Web 2.0 experimentation should be low risk and high return

Professor Amy Shuen, author of “Web 2.0: A Strategy Guide” is a Yale, Harvard, Berkeley-trained software/digital electronics engineer, economist and business school professor. She helps CEOs, CFOs and CTOs to think exponentially, leading them to champion world-class innovation inside and outside their companies, leveraging Web 2.0 economics.

At iMinds 2009 Professor Shuen equipped her audience with plenty of Web 2.0 tips for innovation; including a 5-point action plan and innovation checklist. The advice was to think ‘crowd sourcing’, ‘platform innovation’, ‘digital kids’, ‘Gov-to-Citizen' and to collaborate ‘peer-to-peer’ to make smart industry choices.

Professor Shuen hails the social, business & government transformation enabled by global broadband and mobile Web.

How important a role does technology play today in daily life?

Amy Shuen: “Certainly a much bigger one than 5-10 years ago. In fact, assuming you have Internet connection, it can be an integral part of your day from the moment you get up in the morning until you go to bed at night. For many people these days, an average Sunday can start, for example, by them visiting YouTube to pick up some Do-It-Yourself tips and end by them playing a WiiFit game with the kids, with a bit of mobile news reading, and some message sending and receiving via Facebook, LinkedIn and Twitter in between. It will be another story again a decade on from now.”

In your presentation you talked about business models such as Google, where services are offered for free to the greater public, while others pay for them. Are there many companies based on such a model?

Amy Shuen: “Yes, indeed. There is one type of business that we all know, but perhaps don’t think about in these terms: credit card companies. They are a good example of a two-sided market. As the credit card user we hardly pay anything to use the card but the retailer pays a transaction fee to avoid fraud etc. and to ensure that the banks who support these credit cards receive a small percentage of the transaction cost. There is also the model we call freemium (free + premium) where a large number of people receive a basic service for free and a minimal number of users pay for additional services.”

Do you believe that freemium services are here to stay?

Amy Shuen: “I don’t see why not. It is a win-win situation. For just a few services, which are valuable to a small percentage of people, these companies can function with less than 5% premium users, and still have a very good revenue stream. Where Google is concerned, the premium users are the advertisers. In the case of LinkedIn, 95% of the people who join LinkedIn don’t pay for any services. However, there are fees for certain users, such as recruiters or people who want to extend their contact capacity or reach somebody that is more then 2 or 3 degrees of separation away. These fees provide the necessary revenue. iPhone applications are another example. You can download the basic application for free and if you want more you have to pay. The fact that some people pay, makes it possible to offer the basic application for free. Two-sided markets work because as the market grows, more people can get indirect revenues from them. Take micro payments for iPhone applications: companies can create an iPhone application for free and then when many people use it, it is easy for Apple to request a small micro payment. The future calls for more innovative ways to make a few cents from web services.”

What value add does Facebook offer?

Amy Shuen: “Facebook provides an amazing tool for keeping people in your circle up-to-date on whatever you are doing, buying or attending, and aware of what applications you are using. It is way for people to play the role of social connector and become a natural hub for a lot of people. If they were a hub for 100 people in the real world, on Facebook they are likely to be a hub of information for 300 or more people. As an example, if one of your friends is the social coordinator for your favorite kind of music, on Facebook you can stay informed about it. You know if your friends are attending concerts or events by a particular artist. Alternatively, if one of your friends always knows the best parties to go to, you can be updated real time on what is going on in the party world. Facebook amplifies the kind of impact that natural social connectors or hubs have, and it benefits the entire network. Social networks are amazing. They’re not simply fast, they are real time.”

What did you think about the entries for IBBT’s INCA Award?

Amy Shuen: “I was very impressed by the huge diversity of the proposals, which really mirrored the kinds of things I have been talking about. At least one application was child oriented. The nominees all fitted in one of the five categories of my five-point action plan. It was almost as if they did it to provide supporting evidence that these are very important trends in Web 2.0! It seems that these trends are particularly being translated into mobile applications using the power of mobile broadband.  This is combined with information on the web with mobile access, interactivity and the fact that many of them allow the user to give back in some way. Teleatlas pointed out that the community was so powerful it became the engine to their future updating and business model.”

Do you think the INCA Award will put Flanders and IBBT on the map?

Amy Shuen: “I think it’s a very innovative way to get interesting and feasible projects quickly assessed, commented on and tried out by a large group of people. The most important aspect in Web 2.0 is that it should be a low risk-high return way of experimenting and the path to sourcing markets and finding out if there are revenue models should be swift. To be presented at an innovation jam like the IBBT conference can accelerate the visibility of these companies: there is a strong likelihood that people at the conference will try out the innovations and perhaps even mash up their own work with some of the things they discover. They can learn from the best practices of the contest winners. My hope is that if the venture capitalists or investors don’t immediately see an investment opportunity, maybe some of the other companies in Belgium that are not right now doing a web 2.0 project will see the potential of a partnership. Companies don’t have to come up with their own ideas; instead, they can partner with someone who has a good idea and who has even started implementing it, and from their side can provide the customers, the distribution or even the visibility. Together, the market place would be larger than if each operated separately. This kind of Web 2.0 collaboration innovation is exactly the kind of thing that might happen as a result of the IBBT INCA competition. This competition has the potential to bring together the different disciplines needed for projects to succeed.”

How would you define the word ‘innovation’?

Amy Shuen: “The Austrian economist Schumpeter described innovation as being new combinations, rather than just new things. In my view, this description is at the heart of online innovation.  Virtualization and online tools and tactics allow many different disciplines to come together. The combination of these elements results in innovation.”

How do you see the future of an organization like IBBT, do you think it will become even more important?

Amy Shuen: “Absolutely! Different groups may spend many years building up their competences and skills, but they need help in bringing together those different capabilities. In this period of collaborative innovation, organizations need an orchestrator like IBBT to link the academic with the commercial. If the orchestrator can pick the best of each of those worlds and help combine them, it will not only have great success but also a great impact on the future.”

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