A blue­print for social net­work­ing investments

Web 2.0 and social net­works have gained per­cep­ti­ble mind­share dur­ing the first quar­ter of 2009, and con­ver­sa­tions with clients, fel­low speak­ers at con­fer­ences and online con­ver­sa­tions are clearly show­ing the reap­pear­ance of a famil­iar adop­tion curve. Here I’ll dis­cuss the Adop­tion Curve for Web 2.0 and Social Net­works and pro­vide rough mile­stones, so you can use it to gauge your invest­ments in Web 2.0. You can avoid some of the extremes that the major­ity of the mar­ket will experience.

In addi­tion, I will also show how Web 2.0 pro­vides a rare oppor­tu­nity to develop com­pet­i­tive advan­tage ahead of the market.

Hav­ing been on the front lines of Price­wa­ter­house­C­oop­ers Consulting’s E-Business Strat­egy prac­tice dur­ing Web 1.0 (the Inter­net bub­ble), I am not sur­prised to see the famil­iar bub­ble pat­tern devel­op­ing, so this is a rare oppor­tu­nity to rec­og­nize it and pro­duce tremen­dous value by avoid­ing some of the mis­takes most com­pa­nies make when adopt­ing dis­rup­tive technology.

What I want to draw your atten­tion to is not the dis­rup­tive tech­nol­ogy itself, but rather the market’s per­cep­tion of the tech­nol­ogy. The Web 1.0 bub­ble was caused by dis­torted per­cep­tions of the tech­nol­ogy, what it could do, and when it could pro­duce value. Com­pa­nies’ per­cep­tions of the value it could deliver were unre­al­is­tic. How­ever, the Inter­net has pro­duced fan­tas­tic value; it just took longer than most peo­ple thought. There­fore, a rare oppor­tu­nity presents itself: What if exec­u­tives could under­stand the Web 2.0 Adop­tion Curve and make more real­is­tic investments?

The Adop­tion Curve and its phases

I first encoun­tered this curve while in an exec­u­tive train­ing course at KPMG, and it is also strik­ingly sim­i­lar to Gartner’s “Hype Cycle.” I have been work­ing with clients exclu­sively with Web 2.0 strat­egy since Q1 2006, and I have seen a vis­ceral change this year. This dis­cus­sion per­tains to Web 2.0 adop­tion by com­mer­cial and gov­ern­ment enter­prises, not con­sumers and tech­nol­ogy enthu­si­asts. (Click to enlarge)

• Ini­tial Dis­cov­ery (2006–2007) — Skunk works approach by vision­ar­ies while most exec­u­tives wrote off social net­works as some­thing for “kids.” Very few exec­u­tives got past the “gee whiz” stage. There were very few skills within the orga­ni­za­tion to suc­ceed with Web 2.0; most were sourced outside.
• Hype & Exper­i­men­ta­tion (2008–2009) — As the curve shows, the first half of this sec­tion builds slowly, but its slope increases markedly in the sec­ond half. In the U.S., Obama edged Clin­ton (more here) because the cam­paign rec­og­nized the promise of Web 2.0 and made it the tip of the spear. It was a clas­sic exam­ple of a chal­lenger employ­ing unproven tech­nol­ogy to upset the dom­i­nant player. It was an excit­ing case study, and politi­cians and exec­u­tives world­wide have taken note.During this stage, the mar­ket grasps some of the key con­cepts rep­re­sented by Web 2.0, but it lacks the expe­ri­ence to apply them to busi­ness processes with con­sis­tent suc­cess. This phase will cul­mi­nate this year in the apex of imma­ture adop­tion (Gartner’s “Peak of Inflated Expec­ta­tions”). Web 2.0 providers flood into the mar­ket, so this stage is also char­ac­ter­ized by providers that barely know more than their clients lead­ing ini­tia­tives that often fail.
• Fail­ure & Dis­ap­point­ment (2010) — Most Web 2.0 ini­tia­tives will fall short of expec­ta­tions, which always con­tain some kind of result tied to time. Because enthu­si­asts do not under­stand the appli­ca­tion of the dis­rup­tive tech­nol­ogy, they make false assump­tions, and ini­tia­tives are not suc­cess­ful, so they are cur­tailed in a clas­sic back­lash. In con­sult­ing, a key value propo­si­tion is help­ing your client to set real­is­tic expec­ta­tions so they keep invest­ing while oth­ers sit on the side­lines.
• Tri­umph of Deter­mi­na­tion (2011–2013) — While most enter­prises will write off Web 2.0 as a failed curios­ity, a deter­mined few will con­tinue invest­ing, learn how to apply it and trans­form them­selves, and they will pro­duce case stud­ies. This will take longer than expected.
• Per­va­sive Adop­tion (2014–2015) — Mass adop­tion will occur here as the tech­nol­ogy and atten­dant work processes will be rec­og­nized and broadly prac­ticed. The Inter­net has been at this stage for the past sev­eral years; the inno­va­tions and appli­ca­tion to work processes have long been more incre­men­tal than dur­ing Web 1.0.

Notice that the ver­ti­cal axis is per­ceived value while the hor­i­zon­tal axis is Learn­ing & Com­pe­tence. The curve shows that dur­ing 2009 per­ceived value is high, but com­pe­tence is low, which leads to fail­ures and rapidly falling per­ceived value in late 2009 and 2010. Sig­nif­i­cant learn­ing and com­pe­tence develop with lit­tle mass per­ceived value from 2010 to 2011, which leads to a more sus­tain­able curve in 2013 and beyond.

Using the Adop­tion Curve

• Dis­rup­tive tech­nol­ogy always takes the mar­ket by sur­prise. It is by nature not ini­tially per­ceived as a “seri­ous” propo­si­tion by the major­ity of the mar­ket, so it does not enjoy the rigor with which orga­ni­za­tions approach their mature processes. In addi­tion, trans­for­ma­tion faces exten­sive oppo­si­tion within the cor­po­rate organ­ism, as many exec­u­tives do not believe that legacy processes need to be changed. There will be a pro­longed period in which Web 2.0 will strug­gle to gain the mind­share of key exec­u­tives and mid­dle man­age­ment and in which the enter­prise devel­ops the skills nec­es­sary to succeed.
• Social net­works sig­nif­i­cantly reduce the cost of com­mu­ni­ca­tion and rela­tion­ship build­ing. In How Social Net­works Make Mar­kets More Effi­cient for Buy­ers and Sell­ers, I showed how this affects prof­its. At this point, if you rec­og­nize social net­works’ value propo­si­tion, you can approach ini­tia­tives with more pur­pose. Imag­ine if you had real­ized the Internet’s full poten­tial in 1995, and you had invested with that pur­pose in mind. This is the oppor­tu­nity that exec­u­tives have today with Web 2.0.
• Employ healthy skep­ti­cism when you encounter technology-based propo­si­tions that do not explic­itly address how they will change behav­ior. The mar­ket is accus­tomed to assum­ing that tech­nol­ogy leads inno­va­tion. Web 2.0 largely employs software-as-a-service tech­nol­ogy that imposes very lit­tle on users. To suc­ceed, lead­ers must focus on behav­ior, not technology.
• Keep in mind that few peo­ple have exten­sive expe­ri­ence with Web 2.0 and social net­works. “Fail­ure & Dis­ap­point­ment” occurs because expec­ta­tions (and invest­ments) are too high com­pared to com­pe­tence. Mit­i­gate risk by chunk­ing invest­ments rel­a­tively small. Be wary of mak­ing large fixed cost invest­ments (i.e. technology).
• Aggres­sively focus on devel­op­ing your organization’s com­pe­tence with social net­works because Web 2.0 com­mu­ni­ca­tions will be core to your suc­cess going for­ward. Web 2.0 is anal­o­gous to a “21st cen­tury tele­phone” that every­one will use to com­mu­ni­cate dif­fer­ently than they do now. As the Inter­net came to touch vir­tu­ally all areas of com­merce, social net­works will assume an increas­ingly dom­i­nant role in how all peo­ple com­mu­ni­cate. This will bring with it a new cul­ture of open­ness (trans­parency), coop­er­a­tion, ser­vice, rep­u­ta­tion, and lack of hier­ar­chy. Net­works are anti-hierarchy. These cul­tural shifts will prove to be the most chal­leng­ing to large enter­prises with large hier­ar­chies. Try not to depend on ven­dors or con­sul­tants to do things for you; insist on learning.

Christo­pher S. Rollyson is man­ag­ing direc­tor of CSRA, a man­age­ment con­sul­tancy that advises enter­prises and star­tups on Web 2.0 strat­egy. He is also edi­tor of the Global Human Cap­i­tal Jour­nal and Founder of the Executive’s Guide to Web 2.0. See his pro­file, con­tact Chris or leave a com­ment below.

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