Using Web 2.0 to reinvent your business for the economic downturn

At this point it's more than clear that 2009 will be a challenging year for a great many businesses. Most organizations these days are now actively engaged in activities that are taking a look at what they can do to make the best of the current economic situation. Some business leaders will be looking at paring things back to the basics while a different sort will be looking at entirely new avenues to survive and thrive. The decisions we make now can greatly affect what happens to our organizations going forward.

We are very fortunate that, given the generational challenges we face today, we have tools that those that came before us could not possibly imagine.At this point it's more than clear that 2009 will be a challenging year for a great many businesses. Most organizations these days are now actively engaged in activities that are taking a look at what they can do to make the best of the current economic situation.

Some business leaders will be looking at paring things back to the basics while a different sort will be looking at entirely new avenues to survive and thrive. The decisions we make now can greatly affect what happens to our organizations going forward.

The good news is that most enterprises actually have a fair number of compelling options right now if they are willing to think outside the box. While some might look at the social aspects of things like Web 2.0 as marginal subjects when things get tough, nothing could be further from the truth when it comes to the deeper implications of Web 2.0 in the enterprise. Many of the more transformational aspects of the 2.0 era now have extensive groundwork laid for them, are available in genuinely enterprise-ready solutions/pilots, and many have just been waiting for the right situation; the driving need for businesses to change and transform in the face of radically different business conditions.

Why is Web 2.0 particularly interesting right now for the enterprise? Web 2.0 has always been about making the most of the intrinsic power of the network and whatever is attached to it. This can be people (social computing and Enterprise 2.0), low-cost dynamic Web partners (open APIs and cloud computing), the world's largest database of information, lightweight integration (mashups and Web-style SOA), or maximizing the value of the network itself (the network effects that everyone talks about), and much more. These collectively represent better, more efficient, and less expensive ways to accomplish things that we previously used to do without the network's help or with methods that didn't take advantages of how the network works.

Read this year's Enterprise Web 2.0 predictions for 2009 for more perspective on this topic.

Fortunately, our businesses have become so thoroughly network connected that the inherent efficiency of most 2.0 approaches will now work just as well inside the firewall as outside, though there still remain a few differences.

So what does this mean to the harried businesses looking for new approaches to creating value in a chaotic and unpredictable time? How can this help in cutting costs or driving growth? Here are some practical ways that 2.0 approaches can help organizations grapple with the challenges of 2009. Though some of these have an IT slant, many of them are strategic approaches to Web 2.0 that most organizations can embrace across their lines of business to capture substantially better outcomes.

Note that the struggle with many of these, as with so much of Web 2.0, is that there is a major shift in control, a much higher level of transparency, and an openness that many businesses can be uncomfortable with. However, to organizations that are willing to overcome these largely political, cultural, and mindset challenges, significant opportunities are available for the taking, often for relatively modest investment.

Strategic use of Web 2.0 for growth and resilience

As always, this is not an exhaustive list, though it's a good start, and only gives a sense of the possibilities. I pointedly left out important areas like mobile, despite prognostications like mine or others lately that it's a hot subject; it is, it's just not fundamentally transformative enough at this point. I am sure readers will contribute more below in TalkBack.

  1. Move to lower-cost online/SaaS versions of enterprise applications. - Face it, paying for yearly upgrades and new license fees is a major, recurring budget line item most organizations would like to eliminate now that most companies have a computer in front of every worker. Open source software is an option and is certainly cheaper up front, until the support costs and other factors come in. There are, in fact, numerous lower-cost options today for virtually any type of business software but unless it's browser-delivered, or even better, externally hosted as SaaS, you can't use the provider's economies of scale to drive down the full range of costs from deployment of upgrades and technical support to hosting, backups, and management. In general, moving to SaaS for anything that isn't strategic to the business is the best place to start if you're trying out externally hosted apps for the first time.

    Strategic applications might be more difficult to migrate to a SaaS model both from a customization and change management standpoint as well as from concerns about governance, reliability, compliance, and regulation. Retraining and data migration are a cost component in SaaS scenarios but are manageable in today's increasingly online and data standardized world. How much will you actually save? The numbers vary, but recent reports say that moving to a SaaS version of your Customer Relationship Management (CRM) system will save the average firm 25% to 40%, a number that likely translates well to other types of business applications given the core nature of CRM to most enterprises. A good place to get a sense of the options for SaaS versions of traditional business applications is to look at Monolab's excellent Office 2.0 database.
  2. Use Enterprise 2.0 to capture the knowledge and know-how of employees. The bad news: If you haven't embraced Enterprise 2.0 across your organization already, then you're aren't going to be able to take advantage of this for a while. The good news: There no time like the present to start enabling the network to learn. Enabling open, persistent, freeform collaboration amongst far-flung workers allows vast amounts of institutional knowledge to pour out into visible places on the network where that information can then be studied, reused, and learned by others including (perhaps especially) new workers down the road.

    In the mass layoffs taking place in organizations around the world, tens of thousands of years of built up expertise and capability are walking out the door, largely untapped; the knowledge residing in inaccessible places such as e-mail accounts, file servers, meeting notes, and most devastating of all, in the minds of the departing workers. While blogs, wikis, and other Enterprise 2.0 tools can't be a direct replacement for people, they allow organizations to be highly elastic in terms of headcount while resisting the erosion of vital corporate culture, knowledge, historical context, and critical methods. You'll also reap the other benefits of Enterprise 2.0 reported by many adopters: higher efficiency, more transparency, better communication, and so on. Making your intranet a vibrant, ever growing, worker-powered, two-way social media landscape is one of the surest investments you can make in your organization.
  3. Strategically move IT infrastructure to the cloud. Cloud computing is one of the bright areas of the tech industry right now, at least if you were measuring the hype. However, anecdotal evidence shows that there is broad interest in organizations reducing their data center and infrastructure spending, despite many of the same challenges that gives organizations pause about SaaS: Control, security, and lock-in.

    There are many reasons to start moving business applications and data to the cloud: Businesses have to keep latent capacity on hand to deal with high-water marks for demand, leaving a lot computing and network infrastructure lying idle and underutilized. The same businesses also can't amortize the cost of purchases at nearly the scale that top-tier cloud vendors can, further driving up cost. Economies of scale are the name of the game in cloud computing and ready, on-demand access to them is what vendors provide, among other more run-of-the-mill benefits such as simplifying capacity planning and encouraging a more consistent enterprise architecture. I did some back-of-the-envelope costs calculations on moving to cloud computing in a post here last year and the results were eye-opening in terms of savings. The bottom line: We are a ways from moving all our enterprise computing to the cloud but it's high time to begin the process of moving today.
  4. Embrace new low-cost models for production such as crowdsourcing. I explored this topic in detail in my recent exploration of the emergence of compelling new open business models. There are numerous competitive and economic reasons to move to crowdsourcing models for many aspects of modern business. These include using the vast audience of people on the network as a primary source of innovation, research, and product development as well as customer support, sales, and marketing. Almost anything that you can outsource you can crowdsource for less and with more robust results, although with less predictability.

    Crowdsourcing does require a certain set of skills however, that is very different from traditional corporate hierarchical command-and-control, which works well even in outsourcing relationships, but much less in a social computing environment. While crowdsourcing is providing increasingly impressive stories of late (see the aforementioned open business models article), it's also clear that some organizations will be a failure with it and that primarily online firms will have the most success. The latter live and die by their understanding of the network and tend to understand this model better. So, trying to do a lot more in your organization with a lot less this year? There are dramatic cost savings and leaps in innovation that can be tapped with crowdsourcing, one of the most potent Web 2.0 business models. If you aren't doing it now or considering it, put it on your short list.
  5. Lower customer service costs by pro-active use of online customer communities. These days all of your customers are online. All of them. Are you truly engaging them, supporting them, and creating a rich community of shared interest around what you're doing? Chances are you're not. Few large companies have created successful online communities around their products and customers have largely had to create them on their own until very recently. I took a look at the state of online customer communities a few months ago and things haven't changed much.

    Despite early promise that CRM costs will drop and customer satisfaction will rise for comparatively small investment in online communities, most organizations have been painfully slow to move to them, almost complacently so. Though there is a definitely skill cap in creating and nurturing successful online customer communities, it's not so large that it can't be crossed fairly quickly when there is a need. And there is very much a need today. With the rank and file of the customer service and account representative ranks of organizations shrinking rapidly in many cases, now is time to provide your customers an entirely new and largely superior channel for communication, collaboration, and working together and amongst themselves. Organizations looking to minimizing customer disruption during staff turnover, lowering customer servicing costs across the board, and retaining the customers they still have must look to robust online customer communities in 2009.
  6. Reduce application development and integration time/expenditures with new platforms and techniques. Over the last few years, the Web community has developed highly innovative new models for creating and integration software together to cope with the scale and complexity of the online world, which with which most enterprises pale in comparison. Application development has moved to dynamic languages and new productivity-oriented platforms such as Ruby on Rails, Python/Django, Grails, and many others. Relational databases have been challenged by new successors such as documented-oriented databases like CouchDB and distributed computing/storage systems like Hadoop. All of these are mature, high capable, and new ways of tackling the enormous challenges that large-scale computing requires and that most enterprises aren't even aware, much less embracing.

    Then there is ongoing story of enterprise mashups which bring lightweight integration and composite application development, often by end-users, directly to lines of business. See this list of mashup providers, most of which are offering highly capable solutions. What bottom line benefits will all of these bring beyond being to tackle problems you couldn't before? Most of them will dramatically drive down the cost of application development, famously in the case of Rails, by as much as an order of magnitude. Integration is also one of the largest costs of software development and mashup approaches on the Web have been created out of sheer desperation and while a fair amount of success. Of course, these gains get dulled when shoe-horned into traditional software development processes, but if you are willing to think outside the box and move closer to the edge of innovation, there are major gains to be had.
  7. Open your supply chain to partners on the Web. By building on top of existing investment in SOA and enterprise architecture, your organization could open up its SOA to trading partners, something that CIOs have reported wanting to do en masse for several years now. But with open APIs and Web services, it's now possible to do in such a cost-effective fashion that it could end up being one of the major growth areas of our business. I covered this important Enterprise Web 2.0 topic recently so I won't go into detail here, but if you want double-digit growth during the downturn in whatever otherwise staid industry you are in, there are few more powerful 2.0 techniques for doing it than turning your business into a strategic open platform on the network. Open APIs do require non-trivial investment and serious organizational commitment to flourish but there is a growing body of evidence that they are new business delivery channel to be reckoned with.
  8. Overhauling and reinventing paper and digital workflow. Going beyond lipservice to green business, transforming how we carry out processes is essential in driving down costs and increasing business agility. For example, the government has long known that poor paper and digital workflow chews up people, infrastructure, and energy like few other activities. The DOE reported in 2006 that US paper making alone used 75 Billion KWH and U.S. data centers and servers using another 61 Billion KWH of electricity, never mind that print and digital media supply chain costs can represent as much as 35% of every dollar spent by public and private organizations, exclusive of labor. This is an indictment of both physical and electronic workflow inefficiencies today. And, again, without an impetus to improve, there won't be increases in efficiencies. But the current business climate is driving us towards just such refactoring activities.

    I use the word refactoring since there also isn't any budget for big bucks, big bang business process re-engineering. Refactoring is a means of "redesigning in place" and it's a perfect way to describe a more rapid, recombinant "editing" of existing workflow using tools that are far more user-driven. The enterprise mashup tools above are a good example of a Web 2.0 platform that can address this challenge and so are Enterprise 2.0 tools which are emergent and freeform by definition and can adapt dynamically to the changing processes and structure of the workplace. Social networks and their activity streams are increasingly providing a means to start creating emergent workflow as well, though they are not as far along as mashups and Enterprise 2.0 in being able to address this opportunity today.

The modern technology landscape is an enormous one and the pace of technological change is only increasing, greatly challenging the 21st century organization which still tends to adopt new things in a top down manner. However, we are very fortunate that, given the generational challenges we face today, we have tools that those that came before us could not possibly imagine. Web 2.0 models offer one of the most potent ways we presently have to regroup, reorganize, and systematically improve what we're doing in terms of private enterprise, government, and public service. Right now is a very exciting time indeed to be in business, for better or worse.

Which way do you see the IT and business winds blowing? I encourage you to offer your own insights on how to use 2.0 models (or other ideas completely)) to create better business outcomes in 2009 below in TalkBack.