Heads Up Leaders: It's Time to Make "Friends" with Web 2.0

By Matthew Fraser, Ph.D. and Soumitra Dutta, Ph.D

If you’re an “old school” leader—and, sadly, if you’re over 40 you may well qualify—chances are you’re not a huge fan of online social networking. It evokes images of employees wasting time on Facebook, using wikis to “update” the employee handbook, or angrily blogging about CEO decisions they don’t like. Admittedly, those things do happen. But Web 2.0 can bring enough lucrative benefits to business that leaders would do well to learn to embrace it or risk being left behind.

Despite a survey from The Economist in which some 80% of executives surveyed said they regarded Web 2.0 information sharing and peer collaborations as an opportunity to increase revenue and margins, most corporate leaders are hesitant about adopting social technologies in the workplace. The reason is a fear factor—often an unarticulated anxiety about losing power and control.

Enterprise 2.0 companies are corporations and small businesses that have already accepted this reality. They encourage horizontal collaboration and harness the power of collective intelligence to boost productivity, foster innovation, and create enhanced value. And because the net result is increased efficiency and cost-effectiveness, they enjoy a competitive edge that can mean the difference between success and failure.

Still not sure you’re ready to jump in? Here are seven compelling reasons why you should embrace Enterprise 2.0:

1. It encourages open communication and information sharing. Web 2.0 software tools knock down corporate silos, moats, and walls by encouraging open communication and information sharing. Expertise and solutions to problems no longer remain “hidden”—they are actively sought out and exploited. Since Web 2.0 tools foster transparent communication visible to all, the collaborative input of any employee, even far down the formal hierarchy, will be known, recognized, and perhaps rewarded. Status and prestige incentives are thus built into the collaborative process. When collaboration is a win-win for everybody, buy-in is universal.
    
2. It opens the door to innovation. Senior executives in large corporations have become increasingly aware that innovation is not restricted to R&D departments but is a dynamic social process. Steve Jobs has mentioned the importance of social interaction for innovation at Apple. And in fact, the list of major corporations using Web 2.0 software tools to promote productivity and foster innovation is growing: FedEx, Shell Oil, Motorola, General Electric, Kodak, British Telecom, Kraft Foods, McDonald’s, and Lockheed Martin. Multinational corporations like Procter & Gamble are outsourcing R&D Websites to invite customer input, thus blurring the line between producer and consumer. If customers are already helping P&G to produce new brands of toothpaste and shampoo, they may soon be designing cars for General Motors, Ford, and Renault.
    
3. It reduces the awkwardness (and cost) of job interviews. Virtual reality job interviews are becoming increasingly common in large corporations, with Fortune 500 companies and headhunters using online tools like Second Life to interview candidates. Virtual job interviewing has several advantages for both employers and applicants. The permit a more relaxed setting unburdened by the stress and awkwardness imposed by bureaucratic values. Also, time-pressed top executives can discreetly drop into a virtual setting in avatar form. Professional recruiters say that a simulated meeting between employer and jobseeker often opens up the dialogue and brings out the candidate’s potential more quickly. Virtual interviews also lower the cost of recruitment, as companies no longer have to fly dozens of candidates into the city where the head office is located.
    
4. It makes it easier for the cream to rise to the top. Web 2.0 is challenging traditional bureaucracies in which valuable competence and expertise too frequently remain “hidden” and thus unproductive, merely to minimize potential threats to existing status hierarchies. A lofty title and a corner office are no longer sufficient to assert status. Rewards are attributed on the basis of performance, not position.
    
5. It promotes employee loyalty and can boost performance. In healthy organizations, loyalty is a precondition to working toward corporate objectives. Social networking tools promote organizational citizenship. Just as people deal honestly in commercial transactions if they believe in the overall integrity of the capitalist system, in corporations employees will collaborate openly with others if they feel intrinsically motivated by positive attitudes towards the organization.
    
6. It’s cheap. You can start building a name for your company through social networking sites for free. Yes, free! Facebook, MySpace, and LinkedIn are all great ways to get your name out there without any cost to the company. You can also create a blog for next to nothing. Compared to the amount your company spends on advertising or PR campaigns each year, social networking will be just a drop in the bucket. But if you execute your campaign well, the ROI can be sizeable. Among other things, you’ll receive brand recognition across the Web, increase brand loyalty among your customers, and attract new, Web-savvy customers
    
7. Blogs can improve a company’s reputation and boost morale. Corporate blogs can help position a company as a “thought leader,” put a human face on the corporation, build a dialogue with customers, capture information for sharing, facilitate collaboration, promote knowledge management, test new ideas, manage media relations, and attract new employees. And employee blogs, even when providing a forum for negative comments, can boost morale, because open dialogue enhances credibility and draws people to positive postings. You can bring employees and customers into the conversation in an open and honest way, creating a more genuinely democratic organization.

Capitalism is no longer about the production and provision of goods and services. According to Web 2.0 evangelists, capitalism is now a “conversation.” And leaders who realize that sooner, rather than later, will have a huge competitive advantage going forward.

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