The Rise of Enterprise 2.0

By Brian P. Watson  |  Posted 11-11-2009

The Rise of Enterprise 2.0

Andrew McAfee may have been a Web 2.0 skeptic before he coined the phrase "Enterprise 2.0" in 2006, but now he's a believer. He makes the case in his long-awaited book, Enterprise 2.0: New Collaborative Tools for Your Organization's Toughest Challenges (Dec. 1, Harvard Business Press). While collaborative tools like Twitter and Facebook have enjoyed astounding success in the consumer realm, McAfee makes a strong argument for their viability in the enterprise.

The book is written for business managers, but it contains important lessons for IT leaders. McAfee--a research scientist at MIT Sloan School of Management's Center for Digital Business--says that while Web 2.0 tools vary in nature, they share certain aspects that have the potential to change the way business is done.

This transition won't be simple for IT. There's the usual hype that surrounds new or buzzy technological tools. And there are ongoing doubts over whether something deemed "social" can really work for business.

McAfee spoke about the challenges and opportunities for CIOs with CIO Insight Editor in Chief Brian P. Watson. What follows is an edited, condensed version of that discussion.

CIO Insight: You quote Nicholas Carr's "IT Doesn't Matter," in which he says businesses shouldn't overspend on IT and that IT should be "boring." What do you think about that in light of all the Web 2.0 tools available?

McAfee: "Enterprise 2.0" is a bunch of really exciting technologies that are coming into the enterprise, and they hold out the promise for helping us with really important business goals. Everything I've seen tells me that companies are not going to be equal in taking advantage of these tools. That means there's an opportunity for competitive differentiation and advantage.

So I think it's a very exciting time in the world of technology, and I think the end result of these technologies entering the enterprise is that some companies will pull ahead and some will lag behind.

Too many technologies become hyped and don't actually deliver any advantage.

McAfee: We all have the ability to acquire the raw materials of IT: hardware, software and networking. What we don't all have is the ability to exploit those things--to convert the raw materials of IT into finished goods, into an infrastructure that provides business value and business insight that lets you tackle tough problems. That's really hard to come by.

Not all companies are equally good at this. I've talked with a lot of management teams that are skeptical, that have security concerns, that are downright hostile to these ideas. Those companies are not going to be as successful with Enterprise 2.0 as will companies that embrace and are excited about this stuff.

When you first heard the term "Web 2.0," you say you were a skeptic. What's changed?

McAfee: When you hear technology claims, skepticism is the right initial attitude. When we hear any claim about a new product, do we automatically believe it? No--that makes us very naïve consumers. When I heard "Web 2.0," I thought there's likely not to be any "there" there. I thought this is probably just some flavor of marketing from the technology sector.

But if you're a good skeptic, you test that hypothesis. The quickest way I could think of to do that with Web 2.0 was to look at Wikipedia. I had heard so much about it, and I thought it was destined to failure. These utopian, community-based experiences broke down because people with bad intentions usually show up and start to pollute the environment for everyone else.

I thought if this unpleasant dynamic exists, where would I see it first? So the first word I typed into Wikipedia was "skinhead," because I thought that the peace-and-love skinheads would not get along with the racist, violent skinheads and that we'd see that disagreement play out in the Wikipedia article.

I was flat wrong. I found the entry and, half-an-hour later, realized I had read the single, best general reference piece about skinheads that I'd ever come across. I said to myself, "Something's different here."

A new combination of technologies, philosophies and approaches to collaboration is at work here. They are generating output in a way I wasn't expecting, in a place I wasn't expecting. So, instead of being skeptical, I became deeply curious and went off to try to understand what's going on here.

Technology companies and the buzz

Technology companies are great at innovation, but not so great about tempering their own buzz.

McAfee: We shouldn't expect them to temper the buzz. The buzz is what they're all about.

What does the buzz do to hamper Web 2.0 adoption in the enterprise?

McAfee: After the turn of the millennium, I noticed that my executive education students and the management teams I work with had suddenly become a lot more skeptical about the technology sector. With all the enthusiasm around the first wave of the Internet and the alleged Y2K crisis, there was a lot of uncritical acceptance about what the technology sector was saying to businesses.

There was a lot of money spent on IT--and a lot of money misspent and overspent on technology. After the turn of the millennium, I noticed a higher degree of skepticism among business executives--a feeling that business was sold a bill of goods and they're going to make sure it doesn't happen anymore.

Skepticism is healthy, but when the philosophy turns from, "I'm going to believe everything they say," to, "I'm going to believe nothing they say," then you risk turning your back on a legitimate innovation that can help you with your business goals. I see a bit of that going on with Enterprise 2.0 right now.

Business leaders don't like the label "Web 2.0," so there's a movement to use terms like "social" and "social business." These are not inaccurate because all of the tools make use of communities--they're all social technologies. My problem is that "social" is not a word that resonates with most of the business decision makers I've worked with. They tend to think of low-level things like employee "happy hour" or wasting time. Business leaders say they're in the middle of a recession and they need to get products out the door, so making the workplace more social is a fairly low priority right now.

But we can talk to them, instead, of a new suite of tools that can help with their business problems. One of the characteristics of those tools is that they're social, but let's not emphasize that--let's emphasize toolkits and their connection to solving business problems. Then I think we'll be in a much healthier place.

But how can they explain the benefits to the business?

McAfee: One of the most common dynamics I see today is when the CEO calls in the CIO and says, "What is this '2.0' thing I hear so much about, and what does it mean for us?" It reminds me of where we were 10 to 12 years ago, where the request to CIOs was: "What is this Internet thing, and what is our Web strategy?"

Very often, the business side is looking to the CIO and the IT side for answers. And they'd better receive answers that make sense to them, in business terms that make sense for the enterprise. If they're phrased the wrong way, there could be a missed opportunity.

Big roadblocks

What are the biggest roadblocks you see for CIOs?

McAfee: The biggest roadblock is the possibility that bad things can happen. All the risks and nightmare scenarios seem very real, very concrete and very likely, while all the benefits seem more distant and harder to understand. When you're faced with this concrete, immediate downside versus some distant, nebulous upside, a lot of people decide not to proceed.

So the risks and the downsides are, "Is sensitive information going to leave the company?" "Is this going to become a vehicle for sexual harassment or building an uncomfortable workplace?" "Is information going to go from one part of this organization to another when we shouldn't cross these boundaries?" "Is sensitive information going to our partners, suppliers or customers when it shouldn't?" or "Can these things respect the boundaries that are set up for good reasons here?"

There are some legitimate risks with Web 2.0. But, as much as I've looked for nightmare scenarios, I've found very, very few.

If that's the case, why hasn't there been more widespread adoption?

McAfee: I had my eyes opened to this when I was doing early research, and I spoke with the CIO of a fairly large multinational investment bank. He said that all these Web 2.0 technologies were his best defense because the contributions to them are highly visible--essentially public--and attributed to the people that made them. This means that the instant there's any hint of infraction, the community will help him figure out what happened, how bad it is, and who did it. Then he can show any regulator or authority when the problem occurred, when his company became aware of it, what action it took and how quickly it was removed.

Typically you don't get in trouble for isolated incidents--you get in trouble for patterns of misbehavior. These [social] platforms are great for making sure incidents don't turn into patterns. E-mail, however--which is fantastic because it happens via private channels--is great for allowing abuses to flourish.

That conversation changed my thinking and got me to believe that the risks, in practice, are very slight.

Some CIOs worry about negative comments posted on Web 2.0 sites about their company. What do you hear from CIOs about that?

McAfee: Say you run a product company and you turn on customer reviews for the site you host, but you don't want the negative ones. Well, you can't stop the negative comments from appearing somewhere on the Web. You can't shut down the conversation. We used to think that if you had 10 positive comments and one negative comment, everyone will remember the negative one. That's what I thought, too.

Someone who builds product review software for a living told me there's a different way to think about it. The existence of that single negative review gives consumers confidence that what they're looking at is a truthful, or unfiltered, sample of responses. This allows us to put more weight on the positive ones. It's a strong signal that we're not whitewashing.

In addition, people are decent consumers of information. If there are 10 positive comments and one negative, who are you going to believe? I believe the balance of evidence that's presented, not the biggest outlier.

Finally, companies can respond to that, make something positive out of it. They can put a comment up, they can reply, they show what action they took, and they can demonstrate that they're aware of the problem. That kind of thing goes a long way.

In the world of Web 2.0, you cannot shut down negative comments, reviews or conversations. By embracing them, you can show that you're not afraid and that you're taking action. This allows you to demonstrate that all the good stuff said about your company is true.

Web 2.0 low-cost boosts adoption

This year CIOs had a lot of cost pressures. Web 2.0 is a low-cost play. Shouldn't that boost adoption?

McAfee: These are comparatively cheap technology initiatives for a couple of reasons. First, the software itself doesn't have a hideous price tag. A lot is freeware--not all of it, by any stretch, but a lot is. Second, you don't need an army of people to populate and configure it before you go live. The beauty of these things is that they self-organize and self-populate over time.

For all those reasons, these are not big-ticket items. In addition to which, one of the use cases for them is to let the community--your employees, your value-chain partners or your customers--help decide what you should do to cut costs and economize, as you try to get through this nasty recession. It's one of the topics you can tee up and let the community help you with.

I keep coming back to a quote by Eric Raymond: "With enough eyeballs, all bugs are shallow." Today we have a lot of bugs, but we have a lot of eyeballs.

How should a newbie to Web 2.0 approach it in terms of internal versus external?

McAfee: First of all, it's not an either/or conversation. You can proceed down both these paths simultaneously. But the first questions I ask, when we talk about your business, are: What problems are you trying to solve? What are your pressing challenges these days? And do you consider them primarily internal, or primarily external? After a pretty short conversation you start to home in on the fact that we really want to be focusing on inside the four walls of the business versus focusing on value-chain partners, or we're really not engaging with customers the way we want to, so we need to build out some sort of Web 2.0 aspect to our public-facing presence.

The interesting thing is that the marketing case seems to be the more obvious one. The thinking is that revenues will go up if you build a stickier community site to take better care of your customers and let them interact. That seems relatively straightforward.

McKinsey just released its latest Web 2.0 in the enterprise study, and they found that most of their respondents were focused on internal efforts--what I would call Enterprise 2.0--and that they were reporting big benefits from those efforts. The gap between the internal and external wasn't huge, if I recall, but the internal benefits were both broader and deeper than the external efforts. I find that really interesting.

The marketing stuff is real. We're dealing with customers and consumers differently; they have different expectations than they used to. If all we're doing is putting up brochure-ware on a Web site, it's a missed opportunity that might come back to bite a company.

But more fundamentally, there are also challenges to gathering and sharing information inside the company, hooking up people with colleagues who could be useful to them, locating sources of expertise, or tapping into collective intelligence. These are all challenges on the levels of reaching out to our customers better. Historically we've had some really lousy technologies for doing these things. Thanks to this new toolkit, we actually have really good technologies now.

What key issues should CIOs consider about Web 2.0?

McAfee: For the comfort of their business colleagues, CIOs need to make sure they understand why they're doing this. What's the business need they're tackling? What benefits are they seeking? CIOs need to be sure they have a plan that calms decision makers and shows them that these are going to be valuable tools.

To convince users, it's important to keep in mind that if you want people to, say, throw away their e-mail and collaborate differently, that's an uphill battle. We need to roll out tools that let people do things they haven't before--broadcast their expertise, broadcast their ignorance, ask a question and get help, build a social network that can be used through the day, and weigh in on a question and take advantage of the wisdom of crowds. We've had lousy technologies for doing those things. The technology toolkit has become better by leaps and bounds.

And people like doing these things if it's easy for them. So the third piece of advice is that, if you're going to roll these things out, they should have three properties. First, they should be frictionless, meaning they're easy to use. One of the things that always appeals to me about Twitter is that from idea to finished tweet takes about 20 seconds. It just couldn't be easier to do, whereas, if we're making people jump through hoops and click and type before they can make their contribution, you're going to see fewer contributions.

Second, they should be free-form. Don't assume the workflow; don't assume who has the authority or expertise. Start these things off as broadly open and egalitarian efforts and see what happens over time.

Third, build in tools to let the patterns and structure become evident. I call this "emergence." With things like linking and tagging, we have ways for the good content to rise to the top, so build those into the tools.