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Web 2.0 and Market Share – Chicken or Egg?

Chicken or eggDoes Web 2.0 make a company effective or does an effective company use Web 2.0 to its advantage?

It’s all to common to make an observation and infer its cause. If you were to measure elementary school standardized reading test scores against shoe size you would find a direct correlation. Students with larger shoe sizes perform better, therefore large feet make you smarter.

I was thinking about cause and effect while reading about a McKinsey survey, which found that companies using the Web intensively gain greater market share and higher margins. The report states that:

…a payday could be arriving faster than expected. A new class of company is emerging—one that uses collaborative Web 2.0 technologies intensively to connect the internal efforts of employees and to extend the organization’s reach to customers, partners, and suppliers. We call this new kind of company the networked enterprise. Results from our analysis of proprietary survey data show that the Web 2.0 use of these companies is significantly improving their reported performance.

The report found significant benefits enjoyed by these networked enterprises in areas of internal adoption and reaching out to customers, suppliers and partners. Furthermore, 27 percent of these companies reported market share gains and higher profit margins versus their competitors.

Several blog posts I read about this study stopped there and reported these benefits as if any company could start chugging Web 2.0 solutions like a magical elixir. But I think this sentence from the study is revealing if you read between the lines:

In fact, our data show that fully networked enterprises are not only more likely to be market leaders or to be gaining market share but also use management practices that lead to margins higher than those of companies using the Web in more limited ways.

As George Costanza would say,

Ah Ha!

They found a correlation between management practices and results. So which came first? A management style that encourages autonomy, mastery and purpose or a workplace that is transformed by using shiny new tools?

Just like buying a pair of Air Jordan sneakers doesn’t make you a professional basketball player, making Web 2.0 part of your company’s tool set won’t automatically deliver the results uncovered in this study. Using Web 2.0 requires a management style that is not common these days. Most companies’ culture and rules are designed like factories – show up, follow directions, and fit in.  They demand and reward conformity.

Conversely, Web 2.0 work best in environments of creativity and innovation. That’s kind of the whole point, actually. Web 2.0 applications and services are like blank canvases while most companies are like paint by number. I’m not saying one is necessarily better than the other; I think they both have their place. But it is important to understand whether your culture and workforce would look at a blank canvas as an opportunity to create a wonderful work of art or simply stare at it, frozen in fear.

I suspect that those networked enterprises who enjoyed market share increases and higher profits already had a corporate culture that rewarded standing out over fitting in.

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