology, research and development organisation that spans the US, Europe and Asia-Pacific. Matt has had a long and distinguished career in communications and innovation, including senior positions at ConTel, MasterCard and Williams.
- Moderator: Susan M. Miller, President & CEO, Alliance for Telecommunications Industry Solutions—Susan Miller leads ATIS, a leading standards development and technical planning organization committed to rapidly developing and promoting technical and operations standards for the communications and related information technologies industry worldwide using a pragmatic, flexible and open approach. Participants from more than 300 communications companies are active in ATIS’ 22 industry committees, Incubator Solutions Programs, and other activities.
The Converged Experience
- Consumers will experience content from any screen, and it will be device-appropriate and seamless.
- All applications will be unified around an IP (Internet Protocol) infrastructure. Much content will be video. Think way beyond wireless vs. wireline.
- Telecoms have been too fragmented and too focused on product (service) P&L. Now they have to eliminate barriers between products, so the customer can have a context-appropriate, seamless experience.
- The first phase of this transformation is bundling existing services; however, the real value will come from innovating new services. One example is having one voicemail for all devices.
- It will be essential to adopt open architectures. Telecoms don’t need to integrate networks; they need to build networks that interoperate.
- IMS (Infrastructure Managed Services) will be a stepping-stone, not a big bang. Operators will move toward IMS compliance gradually.
- Web 2.0 services will be strong drivers of innovation. CTOs’ challenge is enabling connectivity and collaboration across the enterprise boundary.
 IPTV
- IPTV will take us into a new era, “more than TV.” Text search will make content more accessible, and electronic program guides will be drastically improved.
- People will be able to access and share video via any broadband connection, including mobile devices (integrating the third screen), the same way they do now via their computers and Slingbox.
- Customers want flexibility—access and choice of content—not more linear broadband channels.
- With IPTV, consumers can interact with each other while they are experiencing the game, and time shifting will be routine.
- TV will integrate “web widgets” for content like weather, traffic and time (an example of external, Web 2.0 content?).
Managing Consumers’ Home Networks
- The home network is the final frontier (in owning the customer relationship because a lot of content will reside there, and helping the customer to access it will be key).
- It’s imperative to make all this technology available to consumers without creating frustration. In effect, consumers are running fairly complex home networks, and that brings up the question of who is responsible for devices, network services and content interoperating. Telecoms don’t control consumer networks and infrastructure, but the ability to deliver services is affected by the home network.
- Currently, home network operation is a gray area. DSL providers service their routers but not PCs. Cable operators service their set-top boxes, but when these become interactive, complexity will increase.
Innovation
- One billion new people will be on the Internet by 2011, and most will be in “emerging” economies. This will drive new thinking and unprecedented innovation. Telecoms will be challenged to scale networks to handle the increased activity.
- Telecoms can add value by collaborating with ISVs. They also need to target offerings for SMBs (small/medium businesses). Optical switching should help.
- Taking complexity out of services is critical to preventing adoption.
- Content will come from everywhere, and carriers’ value is to distribute it, make it available in as many places and formats as customers want.
- However, telecoms’ biggest challenge is their immense barriers to collaborating with external parties.
Analysis and Conclusions
- The phrase “Converged Network and Entertainment Experience” epitomizes the crisis in telecoms’ value proposition. As we wrote in AT&T CEO Unveils Telecoms Vision, we predict that technology maturation will increasingly enable network components to interoperate natively, which will remove a large portion of telecoms’ value add, which is assuring the delivery of data and services. In the medium term, this will be taken for granted.
- In our opinion, this is the real message behind Randall Stephenson’s assertion that telecoms need to reflect on the definition of “a communications company.” AT&T is aggressively moving into content to maintain margins.
- The last mile will provide extensive opportunity for new services that help customers manage their networks. People make fun of setting the VCR and other gadgets. They are so complex that people don’t use the features. This also holds true for smartphones, whose advanced features are used by fewer than 90% of customers.
- Telecoms are going to have difficulty breaking out of their role as purveyors of “dumb pipes.” Their processes and infrastructures are tightly coupled and inflexible. Panelists’ remarks about IMS and its difficulty interfacing with Web 2.0 do not bode well.
- The same inflexibility prevents telecoms from external collaboration and innovation.
- Telecoms will have their hands full just coping with doubling the size of their networks to accommodate one billion new users.
- Because the bulk of new users will come from emerging markets, which often have vastly different usage contexts (from mature markets), innovation will be far more varied than in the past.
- Question: if the goal is to standardize on Internet Protocol networks, that will mature the technology and remove much of its current “value subtraction” character. Currently, telecoms are focused on evolving their networks to interoperate seamlessly. That is how they define value. Medium- to long-term, however, they may have to shift their business model to content.
- IPTV converges watching with gaming, one of the most rapidly growing areas of activity among younger demographics.
By Christopher Rollyson The Rise of the Niche Will Transform the Mass Model—The UGM Threat Is the Opportunity
The advertising industry is at a crossroads. It came of age during the Industrial Economy, and explosive growth coincided with the development of the mass media and the focus on “brand” TV and print advertising. Big media and advertising reflect Industrial Economy values and sensibilities: produce big numbers efficiently and innovate when necessary. Amortize existing investments. The problem is, Knowledge Economy customers want to be communicated with as individuals. Since advertising’s processes have been built with big numbers in mind, they are expensive, and the numbers don’t work when agencies try to address niches.
Efficiency in advertising has given rise to a value chain that is as heavy with inflexible infrastructure as the airlines’ hub and spoke system. Advertisers remain focused on “reach,” the number of eyeballs that view their messages (and respond when it’s measurable). That’s how advertising effectiveness is measured. Advertisers are resistant to changing this system, and that makes emerging technologies like mobile video and social networks of secondary interest to them. Meanwhile, innovators are developing technology and offerings to help early adopters to take advantage of the emerging media.
 User-Generated Media (UGM) is a quintessential opportunity/threat. Although amateurs do not produce comparable quality as professionals, they can afford to address niches since their production costs are lower. We predict that they will increasingly disintermediate professional marketers: their relevance is often high because amateurs are focused on what interests them, while professionals are drafting communications to appeal to big numbers but to few people in particular. Astute agencies will explore collaborating with individuals to bring down production costs and increase relevance.
Panelists
- Lon Otremba, CEO, Access 360 Media—Lon Otremba manages Access 360 Media’s day-to-day activities and develops the company’s overall strategic direction. A well-known interactive media pioneer, Otremba is a veteran operating executive and advisor in the Internet publishing, print, television and broadcast music industries. Otremba currently sits on the board of EEI Communications, a leading provider of outsourced new media, print publishing and staffing services. He has also served on the executive board of the Interactive Advertising Bureau. Prior to joining Access 360 Media, Otremba was CEO of Muzak, LLC, the world’s largest provider of commercial music services.
- Nir Shimoni, VP Product Planning & Business Development, Eyeblaster—Nir Shimoni oversees key aspects of product planning at Eyeblaster. Mr. Shimoni came to Eyeblaster from RADVISION, where he served as the director of business development and product marketing. An expert in videoconferencing and multimedia communications product development and network architectures, Mr. Shimoni was a lead member of the RADVISION team responsible for architecting the company’s enterprise videoconferencing and multimedia communications solutions, strategies and opportunities.
- Frank Nein, Senior Analyst, OrionsWave—Nein serves as SVP of Strategic & Business Development for OrionsWave, which provides next generation interactive video & digital media gateway solutions, transcoding, middleware, P2P & (CDN) content delivery networks over IPTV infrastructures allowing all/any set-top boxes the ability to seamlessly merge conventional H.323 & H.264/MPEG-4 with all other AV media codecs for cross-platform video broadcasting & video conferencing over multiple web based & portable wireless devices such as mobile/cell, PDA’s & SmartPhones, etc. Formerly, Nein held senior consulting positions with Verizon and Bell Atlantic.
- Brian Knapp, VP Corporate Affairs, Loopt—Brian oversees loopt’s privacy matters, regulatory and policy efforts, corporate development, and legal affairs. Previously an associate with Wilson Sonsini Goodrich & Rosati with a focus on intellectual property technology transactions, Brian held senior positions in business development and marketing with such companies as Dun & Bradstreet, Barnes & Noble.com, and AllBusiness.com.
- Allan Linden, Senior Director Marketing, Kasenna—Allan Linden directs marketing for Kasenna, a leading provider of video-on-demand (VOD) content and MPEG-4-ready IPTV applications for triple-play services over broadband networks. Their solutions enable telecom service providers and cable operators to generate additional revenue by delivering advanced television services. Moreover, through its ViewNow subsidiary, Kasenna offers a turnkey IPTV solution that includes scalable IP video infrastructure, subscriber applications, and VOD programming.
- Moderator: Michael J. Pinto, Managing Principal, mCapital—Mike Pinto leads the growth of the mCapital’s investment portfolio. Prior to mCapital, Mike was the CEO of mobZilla, a dual platform mobile and PC music service provider, and he held managing director positions with two European wireless application service providers. Working mostly in the Spanish market, both companies specialized in delivering premium content to mobile consumers through relationships with major and local TV channels, magazines, newspapers, and retail shops. He also led a team that aggregated premium SMS billing with 23 operators in 6 countries, and formed strategic revenue partnerships with over 50 media and content companies.
Key Trends
- There is a seismic shift away from broadcast TV—toward non-traditional advertising vehicles like social networks and digital signage. Younger generations have little or no experience with “legacy” media like broadcast TV, and advertisers need to create engagement.
- Agency visionaries are focused on (adding value by) creating precise, relevant messages that are integrated into content so that content and advertising are indistinguishable.
- Today, $9.5 billion is spend on mobile advertising globally. Most is coupons and brand advertising.
- Mobile is fundamentally different (because context is constantly changing around the person). Direct marketing is precise, and so is mobile, since each number is tied to a person. However, consumers don’t trust advertisers, and resistance to geo-tracking is widespread.
- It is difficult to do brand advertising on mobile because the medium is so different. Currently mobile is primarily a communications device, not entertainment. The second screen, the computer, has strong associations with work and search. Mobile will be a force in search.
- IPTV will transform the first screen (TV), which will become more interactive and will provide more granular information about viewing and content consumption. This information, combined with emerging ad insertion techniques will give advertisers new tools to target messages to viewers. To take advantage of it, they will have to change their thinking.
- Content and advertising will converge.
- When money moves, applications will follow.
Convincing Advertisers to Invest in Emerging Opportunities
- Know your customer. Advertisers are organized around advertising types, and their processes and organizations are siloed. This is a major problem because it prevents cross-boundary communication and collaboration. It’s difficult for them to assimilate new information and opportunities. No one is dedicated to cross-boundary initiatives.
- It is very difficult to sell new techniques to agencies. Google’s $6 billion AdWords business took everyone by surprise. Like all new things, it started small.
- Advertisers are limited in how they can deliver targeted ads on mobile devices; there is a lack of software on devices to help manage content.
- Know your customers and show how they will be of value to the advertiser. Mobile enables very targeted messaging. IPTV enables carriers to understand what content the customer is watching as well as when and how.
- Figure out how to optimize local (mobile) and national and optimize buys.
- Messaging is the medium. American Idol is all about voting via SMS. ESPN failed because it didn’t understand how to advertise.
- From an advertising perspective, P2P virtual marketing and community building are expensive, as is “permission” marketing. There is uncertainty around monetizing communities.
Advertising on Mobile
- The third screen is an emerging window into the consumer, but it has many unique characteristics that advertisers must invest in to understand.
- With mobile, obtaining consent is more difficult than it is on the Web (people are more intolerant?).
- Media are shifting away from one-to-many to many-to-many.
- Carriers need to create opt-in communities. Advertisers want to know how they can become relevant in the mobile video context.
- Video is different from music because people listen to music repeatedly, but they will watch a film 2-3 times on average (isn’t this assuming that people will watch films on their mobiles?).
- Younger generations value the advice of their friends, not adverts.
- User-generated advertising has real potential; the 13-second Doritos ad during the 2007 (U.S.) Superbowl was a hit. However, GM’s Chevy Tahoe experiment is considered by many a failure (users generated a high portion of negative ads). To succeed, advertisers must establish “guard rails” but still enable users to have considerable creative license.
- MySpace has a lower CPM (cost per thousand) than AOL.
- People will endure adverts to get free mobile video—in certain situations. Advertisers have to experiment to learn what works.
- Results will dictate what advertisers can get away with. The “I.P. generation” knows that they are in control; they will desert any content that displeases them. They expect things to be free, but many are virulently intolerant of advertising.
- Emerging ad insertion technologies currently offer much more specific and timely ways to reach consumers. This is key to delivering relevant messages based on geo or activity.
- Carriers will not give free service.
- ViewNow offers advertisers the ability to track what home viewers (first screen) are watching, and they will have a similar solution for mobile video viewing.
- Mobile gaming has considerable promise, and it is a way to reach the I.P. generation.
- Analytics are critical for measuring the impact of advertising on mobile. Some metrics are length of exposure, time of exposure and reach. (These sound familiar; it would seem that mobile would offer direct response across a greater spectrum.)
- Network capabilities for delivering mobile video advertising are spotty, and this is a major barrier to adoption.
- Most media is still one-to-many.
Holistic Advertising and Experience
- To learn how to integrate campaigns, observe how people currently multitask while viewing content. It’s quite common for first screen viewers to research/interact via the second screen (computer) and third screen. IMing, chatting, calling all coexist with first and second screen viewing.
- Companies need to build resident knowledge networks to understand these phenomena (don’t depend on agencies, who are often not much more knowledgeable than their clients at emerging phenomena).
- Coupons can be extremely effective at tying (mobile) campaigns together (and measuring effectiveness). However, many companies have not even successfully created online and offline processes (“clicks and bricks”) yet.
- Retailers have numerous opportunities to leverage technology. For example, music retailers FYE has kiosks at which to listen to music. These can collect information on who listens to what (listening patterns) and can target advertising. 15,000 viewing stations at 800 stores are all connected via a WAN. If effect, they are a TV network.
- However, many retailers have avoided implementing new technology. They successfully ducked investing during Web 1.0 (the Internet). There are offline, and they will become decreasingly relevant.
- On MySpace, members are creating their own advertising to support their favorite products and services, and they deploy these UGC adverts on their MySpace pages.
Analysis and Conclusions
The Transformation of Advertising
- Advertising is a professional services business with high people and process costs. Like other vestiges of the Industrial Economy, it is oriented toward products, which have decreasing relevance to consumers. An increasing portion of products is commoditized.
- Brand advertising has always had difficulty measuring results, and it represents a majority of advertising expenditure in many categories. To compensate, agencies and their clients have developed systems that try to measure impact but do not come close to the measurability of direct marketing.
- Advertising used to create a large portion of companies’ voices in communicating with customers. Now consumers are growing their own voices via Web 2.0 and social networks, and these will increasingly disintermediate advertisers. Advertising as an industry has a lot to lose.
- Despite these significant disadvantages, agencies that learn how to engage emerging consumer voices can produce unprecedented results. This will require rethinking their roles in light of “the conversation” in which the consumer will play an increasing part.
- Advertising executives as a group have a lack of experience with technology adoption, and vendors should make client education a key goal. They should prioritize business development by realizing that many advertising executives do not want to be educated.
- One of the biggest barriers to creating new offerings is that telecoms and cable operator billing systems are not capable of recognizing and charging for new services. They are very inflexible; they were designed to charge for services with very narrow parameters.
- Overall, telecoms and operator business systems stifle innovation considerably; they should consider outsourcing backend systems to gain agility; the pressure will only increase to offer new, granular services; this means defining granular services and charging for them—or not charging if the customer chooses to view adverts. Customers will insist on tweaking billing plans on a highly granular basis (i.e. “I want to pay for ad-free Wimbledon, but I’ll endure advertising to get Oprah for free”).
- The mass advertising experience has left consumers wary of advertisers at best. “Commercials” are widely regarded as an irrelevant nuisance. Few people trust advertisers to offer messages on mobile.
- Relevant advertising will add value and lose the stigma of stupid mass advertising. However, advertisers must expect to win trust—and permission—slowly.
- Devices are constantly gaining functionality and creating opportunities, but specialist value chain players are necessary to make it work. This creates complexity and detracts from adoption.
- Advertisers are biased toward reach—and away from the niche. Self-organizing social networks are often niche-y, so providers will have to show how their demographics are of value. Advertisers won’t do the work.
Capitalizing on the User-Generated Media Opportunity
- Web 2.0 and social networks digitize word of mouth (WOM) marketing. Proponents argue that WOM has driven the majority of sales results compared to all other forms of marketing. However, because WOM was never purchased, it was never measured. Therefore, it was invisible. This is all changing because digitalization enables much better measurement.
- Although it may should preposterous, agencies should take note of the fact that individuals are creating their own advertisements for their favorite brands. They should lose the “us and them” mentality and remain alert for opportunities to collaborate with consumers who have increasing media production skills.
- Agencies should abstract away from whether a creator is professional or amateur. Agencies and individuals are communicating, and individuals’ skills are increasing while tools get more powerful. At the end of the day, agencies who are able to weave their professional expertise together with individuals’ creativity and insights will produce unprecedented results.
By Christopher Rollyson Content Providers Hobbled by Conventional Thinking—UGC May Fill Content Vacuum in Plum Mobile Video Market
At Digital Hollywood Chicago, speakers held that video would grow significantly as a portion of content experienced on the three screens. However, no panelist gave a compelling reason that video would grow—and there are many problems that will dampen adoption in the short- to medium-term. I question whether they are just trying to drive demand to drive their businesses. Don’t forget that this conference is digital Hollywood.
Myopia is content owners’ biggest problem: they seek to repurpose existing content for the mobile screen to amortize past investments. This logic permeates their thinking and prevents innovation. Meanwhile, consumers are awakening to the excitement of consumer-produced content, the prices of software tools are falling, and skills are increasing. True, the production quality is usually amateurish, but UGC (user-generated content) is usually free, fresh and relevant—to niches, which is where the action is. Users produce content for fun, and they can afford to address topics that “professional” content cannot. Mass-produced vapid content will still have a place in the consumer entertainment universe, but it will decreasingly be the default.
Mobile video may be especially well suited to UGC: attention spans are short, so relevant short videos, created by other consumers, may be most relevant because they may be “about” the situations in which viewers find themselves. Professional content providers could not afford to make videos of bank bloopers, rude bus drivers, or comical playground incidents. In addition, telecoms’ networks won’t be ready to carry high production value video for several years, so UGC production quality may be suitable.
 If Hollywood doesn’t wake up to the opportunity within the next 2-4 years—when mobile video will be at an inflection point—they will have difficulty recovering.
Panelists
- Rahul Sonnad, VP Business Development, The Platform—Rahul Sonnad co-founded thePlatform with solid experience in digital media services. He managed some of the first backend solutions for digital media delivery and commerce integration while with Microsoft’s Digital Media Division’s Research and Development, and later joined WindowsMedia.com developing digital media strategies. Rahul’s background includes managing Asian versions of MS Office, innovating Microsoft Word tools, and engineering at Adobe Systems.
- Ted Mendelsohn, Director Business Development, AP Digital—Ted Mendelsohn is responsible for expanding AP’s commercial opportunities in the interactive media by identifying new markets and new revenue opportunities. Based at the news cooperative’s international headquarters in New York, he has negotiated licensing arrangements with AP Digital’s largest clients.
- Mark Pascarella, President, Gotuit Media Corp—As one of Gotuit’s founding investors, Mark has been a member of the company’s Board of Directors since inception and joined Gotuit full-time in 2001. Under Pascarella’s direction, Gotuit has pioneered video search / navigation and has become the leading provider of on demand video products for multiple platforms including cable, broadband and mobile.
- Maha Ibrahim, General Partner, Canaan Partners—Maha Ibrahim joined Canaan’s Menlo Park office in 2000 and focuses on Internet, networking and wireless investments. She is also an active speaker at wireless industry conferences. At Canaan, Maha helped to negotiate and manage a partnership between Tacit Networks and Brocade, and established Canaan as the first investor in Blue Frog Mobile, one of the largest US-based direct-to-consumer mobile content companies. Prior to joining Canaan, Maha held numerous roles at Qwest Communications including Vice President of Business Development and Vice President of eBusiness and Internet Operations. While at Qwest she was instrumental in forging the company’s relationships with Netscape and Microsoft as well as several other private Internet companies.
- Moderator:Antonette Goroch, Senior Analyst, Digital Tech Consulting—Goroch has been an analyst and executive in the media industry for over 10 years, covering areas including cable, digital satellite, consumer electronics, Internet, IPTV, digital video and music. She has authored expert analyses focusing on digital media entertainment and technology, and her work has appeared in The New York Times, The Wall Street Journal, Broadband Week, Satellite Communications and Broadcasting & Cable.
Customer Experience: The Three Screens
- The first screen is TV, and several generations of viewing have set strong precedents. Most viewers of TV content are passive. This has reached such a point that many “viewers” do not watch TV; they just have it on in the background, and they often do other things.
- The computer monitor is the second screen. Here, people are far more active. The computer first assumed a work context, but entertainment has increasingly grown, so that the second screen has a balance of work and entertainment today. People are interactive at the computer. People increasingly watch entertainment at the computer, but TV is the ultimate “watching” context.
- The mobile experience is emerging. It is more driven by impulse, and mobile entertainment happens when people are in-between doing other things, when they are commuting or waiting for something.
Adoption Factors
- Currently, each of the three screens has different content creators and distributors, and this serves to keep each in its own channel.
- Customers will insist on convergence, but it will happen gradually due to technology constraints and the lack of business models.
- Mobile (the third screen) is slow, and picture quality is poor, and this will prevent content sharing with the other two screens in the near- to medium-term.
- The broadcast model will not work for mobile: neither its content, nor its business models.
- The customer base for mobile video is broad, but myriad providers and business models prevent adoption. Mobile has to have a YouTube offering.
- The mobile video value chain is complex; on the Internet (second screen), ad models work, as well as search and recommendations (like amazon.com).
- There isn’t yet a business model for user-generated content (UGC).
- There was a consensus that advertising-sponsored free content for mobile would have a limited appeal; both content and advertising would have to be carefully targeted in order to avoid annoying customers.
Content Protection
- Video content incorporates film and audio, and each has potentially numerous content owners.
- YouTube content is unprotected, but it is monetized, so that makes it acceptable to many industry executives. However, everyone is painfully aware that the misuse of content is growing, and the lack of control is too obvious.
- For many situations, enabling consumers to stream content (without downloading) is sufficient protection (however, there will always be people who find workarounds and share). Digital fingerprinting and embedded players are other tools. YouTube is developing its system to detect unauthorized content and may innovate for the industry.
- Apple is a heavyweight with its proprietary system, Fairplay. They are trying to take advantage of the content protection problem to further their own business model. Apple has a lot of influence right now.
- Standards bodies must play a key role; however, there is no imminent solution. No one has enough power to enforce content protection; Apple probably has the most influence currently. The lack of standards adds significant cost to content.
- The goal is to make it inconvenient enough to prevent most people from abusing it while not detracting from user experience.
- Content owners have a clear risk/reward: if content is too protected, they lose exposure; if it’s too loose, they suffer brand compromises.
Business Models for Mobile Video
- Two models to start with: pay for content and free content supported by advertising. People subscribe to cable (first screen) and numerous Internet (second screen) offers; why not the third screen?
- A key challenge is that there are many value chain players, and each must be paid, which makes content more expensive. Video content owners want their pound of flesh, and this stifles innovation. The mold must be broken.
- Business models are currently channel-specific, and that’s a problem (i.e. TV, Internet and mobile). They work very differently, and this makes sharing content among channels difficult. Internet is largely free content with ad support, while TV is subscriber and ad support.
- However, mobile delivery costs are going down, and this will continue and increase options in the medium term.
- In 2007, mobile providers supply content via their marketing budgets; they are trying to attract new subscribers. This isn’t sustainable long-term. In addition, mobile networks can’t deliver extensive video content; they aren’t robust enough. It’s a classic case; they are trying to grow subscribers and make new infrastructure investments in alternating cycles.
- Close networks (walled gardens) aren’t viable long-term.
- IPTV will add significant interactivity to the first screen, which will be transformed as nodes on IP (Internet Protocol) networks as IP-enabled set-top boxes diffuse into the market.
- There is a significant opportunity for carriers that can deliver content to all three screens. However, consumers will be most happy when content is simpler to access. It has to just work. The “connected home” is quite a long way from reality.
- UGC thrives best when it is shared within a community. Threadless is a useful example.
- WAP with short codes offers interesting possibilities.
- Mobile TV is growing fast in Italy and Korea, where the infrastructure is more robust than in the U.S. However, many people in those markets are more oriented to mobiles than computers, the opposite of the U.S.
- Pay for content is too expensive for mobile. Using ringtones as an example, out of every dollar sold, the content owner gets 40 cents, the carrier 30 cents. The aggregator and the delivery company must split the crumbs. It’s very difficult to make money on ringtones; some have had success with subscriptions.
Analysis and Conclusions
- Mobile video is clearly an emerging market, and value chain players see as many difficulties as opportunities. Many people will try to exploit it, but to succeed, players will have to understand the delivery realities of mobile in the U.S., where it is far weaker than Europe or Asia.
- Existing value chain players do face technology and business constraints, but their greatest limitation is their lack of imagination. They want to push high-production video content to mobile. They see mobile as another consumption opportunity, but they are missing the point.
- UGC does have a business model. Look at Threadless: community members create designs and vote on them, and winners are honored by having their designs used on clothing. YouTube for mobile could be viable; imagine a mobile site that features “goofy commuting videos” that are ranked by other users, and winners get recognized by the community and prizes. Mobile phones increasingly have video creation and playback capabilities.
- Existing value chain players don’t see UGC models because they don’t see how they can make money by reusing existing content. They are focused on themselves, not customers.
- UGC might be ideal for mobile’s limited quality and infrastructure because of its low production value. However, the context would be perfect: the site asks users to create content for each other.
- Video content poses significant copyright issues. This is becoming an increasing problem because the Zeitgeist is mashing things up. DJs mash up music, blogs mash up writing, digital illustrations mash up other illustrations.
- “Brand compromises”: content owners need to rethink “brand experience.” Being open and embracing collaboration will trump controlled brand experience in many situations, but most marketers do not understand that.
- Value chain players: look at music: it costs $4.00 to download a song from a mobile provider, and the same song costs $0.99 on iTunes. In the U.S., it is too expensive to deliver video content via the mobile infrastructure.
- Content owners will eventually have to realize that they will have to collaborate with customers to have their content discovered and shared. Many will not understand this and will become irrelevant in the long-term.
By Christopher Rollyson But Legacy Thinking Makes Agency Ecosystem Vulnerable to Disruptive Change—Who Will Be Their Southwest?
Technology is remaking the advertising business because it is beginning to enable individualized targeting via automated tools. It is not a moment too soon.
The ultimate context for this session is that technologies are driving interactivity, which is becoming the default for marketing communications. Legacy players in the marcom value chain have mixed feelings: they want to leverage their investments in legacy processes, people and relationships, and many of their clients are not pushing for interactive or its latest incarnation, digital video.
Thought leaders and visionaries are frustrated by their colleagues’ reticence because they perceive that marketers’ worst fear—irrelevance—will soon ensue unless they begin to make serious investments in digital video and Web 2.0, which highlights peer-to-peer interactivity.
When it burst into public view with the growing popularity of the Internet (“Web 1.0”), “interactivity” represented new capabilities and sensibilities. Viewers of marcom messages could react to the messages by clicking, and these clicks could be tracked very economically.
However, this was merely a brief overture to a long opera: Web 2.0 represents interactivity on steroids because consumers are originating content and constantly interacting via the proverbial “three screens” (TV, computer and mobile).
Panelists
- Tim Hanlon, SVP Ventures, Denuo—Tim Hanlon is chiefly responsible for all US client activity and agency initiatives in the field of emerging media technologies, including the firm’s ground-breaking TV 2.0 Practice, centered around evolutionary television platforms such as interactive/enhanced television, on-demand video, digital video recording, interactive program guide navigation, addressable advertising, and digital broadcasting/datacasting.
- Nash Parker, Director Strategic Alliances, Alcatel-Lucent—As Alcatel-Lucent Director of Strategic Alliances, Nash Parker leads the company’s North American Strategic Solutions Group in supporting the group’s IPTV and Mobile TV initiatives. In this position, Mr. Parker is engaged in strategic partner development activities, analyst relations, and also serves as Alcatel-Lucent’s primary liaison with the content and advertising community – including film, television, and gaming.
- John Hoctor, VP Business Development, Navic Networks—John Hoctor has been with Navic for over five years, and he has had a key role in growing the company. Currently John sets Navic’s strategic direction and executes on a number of Navic’s strategic initiatives. He develops partnerships with programmers, distributors, and national advertisers and oversees all of Navic’s marketing activities. Through its on-demand content navigation and set-top box monitoring tools, Navic enables the next-generation services that have come to be expected by programmers and advertisers, including targeting, telescoping to VOD content, audience measurement and more.
- Brian Shin, CEO VisibleMeasures—Brian is a startup veteran who has co-founded four software companies and was an early member of two other startups, Allaire Corp. and Medsite, Inc. Two of the companies he helped found, Creative Aspects and The Cambridge Intelligence Agency, were acquired for positive returns. Allaire Corp. went public in 1999 and was subsequently acquired by Macromedia for $310 million. VisibleMeasures enables self-service for ad insertion in video, which shrinks the advertising value chain. (Clients can disintermediate ad agencies by bidding, buying and inserting messages via VM’s website).
- Michael Shehan, CEO Booyah Networks—Michael founded Booyah Networks in 2001 as a self-service paid search network. Under his leadership, Booyah ranked 23rd on the 2006 Inc. 500 list of fastest growing private U.S. companies; Booyah was the top advertising/marketing company on the list. The Booyah Networks portfolio also includes The Booyah Agency, a boutique-style online marketing agency that Michael opened in 2005. Booyah’s next division was SpotXchange, a solution that incorporates the company’s successful self-service paid search network into a similar platform for online video ad serving.
- Moderator: Christopher Stasi, SVP Operations & Development, TVN Entertainment—Chris Stasi is in charge of all technical aspects of the company’s on-demand products and services, including day-to-day operations, engineering, platform development and content distribution throughout TVN, the largest distributor of video on demand content in the United States. He also manages the design and implementation of ADONISS, TVN’s revolutionary asset management system. Stasi’s leadership on the project led to his being named the principal inventor on eight patent applications.
Reportage and Analysis
Technologies and Networks
All flavors of TV (cable, broadcast, mobile) are becoming digital, which is transforming the first screen. It means that metadata about their content can make it discoverable like never before. It can be chunked into smaller bits, which can be shared more easily. The quality of the video is increasing. Viewers have increasing choices about how they view the content (sports viewed from different angles). At the same time, digital technologies enable content providers to see who is consuming the chucks of data, and they can target advertising much better, significantly boosting its relevance and value. However, emerging (digital) content is still in its infancy, and agencies are loath to invest in it because it does not have the established metrics by which they are currently measured and paid.
- Technology is changing advertising profoundly. We increasingly have granular, real-time response data, and this is increasing the sophistication of the business. It is more data-driven; response data enables targeting and changes creative. This trend will drive an explosion of creativity, but it will be multidimensional and incorporate delivery, technology and content format as well as what is regarded at traditional “creative.” The new generation (of consumers) gets it, but too many marketers and agencies do not.
- Agencies remain preoccupied with reach (the number of people who see their messages). The reach model is increasingly outmoded in the emerging environment, which is a cloud that contains myriad communications from innumerable parties (individuals). Advertising itself is democratizing: many things can affect the impact of advertising, as consumers contribute their messages and comment on everything. Consumers are increasingly involved in the communication process.
- Looking at it another way, ad owners have assets (creative) that they want to “leverage” by repurposing as much as possible—with the fewest changes possible. This impulse to amortize through reusing content is an opposite force to individualized communications, as far as creative goes. Two innovative ways to do this: having coupons “follow” consumers. For example, a woman is looking for a dry cleaner on her smartphone, and she receives a coupon on the phone. The coupon is subsequently delivered to her computer via email, where she prints it out and redeems two days later. Another example is geographically- and incident-based ad insertion.
- National advertisers are interested in advanced interactive advertising, but they will not buy until the ad buying process is aggregated. The advertising enabled by emerging technology is niche-y and technical.
- Legacy set-top boxes represent a huge bottleneck to enabling interactivity; most of them are too limited. They need to be able to capture viewer data and share with advertisers to enable more targeting, which will drive advertising value.
- Some helpful technologies for modernizing advertising would be:
- Much better metrics and information about who is consuming advertising. The Web has wrought a sea change on the business because it generates highly granular feedback quickly.
- Better video search capabilities. Metainformation is currently far too subjective (there’s a lack of standards).
- Cross-operator management systems to enable easy cross-platform ad buys. Currently local advertisers buy most interactive advertising, which differentiates cable from broadcast.
- The technology value chain is far too complex, and technologies are not integrated well. It is necessary to assimilate technologies; too many (value chain players) need to access the inventory, which drives the need for options and technology complexity.
Content and Creative
Most agencies still feel that they add the most unique value through content, their “creative.” However, panelists argued that, increasingly, the delivery was as important—or more so—than the message. Technology is enabling people to bundle content themselves, which is pressuring all content creators to unbundle content (the most common example is music: increasingly people buy songs and bundle them into playlists; the “album” is dying). Digital content enables unbundling and more interactivity. Another prescient example: advertising that enables “viewers” to drill down and find more information before returning to the “program” in which the ad spot appeared. This is also blurring brand and direct response marketing.
- The choices for delivering advertising are exploding. It is increasingly possible to develop and deliver messaging on the fly (for example, ad insertion based on local conditions or response). It is possible to configure video messages dynamically. Users self-select video and SMS.
- Content is continuing to fragment. There are already hundreds of high definition TV channels, and their numbers are increasing rapidly. However, the “one on one” (ad to consumer) concept is a fallacy because the infrastructure cannot deliver it without massive rebuilds, and the industry is already struggling to recoup standard definition investments. The nirvana is not practical in the near future.
- Video is often the best medium to communicate the message, and agencies are experimenting, but slowly. Witness video resumes and the YouTube phenomenon.
- Video and advertising are converging: many of the most effective ads are targeted and provide relevant information (not so much a mass selling message), but to make ads more effective, advertisers need to infer preference based on imperfect information. One example of convergence: consumer-generated video that shares consumers’ excitement and use of the products/services. They create excitement like ads, but they often provide entertainment value and insight into customer experience like video.
- Newspapers and TV still represent the bulk of advertising volume and revenue, which is too easy to forget. It is the reality. The 30-second spot may be on the wane, but it still generates a lot of revenue today.
- Brand and direct response marketing have traditionally been bought separately, but they are beginning to fuse due to interactive advertising. People want a seamless experience; for example, if they see a brand-oriented message that interests them, they often want more information on the spot (to “drill down”), and advertising needs to anticipate that. Note that providing drill-down information about the offering requires a completely different skill set than traditional creative; agencies are going to have to take wrecking balls to their silos and take a cross-boundary approach.
- TV must strive to become relevant in the new environment (note panelists said “become” relevant; it is not relevant right now). For example, NBC is inserting its “NBC tones” into shows purchased on iTunes. Networks have no brand awareness with the new generation, who have largely grown up with no TV or with cable. They are experimenting with reality shows and shows in which viewers rate competitors; some examples are Top Chef and The Last Comic Standing.
- Broadband video is far more granular, but broadcast TV is too general: no one knows who is watching. (In an interactive world, Nielsen’s system is increasingly unacceptable.) It is possible to poll viewers, which enables telescoping (information drill-down in which the viewer requests and views additional information before returning to the show).
- It is hard to discover video, and this diminishes its network effect.
- Direct response ads are a way to measure the effectiveness of interactive and video ads.
Legacy Agency Issues
Although they are service businesses, agency responses to these trends are dangerously reminiscent of the airlines in 2000 because their processes are too brittle to respond to the market. They are open to a player like Southwest Airlines, who will change the model. Panelist remarks reflected that agencies are too focused on efficiency, and they give innovation short shrift. Their ad buying and insertion processes are tuned to aggregated buys and efficiency, so they curtail serious experimentation with emerging digital media. Worse, they are alienated from the accelerating explosion of niches, which demand individualized communications. Niches mean “higher cost communications” to conventional wisdom, but business models that prove that narrow targeting actually gets much better results are only emerging. UGM (user generated media) only accelerates the trend because users are often more relevant to other users, especially in light of the vacuum that traditional marcom provides.
- The status quo is biased toward the past, and risks increase with time. Only 12% of senior marketers think that Web 2.0 is important to their overall message. They are missing the whole generation: the zeitgeist is mashing up everything. Agencies are still too TV-centric. There is a huge CPG (consumer packaged goods) generation gap (and it is getting worse). This is partly reflected by the short average tenure of CMOs (chief marketing officers), which is currently 21 months. CMO churn also drives unprecedented change in agency selection. Agencies are now hired by professional procurement organizations, which have little understanding of advertising and marketing.
- Many traditional marketers are having conniptions: they do not know what to do. The attitude toward emerging media is too often, “We’ll buy it when it gets big enough.” Too many people still do not appreciate digital, and they risk fading into irrelevance. Agencies cannot buy digital; they have to do it. (In the medium-long term) innovators will be rewarded and laggards damaged. Emerging media vendors struggle with how limited agencies and their clients are.
- MBNA’s strategy and operations are illustrative of where most agencies should go in the short to medium term: MBNA specializes in creating credit cards for affinity groups, which desire highly individualized card terms and conditions for their members. MBNA customizes the front end of its offerings and aggregates/leverages its back office to create scale for its clients. Agencies should look to follow a similar strategy.
- Nielsen (and IRI) measurement systems do not address HD-TV because adoption is yet insufficient. But HD-TV is where extensive innovation will happen.
- Advertising is still hung up on broad categories, like “males 18-49.” This has very limited relevance; consumers want to interact with more relevant (i.e. targeted) information.
- SEO/SEM and search represent a precursor to thinking beyond marketing push strategies. Search enables advertisers to pull people with highly individualized to them.
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Sucharita Mulpuru gave a very useful summary of how executives can apply blogs, tags, wikis, customer ratings, user videos and shopping communities to aid direct and indirect sales. Moreover, she provided a framework to help think about these vehicles in terms of complexity and the degree of “directness” and “indirectness” of the sale.