Web 2.0 and the New Age of Hacking

If you have started to get the feeling that something new and big is afoot in the consumer Web world, no, you’re not having flashbacks to 1997

Web 2.0 is a new phenomenon that is beginning to realign the balance of power between producers/providers of products/services and customers because it enables customers to self-organize and wield unprecedented influence in the market. “Web 2.0” refers to a group of (usually) free user-friendly Web applications like blogs, wikis, integrated video/phone services and social networking sites (more below) that enable individuals to connect, collaborate and concatenate with unprecedented ease. E-Commerce (doesn’t it sound quaint now?) first enabled consumers to gain a new level of information about products and services and, as adoption proceeded, to buy over the Web. That was “Web 1.0” and it was still largely one-way communication because information flowed from the Web to customers. “Web 2.0” is focused on letting individuals self-organize, interact, collaborate and be equal players in what aficionados call “the conversation” of the Web.

Before you B2B-focused readers yawn and turn the page, consider that this will turn mainstream customers into hackers, although not in a technology sense. As hackers collaborate and expose (or exploit) the weaknesses in (technology) products, customers will share information and expose all the shortcomings in all products and services. Until now, consumers have been a sleeping giant, but Web 2.0 will enable them to organize and take the initiative as never before. Smart companies will begin planning for this now; they will change their attitudes and processes to invite customers to help them provide superior customer experience. Companies’ prowess at engaging customers’ participation in discussing the nuances of their products and services will drive a major portion of competitive advantage in the next 5-10 years. It’s arguable that the customer participation is becoming the product/service in some categories.

The New Age of Hacking Everything

Global Human Capital will be sharing examples of customers’ “hacking” all kinds of services and products, and we invite you to bring them to our attention. For now, these initial examples show that global organizations are losing their control over how information is created and shared. Customers are gaining mastery over the tools and processes of media production and distribution. Customers increasingly scoop mainstream media through their imaginative use of digital cameras, video cameras, podcasts and print.

• Kryptonite Bike Locks—Kryptonite pioneered the now-ubiquitous “U-shape” bicycle locks in 1972, and they have an install base of millions worldwide because they are the Oracle (“It’s unbreakable”) of the bike lock world. This is their core business. However, in 2004 blogs started reporting (and showing with pictures) how the locks could be opened by inserting a simple Bic pen into their circular “keyholes.” This confronted the company with a huge threat to their core business: people around the world, including thieves and owners, not only knew that the locks were vulnerable but also how to pick them.
• “Bus Uncle”—In Hong Kong, Elvis Ho, a young businessman, was commuting home and made the mistake of tapping on the shoulder of the older man sitting in front of him, who was yelling into a cell phone, and asking him to quiet down, as reported by The Wall Street Journal. The older man turned on Elvis and berated and insulted him for several minutes. Another passenger recorded the incident with the videophone functionality on his mobile phone and posted it on YouTube to share with friends. It became an international sensation; people in cities worldwide are repeating the lines of the conversation like it was a hit movie, and they’ve been made into several ringtones.
• The 2006 Montana senate race—The Democratic Party is currently using a “Candid Camera” approach to attempt to unseat incumbent Conrad Burns, according to The Wall Street Journal. A 23-year-old staff member follows the senator with a video camera and tries to catch him in compromised situations, which are filmed and posted on YouTube. Some of these have been featured on local and national media.
• Abu Gharib Prison—In 2003, this Iraqi prison became notorious when photos taken with mobile phones disclosed maltreatment of prisoners by U.S. Army personnel. Inexpensive mobile phones increasingly include video cameras, which also capture sound and conversations, and this can lead to unexpected results.

The Tools of the Trade

Tools of production are in the hands of all of us, but what is coalescing as Web 2.0 is the business process of packaging and distributing the content. Adoption will increase as more people increase their experience with the tools and familiarity with Websites, wikis and blogs through which they can distribute content. They will knit these together into seamless processes for sharing their content on the Web.

• Weblogs (“blogs”)—Blogs have always exhibited a wide range of content, but many began as on-line journals of impressions, opinions or experience (“logs”). Often a central feature is linking to other sources of content on the Web about which the author comments. Today, there is boundless variety, and I think one of the best ways to define blogs is by the software they use (usually websites like Blogger, Typepad). Blog software is critical because it streamlines the process of creating and sharing content: it has templates that the author customizes by point and click; creating content is as simple as using a word processor, and the author publishes/edits entries via one button. Also, most software also simplifies “tagging” and notifies blog intermediaries (i.e. Technorati) of new entries. Tagging is a way for the author to categorize his/her entries according to topic, which Technorati will relate to other blogs with the same tags. This enables readers to rapidly find content on similar topics from diverse authors. One other key social element of blogs is that they often represent personal points of view, and the concept of a “corporate blog” is an oxymoron for many.
• Social networking—There is an increasing number of these sites, but several are bona fide phenoms: MySpace, Facebook, LinkedIn, Friendster. In a sense, the sites offer many of the advantages of blogs in that they encapsulate very user-friendly features that enable people to share content and connect with each other. Members use the sites’ functionality to post photos, videos, music and written content, but a key element is defining “friends” (other users) and commenting on other members’ sites. Increasingly, music groups and filmmakers directly reach customers through their MySpace sites. Facebook is similar to MySpace except that it specializes in the college and university student community (now high school students as well). LinkedIn is a business networking site that enables members to locate and connect with other members. Members post their resumes and show their connections to other people. A key feature is that it automates the “referral”: people in your personal network can connect directly with each other through you, but someone not in your network must ask you for a referral to gain access to someone in your network.
• Wikis—although they are far less along in adoption by the general public, wikis are revolutionary. They refer to a type of (often free) software that enables collaborative, group authoring of content. One of the best examples is Wikipedia, the on-line encyclopedia, where anyone with a passion can register and create, edit or add to content. As with many collaborative sites, Wikipedia depends on users policing content, and by most measures they do an outstanding job. However, wikis are gaining traction in the corporate and government organizations who use them to enable people to collaborate. Don’t miss Wikipedia’s entry on Web 2.0.
• Free VoIP phone/conference service—Skype is a leader in this space, especially since it was bought by eBay in October 2005 for €1.9 billion. Skype users call other users via their computers anywhere in the world for free, and they can call people on “normal” phones for a nominal fee (“SkypeOut”); additionally, Skype users can order “normal” phone numbers in many countries in the world for a nominal fee (“SkypeIn”) so that any phone can reach them via that number. There are several other free VoIP (Voice over Internet Protocol) services as well (i.e. Freetalk, yakForFree, Googletalk, Apple), and most increasingly bundle video and conferencing functionality. This means that users around the world can increasingly collaborate in real time for free. This used to be an expensive proposition only available to employees of global enterprises.
• Commercial sites—eBay and Craigslist enable people to connect and exchange goods and services. Again, they provide tools and processes that enable people to buy and sell from each other worldwide, in many cases. Unlike other Web 2.0 tools, they are far more structured in how members can use their tools, but they arguably are changing the ownership life cycle and value of many consumer goods because they develop a vibrant secondary market: if there’s a market of 10 people in the Chicago area for your custom-designed chartreuse davenport, chances are you can reach several of them through eBay or Craigslist, which may serve to increase the variety of products in the primary market. Amazon.com is partially in this category due to its leading edge development of reviews, which increasingly cover any consumer product. Through the use of the “real name” designation and user feedback on reviews, they are continually a leader in aggregating customer advice and delivering it where it’s most relevant, at/near the sale.
• “Digital life”—Apple Computer has redefined itself as a digital life company that also happens to make computers and those über-hot small digital music devices, iPods. The company is applying its legendary prowess at elegant, user-friendly design to the entire process of creating, capturing, sharing and experiencing digital music and video for consumers. There are myriad companies that are a part of this wave, but Apple is a leader that is driving adoption of producing, sharing and distributing music and video. Its iPods are changing the entire model for how people experience music (as VCRs did for television) because users control packaging and timing. In addition, anyone can publish their favorite playlist on iTunes, the music store website through which Apple sells music. Anyone can make a podcast, which is an audio program designed to be listened to on an iPod or other mp3 player. Consumers no longer depend on record companies to create albums or radio stations to discover music; they bundle their own, for each other and comment on the results for all to see. Time will tell whether this model will soon apply to the television episodes and movies that Apple is now selling through iTunes. YouTube is another phenomenon that enables anyone to upload video to share with millions worldwide. Its distribution far surpasses television or major studios in brute numbers, although content quality and variety is all over the map.

Conclusions

• Note that these tools integrate the elements of network, software and business process that enable users with little/no technology sophistication to connect and collaborate, mostly for free. Such functionality until recently was only in the hands of large, well-heeled organizations, who strongly influenced the information to which customers had access. Customers have been relatively isolated from each other, and their voices have been singular. All that is changing.
• Although the idea of customers commenting openly about products and services may be unsettling at first blush, it will be a tremendous boon for those companies that embrace it because customers will do an increasing amount of marketing for them. Overall, large groups self-police and marginalize dishonest or outrageous people. I never cease to be surprised at the quality and validity of reviews.
• Customer “hacking” will become mainstream because most people have an innate sense of fairness. When they care about products/services, things bother or delight them, and they feel moved to comment and suggest, especially when they understand that they are being heard and responded to. Enthusiasts will delight in exposing mediocrity and, as long as companies have the flexibility to respond, this will be to their advantage. Smart companies will have the opportunity to use customer input to innovate in many dimensions.
• Read amazon.com’s book reviews and imagine that virtually all products and services will have customer-created reviews as adoption proceeds. This will include their experiences of doctor visits and hospital stays, their interactions with their stockbrokers, and what that condo building is really like, as well as any product you can imagine. You may ask, “Why would anyone take the time to review eyeliner, toilet paper, vacuum cleaners, wiper blades or electric companies?” Some people do, and remember that it doesn’t take many people to contribute their opinions and make an impact, especially since an increasing number of websites help users to find each other.
• The customer-driven Web 2.0 wave will be building over the next 5-10 years, and wise companies will begin preparing now. This is a golden opportunity to make a major competitive move, but it will take a sustained effort. First, they need to develop agile processes that can accommodate and respond to customer feedback. Second, they need to create processes that invite customer opinion that they integrate with expert specialists internally and partners to respond. Giving customers unprecedented responsiveness and individual experiences will win their loyalty. I postulate that your company’s ability to do this will drive retention and profitability in the era of increasing commoditization for services and products.
• Think of current governance and compliance initiatives as opportunities to master processes so that your company can become more agile and responsive and innovative.