Will Web 3.0 shatter your current business model?

    I am writing from in the future, thanks to a day with the University of Wisconsin Madison’s E-business Consortium conference. Experts are presenting the implications of Web 3.0 for marketing, supply chain management, IT infrastructure and information security.

    Aged-old assumptions underlying many business models no longer hold true as Web 3.0 technology changes how we communicate and communications infrastructures.

    First, for the uninformed (count me in):

    • Web 1.0 – One-way Internet sites for commerce. 10M users. Gave birth to Amazon and other on-line retailers and information sites.
    • Web 2.0 – Two-way conversations. 100M users. Gave birth to Facebook/Linked-in and collaboration.
    • Web 3.0 – Real-time instant communication. 1B users and rising. Started in 2006, it gave birth to Twitter, video, location-aware applications and cloud computing.

    So what? Web 3.0 will obsolete entire industries.

    Traditional media got into economic trouble because with Web 2.0 it no longer controlled the distribution channel for news and entertainment. Media channels fragmented into thousands, then tens of thousands if not hundreds of thousands of internet sites.

    Access to other information has similarly been controlled by other industries. Instantaneous communication coupled with cloud computing applications and services will shatter these industry monopolies as well.

    Here is but one example: You can now track all the on-line information for your competitors (e.g., Trackle.com) and connect to customer and outside groups to unearth and evaluate new product ideas with live chat rooms, video conferencing and on-line surveys. Do companies need external market research firms?

    With the Internet making supply chain performance easier to accomplish, customer satisfaction is no longer the differentiator that it once was. Many satisfied customers shift their loyalty as soon as a better deal shows up. And customers are increasingly using word of mouth, not marketing messages, to decide which brand or product to purchase.

    In a word-of-mouth economy, companies should be focused on Net Promoter score, a concept introduced by SATMETRIX.

    Ask: "On a 10 point scale where 10 is highly likely and 1 is not likely at all, how likely is it that you would recommend (our company) to a friend or colleague?"
    The answer: Promoters (percent answering 9 or 10) minus detractors (percent answering 6 or below) equals a net promoter score.

    The higher the score, the more positive your long-term revenue and customer retention. Very few companies have high net promoter scores. What’s yours?

    Just as the Internet made sales forces and brick and mortar locations obsolete as barriers to entry, cloud computing will likely eliminate high IT investments as a barrier to entry.

    Cloud computing significantly lowers the cost of IT and turns fixed costs into variable per use costs. The presence of a public cloud means that existing company’s significant IT investments will not automatically trump a new entrant’s cloud-based IT. Rather, companies had best use their IT investments to create advantages that lower costs or deliver benefits other companies cannot easily match.

    IT can become a competitive advantage if your organization thinks about what internal and external customers want to do with information and you make that information easy to acquire. For example, new cell-phone applications stemming from location features of Web 3.0 are endless (e.g., an immediate list of restaurants within a two-block radius of where you stand with your screaming toddler).

    The new organizational structure is flat and organized around customers vs. around functional silos. Everyone owns customer loyalty.

    Vertical and hierarchical organizational structures emerged from a need to communicate information not readily accessible. Today, these structures interfere with creating customer loyalty and are no longer necessary. I have argued this before: If everyone in your organization is not aligned with your value promise, your competitors can easily catch up and beat you. Alignment matters far more than the excellence of any one part of your company. Organize around processes and customers (and not functions) to create alignment.

    The customer is now in control of the conversation. Successful companies will be highly relevant and have permission to communicate with them.

    Forget standard marketing messages focused on features and benefits. Customers have tuned out to traditional messages. You must now offer customers compelling content, highly applicable to their lives, when and where they want it. And you must be credible – lying about a value promise you have no intention of fulfilling will get you nowhere fast.

    Social networking has become a requirement for companies to communicate with their customers and prospects. And the conversation must be two-way.

    On-line is the place to sell. On-line purchasing is growing much faster than brick and mortar, and once you extract Amazon’s growth, manufacturers are driving the gain. Many manufacturers have decided to add on-line as a channel, no longer relying on retail stores/distributors and dealers to reach customers. At last, a way past Wal-Mart!

    My overall take on Web 3.0? Potentially daunting yet certainly exciting. What will you do differently in a new world?

    Kay Plantes, Ph.D., is an MIT-trained economist, business strategy consultant, columnist and author with expertise in business model innovation, strategic leadership and smart economic policies. She resides in Madison, Wis., and Oslo, Norway. For additional information, visit www.plantescompany.com.

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