|Parsing the meaning of Web 2.0 (April 2007)|
Web 2.0 means manythings from the wisdom of crowds and citizen journalists to acommunications platform. What does it mean for bankers?
• The news media desperately searches for a profitable way of coexisting with news and opinions written mostly by nonprofessional citizen journalists and delivered free over the internet.
• The music recording industry is turned upside down as users enforce their preference for listening to favorite pieces over mobile devices at drastically lower costs.
• After Bill Gates had become the world’s richest man by building a near monopoly in computer operating systems, a college student in Finland designs—and offers free of charge—a technically competitive product that captures more than 25% of the server market.
• The venerable Encyclopedia Britannica gets little better than a tie score for accuracy in a “shootout” with a competing product—Wikipedia—written and edited by users and given away free.
Answer: they are all communiqués from the front line of a global assault on hierarchy. All are artifacts of the world wide web and are loosely known as Web 2.0. For a publisher, editor, or CEO with a career invested in a top-down hierarchical universe, Web 2.0 may look like the invasion of the barbarians. And there are some reasons for that apprehension. Consider the ensuing quotes, a few of the 95 principles proclaimed in The Cluetrain Manifesto, a Web 2.0 cult classic:
• “There are no secrets. The networked market knows more than companies do about their own products. And whether the news is good or bad, they tell everyone.”
• “What’s happening to markets is also happening among employees. A metaphysical construct called ‘The Company’ is the only thing standing between the two.”
• “Networked markets can change suppliers overnight. Networked knowledge workers can change employers over lunch. Your own ‘downsizing initiatives’ taught us to ask the question: ‘Loyalty? What’s that?’”
• “Our allegiance is to ourselves—our friends, our new allies and acquaintances, even our sparring partners. Companies that have no part in this world, also have no future.”
Does that sound like youthful arrogance? Perhaps. Like a reprise of the irrational exuberance that precipitated the internet bust of the late ’90s? No way, advocates say. They are careful to distinguish the “boom” internet era from the “post-bust” (and post-fad) eras. Web 2.0 is a natural evolution of the internet’s essential characteristics, they say—everybody’s connected to it, everybody’s equal in it, nobody owns it, nobody controls it. And its driving force is the furthest thing from the get-rich mania of the boom era. In notes prepared for a forthcoming book, here’s what Danah Boyd, fellow at USC’s Annenberg Center for Communications, writes as an afterthought to her rules for Web 2.0 social software design, “One might also include monetization. What’s monetization? Oh, right, remember to add ads somewhere to keep investors happy.”
No specs; perpetual beta
Boyd’s rules for Web 2.0 social software design start with a critique of the present process: An idea emerges. Then ensue market speculation, financial justification, legal review, designing the spec, building to the spec, assuring quality, assuring usability, “. . . blah blah blah until you die of bureaucratic overload before the product ever ships.”
Boyd’s way to design social software: First, get it out there—“hack it up.” Why create specs when you can just launch features piecemeal and see if they take off? Introduce yourself to your users—as in, we will be your designer for this project. Learn from them and evolve the system with them. Consider your product to be in “perpetual beta.” When you make mistakes, “grovel for forgiveness,” users will understand.
From the blog Bankwatch come more-definitive Web 2.0-defining precepts, modestly amplified:
• The web as an applications platform. That is, it’s not merely a delivery channel for apps. Think Google. As Eric Schmidt, that firm’s CEO, put it in an interview at Web 2.0 Summit 2006 held in San Francisco last November: “. . . massive server farms [like Google’s] are fundamentally going to be more reliable than the things they replace. And that shift, which is a very user-centric shift, means that users can get back to whatever they were doing, rather than debugging their software. . . the fact that everyone is now living online in these social networks, [and using] this emergent new platform, [means that] you can see an industry which is larger probably in scope than the size of the PC industry 15 years ago.”
• Interaction is the motif. There are forums on every conceivable human interest—and then some. Over the last two years, blogs have become the core of the web. But the power of interaction, the natural formation of communities of interest, is both “fascinating and deceptive, writes the Bankwatch blogger called Colin, referring to virtual friends and communities. Danah Boyd, cited above, expands on this paradox in her own blog entry,“Why Web 2.0 matters.” She notes that “There is a global influence that is altered by local culture and re-inserted into the global in a constant cycle” and offers the term glocalization to describe the interaction. The “global” part implies a unified hierarchical structure; the “local” part implies diversity—ultimately, in adspeak, a market of one.
• Folksonomy and the ‘wisdom of crowds.’ One technology tool for doing this is folksonomy, a newly minted method of information retrieval in which users create their own keywords or “tags”—i.e., classifications—a takeoff from the centuries-old top-down method called taxonomy. Folksonomy lets users, including subject matter experts, create their own classifications. How a question is classified can strongly influence the conclusions drawn from it, Web 2.0 evangelists and opinion pollsters say. When statistically aggregated and expressed, “folk” knowledge will not only be more accurate than the findings of experts alone, but knowledge thus formed can change with changing times.
The principles of aggregated wisdom were popularized in a 2004 book by New Yorker staff writer James Surowiecki with a title that says it all: The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations.
• Open sources are a must. They enabled earlier features–web services, xml, and in banking OFX and IFC–which in turn now support Web 2.0 concepts ajax, tagging, microformats, openid, opml, rss, blogs, and wikis.
So what does all this mean for banking?
Colin of the Bankwatch blog says go for it. “Develop a wiki—a collaborative website that can be directly edited by anyone with access to it—that lets customers design bank products. You will be surprised. As much as you will have extremists want everything for free, you will get sensible, creative, thoughtful ideas based on willingness to pay.”
Most likely for most bankers, building products directly from consumer input is moving too fast. After all, banking different: Serious. Responsible. Important. Regulated.
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