The Future of Business 2.0 I: Paradigms Shift

In a talk that I am about to give on this coming Tuesday in the Gananan Forum, I will be talking about how the business landscape has changed with a set of new paradigms, particularly with the emergence of web 2.0 and virtual worlds. But where are we really in terms of the business landscape. In part I, I will briefly talk about the forces at work.

Recently, a local businessman from the traditional business landscape asked me about web 2.0. In order to make the jargon understandable to him, I tried very hard to explain to him that the internet business is slightly different from the dot.com era. Compare to the first Internet revolution, we have seen new, interesting and most importantly, sustainable business models, for example, online advertising. Before I was about to finish what I had to say, he had already jumped to his own conclusion and said, “That is simple. I just need to register my businesses on Yahoo! And MSN and that’s online business for me. So, why am I not making money? Is this Web 2.0 a bubble like the dot.com crash?” Unfortunately, he had totally missed the point. He was not aware of creation and management of communities, search engine optimization, online ads and monitoring of internet traffic. He was definitely ignorant about the tools to create and manage communities that brought about the 2nd internet revolution.

How has business changed since the beginnings of web 2.0? Some months back, I wrote about the feasibility of web 2.0 in Asia. A few months later, I ask myself the same question again after being immersed with web 2.0 entrepreneurs, I realized that I was living with a web 1.0 mindset. There is really something else that I have totally missed. The story is slightly complicated than that. No doubt internet business is still very much profit and loss centric, something else has entered into the equation to create and enhance the value of the business.

Why are these so different from the way we do business in the past? I lock it into a few forces that have countered traditional thinking:

From You Inc. to Building Communities: Last year, Time Magazine named “You” as the Man of the Year. If you really think about it in business terms, the old business landscape is dominated by groupthink. The experts decide what the next big thing would be, and the amateurs react accordingly to their whims and opinions. Blogging has demonstrated how the amateur can influence how the marketplace should operate.

They are no longer tolerant of inferior products or bad services. In order to make themselves heard, they air their opinions and in turn force the businesses to take them more seriously and mould products to what they want and like. If you want to go to a restaurant, you do not need any more word of mouth advice from friends. Just type “Chinese restaurants in Singapore” in Google, and you will find endless list of reviews. This is reminiscent of how ESPN has successfully set up the first sports channel brand in 1980s by giving fifteen seconds of fame to the common man. In fact, ESPN championed the “You.Inc” back in the old days by allowing the sports amateurs to talk about their passion in the sports they enjoy, from cross country running to ice hockey.

If you are not convinced that you are now part of this new eco-system, you should start thinking of the amount of text and words written by bloggers, the many pictures, podcasts and videos uploaded into Flickr, Odeo and YouTube.

Wisdom of crowds & Open Source: Traditional business is very dominant by groupthink. A few experts possess the power to decide how the marketplace should move. Somewhere, after the invention of blogging and wikis, you begin to see champions of the common man appear. These amateurs brought in a different viewpoint about how the market place should operate. It is the wisdom of crowds, which is the collaborative effort between many people to tackle a common issue. Linux and Wikipedia are the prime examples of utilizing the wisdom of crowds. Of course, every open system comes with disadvantages and one big problem is cyber vandalism.

With the internet, the consumers are pro-active than before. The consumers have evolved from just complain generators to value creators and arbiters. They create value by offering their perspective on how products or services worked around them and they are arbiters when someone does a poison pen or malice on another product. In fact, an online business told me this story about how his company was being “bad-mouthed” by an anonymous blogger. In the end, a neutral blogger took the time to find out the poison pen was done by his competitor, and hence, he gained additional credibility by watching his competitor’s credibility crumbled before him. If you do not realize, the real thing is the transparency that forces corporations to take their customers seriously.

The Long Tail: We have discussed a lot about the long tail in this blog, particularly the interview with Chris Anderson here. Let me focus a lot on how the long tail has changed the business landscape. We no longer need physical space for stores to sell products to our customers. One can start an online store and as a result, the internet has allowed the entrepreneur to service the niche markets, because it cuts down the cost of inventory storage and distribution and makes it economically viable to sell unpopular products. In the old days, only the popular products can be stored in the physical stores, but with the internet and the easy access with the tools of web 2.0, you can now sell more products and maximize profits without any wastage of shelf space.

Micro Transcations and Online Profiling: Whenever you do a google search with your account activated, you are actually giving away information. Actually, a lot of people do not realize that they are irrationally giving away information when they register in any portals. Be it Facebook, Friendster, LinkedIn and MySpace, you find out more about other people and yourself. With web technologies such as tagging and searching, you realize that a lot of information are available for everyone else. In fact, one other important technology that come about is PayPal, which allows people to make micro transcations.The online advertising market is about change from textual ads towards audio and video ads. New opportunities will turn up as the traditional mainstream media are watching their ad revenues slipping away from their grip.

[To be continued in Part II]

Author’s Note: I will be presenting a talk entitled “Shifting Paradigms: Long Tail, Wisdom of Crowds & Open Source” based on the content of this article. The event will be on 5 Jun 2007, Tuesday, from 1900 hours (registration) to 2100 hrs and the venue is:

MTV Asia LDC
Atrium @ Orchard
60A Orchard Road, #04-01 Tower 1
Singapore 238890

Please register your attendance with ganananforumsg@gmail.com

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