IT's New Detective Game

Web 2.0 has unquestionably opened new doors for advertisers to reach consumers. But it’s also unleashed a vicious enemy on business: customer feedback.

Eric K. Clemons, a professor of operations, information management and management at the University of Pennsylvania’s Wharton School, and a fellow with the Cutter Consortium’s Innovation and Business-IT Strategies practices, has studied the correlation between customer sentiment and business operations. He has seen firsthand how a hotel’s operational inefficiencies led to poor online customer reviews, consequently hurting the establishment’s financial performance. The world of customer collaboration and interaction holds extreme promise—andpotentially catastrophic dangers—for corporate revenues, Clemons says.

CIOs can play a pivotal role in this world. But will they? As Clemons sees it, IT leaders have a new opportunity to flex their data management and business analysis skills, effectively becoming the central nervous system of their company. Or they can sit back and gather Web data at the request of others—like marketers or quality-assurance pros—who undertake the project of figuring out the correlations between online reviews and operational efficiency.

The choice for IT leaders is clear: Either become a data hunter and gatherer, or remain a simple, lowly shepherd. Clemons spoke recently with CIO Insight online editor Brian P. Watson, who edited and condensed their conversation.

CIO Insight: What are businesses doing to get the most out of Web 2.0?

Eric K. Clemons: There are probably three different opportunities for monetizing the Internet. One is through internal efficiency, internal cost reduction or external cost reduction. Another way involves the platform—whether you’re talking about traditional Internet stuff (Web 2.0, Web 3.0, social nets, unlimited bandwidth, virtual reality) or, at the other extreme, mobile text messaging.

The third opportunity is about revenue enhancement. Are you selling insight and intuition? Are you selling products? Are you selling product referrals? Are you selling usage fees on services?

We’ve been doing bottom-line tweaks through cost reduction for 30 years. There isn’t a lot left to clean up in the supply chain, whether internal or company-to-company operations. We’ve already done that well.

The limitation we have now is in trying to understand perishable inventory with limited information. That’s not going to be altered by technology, because we have 10 suppliers while we may have 10 million customers. The place where technology enhancement allows a breakthrough in communications today is with the 10 million customers, not with the 10 suppliers.

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