Internal and external business approach to the electronic environment

The strategic alignment model states that strategy must be addressed in an Internal and external domain. The research that follows on electronic strategies and business types also indicate organizations can have an internal or external focus.

E-service: a new paradigm for business in the electronic environment

Rust & Kannan (2003) argue that the traditional path of e-commerce has largely failed after the dot-com crash, and that organizations must learn to embrace the e-service paradigm that can offer new forms of competitive advantage. Putting the firm in a position attending to the needs of the customer by providing software service in addition to selling products

The transformation of physical products to service products is enabled and hasted by electronic networks. For firms to garner long-term customer relationships they must take full advantage of the e-service opportunities that these electronic networks can offer. They predict that product-centered orientated firms that resist the call of the customers for control are not likely to survive in this electronic environment and give the example of record labels.

The traditional path is focused on automation and efficiency to reduce costs. While the e-service path is focused on enhancing service and building profitable customer relationships to increase revenues. There is a shift form focusing on technology and systems towards focusing on understanding the customer. While the new path offers new forms of competitive advantage both can still be used by organizations to perform successfully.

The electronic environment enables both this inward and outward-looking view of e-commerce. The e-service paradigm identifies a new use of internet for improved customer satisfaction as opposed to increased efficiency and productivity. The e-service paradigm takes advantage of the nature the online environment with its flows of information to learn about customers, communicate and engage in long-term relationships to build customer equity (Rust & Kannan, 2003). E-services identify customer service as an important new approach of businesses in electronic environments.

According to Rust Kannan (2003): “Dell Computers is a good example of how a firm selling products in an increasingly commodity market can follow an e-service orientation to build its customer equity.“ Organizations as IBM, HP and Sun are also undergoing this shift and increasingly focus on their services as prime revenue source.

Business types, e-strategies, and performance

After the dot-com crash IT developments continued shaping towards web 2.0 and new services emerged (Hoegg et al. 2006) creating new business opportunities (Rust & Kannan, 2003)  and new e-strategies emerged. Lai & Wong (2005) mention that the companies that survived the dotcom crash needed to device innovative e-strategies and restructure around new business models. After reengineering efforts some companies recuperated from the debacle.

In their research they look at companies after the EC crash and investigate the influence of different business types(B2B & B2C) and non-EC on the company performance. Also the e-strategies from the different companies are identified and their effectiveness correlated with the company performance.

The results indicate a moderating the relationship between business type and e-strategy performance.

Findings indicate that many EC companies used four different types of e-strategies. Savings-related strategies were most effective for B2B and B2C companies, while marketing-related strategies were only effective for non-EC companies. The business type that benefited the most from the e-strategies were B2B companies and also performed better than their B2C counterparts.

Conclusion: How to approach social media

E-strategies further help identify how organizations approach the electronic environment and which strategies they use. The four main types of e-strategies are identified as: savings-related, structure-related, policy-related and marketing-related. These identified strategies can also be subdivided between internal and external strategies. Savings, structure and policy-related are inward focused strategies while marketing-related strategy is focused outwards.

Rust and Kannan (2003) identify two different paths of e-commerce. The traditional path focused on automation and efficiency to reduce costs and the e-service path focused on enhancing service and building profitable customer relationships to increase revenues (Rust & Kannan, 2003). The traditional e-commerce path and e-service path help identify two approaches of businesses to the electronic environment. One focused inwards on processes and the other focused outwards on customer satisfaction. Organizations can adopt an internal as well as an external focus.

Both papers indicate the existence of an internal and external focus for organization strategies and are in line with the strategic alignment model that was presented and help identify how different organizations can use social media and web 2.0 in their (electronic) strategies.

I argue the same strategies can be used when formulating strategies for the use of social media in organizations, because social media operates in the same electronic environment on web 2.0 services and platforms. Also the e-strategies theory can be connected to e-commerce or e-service paths by making a distinction between internal and external focus.

Functions of web 2.0

Possible uses of the World-Wide Web for business

Having answered what web 2.0 and social media is and developed definitions for both, now the possible use of social media by organizations can be researched. Cockburn and Wilson (1996) present a list of applications for which businesses are using the WWW. While their paper was written at the beginning of the internet era, it can still be used to identify the purposes and goals of businesses on the internet. They identified the following application areas:

Publicity, marketing and advertising:  the WWW appears to be an ideal medium for businesses to promote themselves and their products. Gaining access to millions of people can be achieved by a small fraction of the costs of conventional methods.

Direct online selling: can revolutionize the way in which people shop. Virtual shops and catalogues are available on the web where customers can directly buy products.

Research and development: especially companies involved in research and development can use the internet as an additional resource for collecting information. Many databases are available and discussion boards that can be searched and queried for information and data.

Communication: use of low-cost electronic mail(and other ways of online communication )that allows many companies to link together and communicate internal and external  in an easy and fast way.

Collaboration: fast and easy forming of links and collaboration over the internet instead of using private (network) links.

After the dot-com crash new web business characteristics were identified as web 2.0 (O’Reilly, 2007) and businesses had to understand the new rules for success on that new platform (Valacich & Schneider, 2009). The survey was done in 1996 before the dot-com crash and new developments have led to new approaches and use of the internet. Modern web 2.0 business uses like e-commerce can be seen as part of Direct online selling. Crowd sourcing that makes use of the collective intelligence of web 2.0 (O’Reilly, 2007) can be seen as part of Research and development and Collaboration.

Internal enterprise use of social media focuses reaping the benefits from internal collaboration and communication and makes use of web 2.0 services to achieve this. The free broadcasting platform that social media offers, helps to circumvent traditional organizational hierarchies (Brzozowski et al. 2009).

While the list of applications for which businesses use the internet still is valid, I argue that one business application is missing that was identified after the dot-com crash. Customer service is the main new business application that originated from the paradigm shift after the dot-com crash (Rust & Kannan, 2003) and should be added to the list. Zappos.com is an example of a company that mainly focuses on using internet to offer customer service, with the use of a blog, chat and other messaging services. These are used as a support function on their e-commerce services that are used for direct online selling.

Conclusion: How organizations can use social media

The possible uses of the Internet for business were identified by Cockburn and Wilson (1996) in their survey that presented a list of applications for which businesses were using the internet. I identified one main application that was missing and updated the list. The business uses of internet are: Publicity, marketing and advertising, direct online selling, research and development, communication, collaboration and customer service.

The list of possible business applications of the internet helps identify the use of social media for organizations. I argue that these applications can also be applied to the use of social media that operates on top of web 2.0 services and platforms. Web 2.0 and social media that operates on top of it offer new opportunities, but I argue that the same goals on the web remain. One of the new opportunities that arrived with the rise of web 2.0 and e-services is customer service that can be a goal of businesses on the internet, and was added to the list.

These possible uses of the internet overlap with the possible uses of social media. Only now web 2.0 and social media has really enabled the possibilities to achieve these uses and goals on the internet while at the start of the internet era the possibilities were still limited. These uses will be important for the model that is presented later on in this paper.

Related posts:

1. Business Strategy and Social Media (IT) alignment – Thesis part 3
2. Business use and Definitions of Web 2.0 and Social Media – Thesis Part 1
3. Impact of Social Media and Web 2.0 on Organizations – Thesis Part 2

We answered the questions and collected them in a blogpost to compare our answers. Here follows my contribution. The whole article can be found on bijgespijkerd (in Dutch). International readers could try to make sense of this google translate link.

Is Social Media een hype of is het straks onmisbaar voor bedrijven?

Als je Google Trends bekijkt voor Nederland zie je hoe enorme hype er nu is rondom social media. Dit zie je wel vaker bij nieuwe vakgebieden, waarna dit zich vervolgens weer stabiliseert. Het rare van deze hype is dat nog heel weinig bedrijven in Nederland iets daadwerkelijk met social media doen. Dus er is een groot verschil tussen men die het over social media heeft en hoe vaak het werkelijk wordt gebruikt (door bedrijven althans). Ik denk dat social media onmisbaar is voor bedrijven net als het internet. Eigenlijk hou ik er meer van om het als social web te benoemen. Internet heeft deze sociale structuur aangenomen en net zoals internet onmisbaar is voor veel bedrijven zal deze sociale media structuur dat steeds meer het internet vormt, ook onmisbaar worden.

Welke factoren spelen voor een bedrijf de belangrijkste rol om wel of niet gebruik te maken van Social Media?

Er moet iemand zijn die ze hierin leid, het liefst iemand intern die social media snapt en de link kan leggen tussen de mogelijkheden en de doelstellingen van de organisatie.

Is het belangrijk om bijvoorbeeld veel “followers” of “fans” te hebben als er gebruik wordt gemaakt van Social Media?

Ja, vaak wordt social media toch nog vanuit marketing benaderd en dan is bereik belangrijk. Je directe online bereik is het aantal fans dat je hebt en je communicatie ontvangen. Vaak worden bureaus ook op deze aantallen afgerekend. Eigenlijk is engagement van deze fans ook belangrijk, dit is echter moeilijker te meten en wordt nog niet veel gedaan, maar het gaat wel deze kant op.

Is elke branche geschikt voor Social Media?

In elke branche werken mensen en zelfs de raarste producten kan je een online een sociaal gezicht geven. Van Zeeman onderbroeken tot een blog van Boing vliegtuigen. Je moet je als merk natuurlijk afvragen of het voor jouw product wel loont om hier tijd en geld in te investeren. Vaak kan je door te meten of er al over je product gesproken wordt bepalen of je er iets mee moet doen.

Wat zijn de grootste risico’s bij het gebruik van Social Media voor bedrijven?

Je kan natuurlijk fouten maken in je communicatie die potentieel tot schade van je merk leiden, maar ik denk dat er vooral risico zijn bij het niet gebruiken van social media. Er wordt online toch al (negatief) over je gesproken. Bij Vodafone zijn ze zelfs om deze rede een webcare team begonnen na het HSDPA incident.

Welke sites/tools acht u onmisbaar voor bedrijven bij het gebruik van Social Media?

Het is slecht om vanuit de tools te denken, het is beter om vanuit doelen en doelgroep de juiste tools te zoeken. Natuurlijk zijn sommige tools wel beter dan andere als je naar een gemiddelde doelgroep kijkt. Zelf ben ik groot fan van Facebook, dat zich vooral op de mogelijkheden voor merken focust en deze hierin goed faciliteert. Zeker als je als merk binnen Europa als geheel een communicatie kanaal met je fans wilt hebben is Facebook goede tool. Eigenlijk kan je de Facebook fanbox als een mainstream vorm van rss zien om op de hoogte te blijven van een merk/site.

Hoe groot is het effect van Social Media op Linkbuilding?

Ik weet niet of een link op een site meer of minder oplevert dan op een social network pagina. Als ik mag geloven wat ik erover gelezen heb is het wel een goede manier voor natuurlijke linkbuilding. Ook lijkt google zich hierop aan te passen en meer waarde te hechten aan links via social media sites. Zeker voor traffic is social media steeds belangrijker aan het worden, veel site krijgen steeds meer percentage van hun bezoekers binnen via sociale netwerken.

Welke ontwikkelen voorspelt u op het gebied van Social Media?

SEO, Social Media, Knowledge Management, Business Intelligence en Advertising zijn allemaal met elkaar verbonden. En zullen in de toekomst dus meer moeten gaan samenwerken. Vooral met de komst van social search zullen SEO en Social Media specialisten moeten gaan samenwerken. Ook conversation tracking van het sociale web wat nu nog vooral bij de marketing afdeling gebeurt begint nu ook de Business Intelligence kant op te gaan.

Uiteindelijk denk ik dat social media meer de business kant op zal gaan, waar het nu vooral vanuit de marketing afdeling gestuurd wordt. Door social media te koppelen aan de business strategie kan er dan ook meer effect behaald worden met social media budgetten.

Heeft u zelf nog tips of opmerkingen op het gebied van Social Media voor bedrijven?

Huur niet alleen een bureau in om de social media activiteiten voor je bedrijf of merk te beheren, maar zorg ook ervoor dat je werknemers hierover leren en uiteindelijk zelf de communicatie kanalen kunnen beheren. Probeer externe partijen te leren over de business doelen van de organisatie om zo een betere fit te krijgen en investeringen in social media effectiever te laten zijn.

Related posts:

1. Social Media examples in The Netherlands

Aligning business and IT strategy

Now that we have definitions of web 2.0 and social media and the importance of them for organizations we continue the research on how organizations can approach these and align them with their organization strategy.

Organizations can adopt an internal or external focus, for their business strategy as well as their IT strategy. This chapter will present evidence that IT, electronic and social media strategies should also be formulated in internal and external dimensions and how these strategies should be governed by organizations.

The strategic alignment model

Strategic alignment model, Oxford University Press US (1992)

IT strategy should be articulated in terms of an external domain and an internal domain. Where the external domain focuses on the position of the firm in the IT marketplace and the internal domain focuses on how the internal Information Systems should be managed. To acquire an adequate fit that delivers benefits to IT investments a strategic fit between internal and external domains is needed. Benefits can be realized by finding a fit between internal and external IT applications and platforms.

Between IT strategy and business strategy there is also a need for functional integration that takes note of the impacts each has on another (Henderson et al. 1993). This way, more value can be realized from investments in IT as they take note of the business strategy and goals the organization has. IT effects on business performance varies across organizations, because of the ability to achieve a link between business and IT strategy (Rai et al. 1997).

The need for strategic alignment of IT

IT has evolved from an administrative role towards a strategic role that can support and shape business strategies. Yet sometimes there seems to be an inability to realize value form IT investments. Henderson et al.(1993) argue that this is due a lack of alignment between business and IT strategies in organizations.

Trying to achieve strategic fit between the dynamic internal support structure and the external product-market is a continuous process of adoption and change. Exploiting IT functionality on a continuous basis can deliver sustained competitive advantage. Organizations try leveraging their IT capabilities to differentiate operations from their competitors and use these capabilities to shape and support their business strategies. This underlines the importance and value of aligning both strategies in organizations.

Technology Investment and Business Performance

Rai et al. (1997) argue that when calculating the return on corporate IT investments focus must lie on the links between IT, business strategy and competitive context.

While IT likely improves organizational efficiency the effect on business performance varies across organizations, because of the firm’s management processes links with IT strategy. This emphasizes the need for linkage between IT and business strategy.

IT investments are often not well measurable with ROA or ROE. This paper suggest to break down IT investments, not treating as a whole entity and following an justification process that considers specific objectives of the proposed investments. For example investments aimed at reducing labor costs can be justified on the basis of cost savings

Corporate governance of IT

Raghupathi (2007) recognizes the value of internal and external strategic fit (Henderson et al.1993) and argues that modern IT governance should formulate strategies according to this model.

IT Governance can be defined as: “The organizational capacity to control the formation and implementation of IT strategy and provide direction to achieve competitive advantages for the corporation”. IT is critical for supporting and enabling enterprise goals. Effective ITG can generate real business benefits like reputation, trust, product leadership, time-to-market and reduced costs. These benefits all increase stakeholder value.

This emphasized the alignment of IT objective with business strategy. IT governance cannot be an isolated activity and must be part of top management. IT Governance is changing: ”Boards of directors are beginning to look beyond the accounting roots of IT governance toward the risk of legal liability and harm to product brand and corporate reputation.”

Conclusion

Inability to realize value from IT investments is due to lack of alignment between business and IT strategies in organizations (Henderson et al.1993).

There is a need for strategic fit between internal and external domain of IT and a functional integration between business and IT strategy (Henderson et al.1993). To achieve this alignment IT governance cannot be an isolated activity and must be part of top management (Raghupathi, 2007). Modern IT governance should formulate strategies according to this model that recognized the value of internal and external strategic fit (Raghupathi, 2007).

I argue that social media strategy should be aligned with the business strategy of organization to achieve successful investments. With the growth of social media importance in organizations it should become part of IT governance. Where the ”Boards of directors are beginning to look beyond the accounting roots of IT governance toward the risk of legal liability and harm to product brand and corporate reputation (Raghupathi, 2007).”

Organization strategy formulated in value disciplines

Treacy and Wiersema(1993) presented the value disciplines model that describes three value disciplines that can help define the main focus of an organization’s business strategy, helping the organization to make strategic decisions. Choosing one will shape strategy and operational decisions in a company. These value disciplines are guidelines for organization strategy and in order to be competitive organizations need to maintain an acceptable level on all three disciplines while excelling in one. The three value disciplines are:

Operational excellence:  Aims at offering the best total cost. Optimizing internal and external processes to minimize costs. The focus in the organization is on standardization and streamlining of operations, efficiency and low total cost. Most large international corporations like McDonald’s, Wal-Mart and Dell focus on this discipline. (Marc Eichen, 2006)

Product leadership:  Aims at offering the best product or solution. The focus in the organization is on R&D, design and innovation. Organization structure and culture need to be flexible to stay ahead of competition and offer cutting-edge solutions to customers.

Customer intimacy: Aims at offering the best solution and focus on customers to maintain long-term relations and growth. Continuously tailoring and shaping products and services to fit customer needs. Organization structure needs to be flexible, close to the customer and solving the customer’s problem has to be put above all.

Marc Eichen (2006) argues in his article “Value disciplines: a lens for successful decision making in IT” that the value disciplines are a good method for IT strategy decisions to be aligned with the institutional goals of organizations.

Conclusion: Value disciplines: a lens for successful decision making in IT

Formulating organization strategy in terms of choosing one value disciplines gives and clear view on the business strategy of an organization. Having this clear definition helps communicating the strategy to the rest of the organization.

Operational excellence, product leadership and Customer intimacy can all be used to formulate the goals of IT strategy and shape strategic decisions. I argue they should be used by organizations as a starting point from which to formulate their social media strategy. This way the social media strategy will have a basis that is aligned with the business strategy of the organization.

Related posts:

1. Business types and approach to use Social Media – Thesis part 4
2. Business use and Definitions of Web 2.0 and Social Media – Thesis Part 1
3. Impact of Social Media and Web 2.0 on Organizations – Thesis Part 2

Internal enterprise use of social media.

The social aspects of social media that allow the collecting and sharing of collective intelligence among the social media platforms users can be used by organizations to internally collect, retain and share information. The web 2.0 structure and technologies can also be used for easier communication and collaboration in organizations.

Brzozowski et al. (2009) write about the internal use of social media at Hewlett-Packard (HP). Social media provides a free broadcast platform that allows authors to circumvent traditional organizational hierarchies and reach organizationally distant readers. Unlike email that is targeted to specific recipients.

HP offers all employees a variety of social media services used for internal collaboration and communication. Internal blogs for example can facilitate internal collaboration and knowledge sharing and aim at the benefits of lightweight informal collaboration among employees.

To reap the benefits of internal social media usage managers should be stimulated to ‘leed by example’. For venues that imply discussion (e.g. blogs, comments, forums) external validation from managers is more important to the users than in venues of archives (e.g. links, wikis). Culture and organization structure also influence the internal support to use social media.

Analyzing the building blocks of web 2.0 and social media

Organization theory also indicates the importance of technologies and their consequences on organizations. Dhar & Sundararajan (2007) argue that the past forty years certain principles in IT can be recognized that remain constant. These invariants can be used to interpret the past and make predictions about information technologies in the future. They present a model where in the influence of these technological invariants and the consequences on IT in Business are explained. These invariants will be used to analyze web 2.0. The consequences on IT that are found seem to be in line with the technological trends we see in web 2.0.

Technological invariants

The first technological invariant is digital representation, the visualization of things as information and in particular digitally represented information. Examples are: a bank balance, music, our voice or video can all represented as digital information. This digitalization allows for new possibilities in the use and transport of information.

The second invariant is computing power. This is: “the long-term exponential growth of hardware power, broadband, storage and the miniaturization of IT devices”. Moore’s law, which states that the processing power doubles each six months, can explain this growth in computing power and has proven to be accurate. Computing power has grown, become cheaper and software has made it more reliable.

The last invariant is modularity, this is the sustained increase in programmability of IT systems in a modular way. This allows aggregated complexity to be easier integrated into existing standardized software platforms. This allows existing IT systems to add new functionality and usability with just modular additions to the software. This way Modularity fundamentally provides power to the first two invariants by making these possible and easier to achieve.

Digital representation is the technological invariant that has enabled many of the web 2.0 services to exist and grow with further digital representation of information. Blogs and wikis contain text, pictures, sounds and videos and increasingly more data and information that is made possible by digital representation of this information (Dhar & Sundararajan, 2007).

Computing power has increased and become cheaper (Dhar & Sundararajan, 2007) making internet publishing on blogs, wikis and other services fast, reliable and cheap. Barriers that might have existed in broadband for the streaming of video for example have been overcome by this continuously increase in computing power over the past 40 years.

Modularity drives the flexibility of web 2.0 allowing new functionalities and usability to be added to existing systems. Existing technologies on web 2.0 platforms are often updated enabling new functionalities. Gmail labs from Google and new functionalities in video’s on Youtube are examples of this. Widgets on blog services and widgets/apps on mobile phones also enable publishers to aggregate complexity trough modularity and offer users new functionality and usability trough updates and releases of widgets.

These three invariants are clearly identifiable in web 2.0 and contribute to the three consequences in the model.

Consequences in business

These three technological invariants form the building blocks to recognize the consequences of IT developments in business. Dhar & Sundararajan (2007) recognize three business consequences of these invariants. Digital representation together with the growth of computing power and communication power facilitate the separation of information from a growing number of artifacts. An example is the music CD, where the digital distribution of mp3’s only became feasible once there were internet connections fast enough to transfer the data.

This separation of information from its artifacts can alter the fundamental economics of an industry, making their products become information goods. The economics and production of information goods differ from tangible goods and will have many consequences for the way business operates once this separation starts to plays a role in the company’s sector. The music industry is one of the greatest examples of this and had to change traditional business models to still make profit in the digital music age.

The second consequence is the growth in computing hardware power and the ability of software to be layered in a modular way. This allows for IT infrastructures to become larger, more powerful and more accessible. Supply chain management software platforms and on-demand search platforms like Google are an example of this. Modularity results in functionality adopted by early innovators to be incrementally integrated into these powerful and shared infrastructure platforms.

The third consequence is a growth in society of the importance and variety of  IT mediated spaces of interaction. The difference between Technology-mediated spaces and spaces in the physical world is that technology mediated spaces are shaped continuously by the participants, where as real-life spaces are developed and launched in less continuous form. Digital representation is key in facilitating exchanges of information in these spaces. Computing power supports this by allowing the built of complex Technology-mediated interfaces and Software modularity enables the evolvement of spaces and build of new ones with little effort.

The first consequence ‘information separates form its artifacts’ in some industries has led to products to become information goods. In combination with electronic networks this has enabled and hasten the transformation of physical products to service products (Rust & Kannan, 2003), fundamentally changing economics and production of businesses in industries that are affected. In the music industry this has had great consequences. On the internet we see iTunes and Hulu as a response from the music and film industry to adapt to these changes and create new business models.

The second consequence, shared IT platforms of growing functionality, where IT infrastructures become larger, more powerful and more accessible. An on-demand search platform like Google is an example of this. These large accessible IT platforms can create opportunities and threats for companies which need to be addressed in corporate strategy.

The third consequence, the growth in importance of technology-mediated spaces and interfaces. Digital representation enables exchanges of information in these spaces and is what happens on blogs, wiki’s and other web 2.0 services. These exchanges are mediated in services and spaces that are found on IT and web 2.0 platforms. This is resembles what we see in social media spaces where: “collective goods are produced through computer-mediated collective action”(Smith et al. 2008). And these exchanges arise on web 2.0 services and platforms.

I argue that the third consequence is largely connected to the second consequence on the web. The technology-mediated spaces can be found in the social media part of web 2.0 that operates on large shared IT platforms.

Conclusion

The technological invariants and consequences of IT in business can be used to analyze the building blocks of web 2.0 technologies and the consequences of web 2.0 on IT in organizations. Web 2.0 is greatly driven by modularity and result in the creation of large IT platforms and computer-mediated spaces. Analyzing these IT developments in business has show that web 2.0 technologies are important for organizations.

Related posts:

1. A Technology-Centric view of IT in Business
2. Business use and Definitions of Web 2.0 and Social Media – Thesis Part 1
3. Business Strategy and Social Media (IT) alignment – Thesis part 3

Here is the first part of a serie of blogposts where I present the the research and findings of my Social Media & Business thesis. I hope you’ll comment and share your views on the material. In the end I will make a pdf available and we might even have updated sections based on comments/discussions!

Introduction

We are at the point of new developments in IT and business in the form of social software and social media applications. Many organizations and researchers have begun experimenting with the internal use of social software in the workplace (Brzozowski et al. 2009). The use of these technologies is quickly maturing and moving to enterprise-level projects and platforms and the social software marketplace is now starting to attract large vendors such as Google, IBM and Microsoft (Gartner research, 2008).

The goal of this research is to develop a model that allows web 2.0 and social media to be aligned with organization strategy. Reason for this is that aligning the business and IT strategies in organizations helps realizing more effective investments (Henderson et al.1993). These theories are analyzed in this paper and come together in the model that will be presented at the end.

Problem statement

Corporations trying to adopt and use web 2.0 and social media applications in their business, raises the question of how organizations can use these in extend to their strategies.

• How should web 2.0 and social media be approached and how can organizations align these web 2.0 and social media developments with their organization strategy?

To answer this question the following sub questions need to be answered:

• What is web 2.0 and social media and what are good definitions?
• How can social media be approached and used by organizations?
• How can social media be aligned with the business strategy of organizations?

Web 2.0 and social media theory

To get a clear definition of what web 2.0 and social media is and how organizations can use these, first web 2.0 will be researched. At the end of this chapter a clear definition of web 2.0 and social media is given and how they are connected.

Historical perspective of web 2.0, the dot-com bubble

After the burst of the dot-com bubble in 2001, it became clear that organizations that survived the crash had certain web business characteristics in common that were later identified as web2.0. (O’Reilly, 2007)

O’Reilly’s definition of web2.0 in 2006 is the following: “The business revolution in the computer industry caused by the move to the internet as a platform and an attempt to understand the rules for success on that new platform” (Valacich & Schneider, 2009). This indicates a shift in thinking about internet as a new platform. Web 2.0 is not only a collection of technologies but also a way of approaching these new technology applications to create successful business model.

The following list was created by O’Reilly when analyzing which applications are thought of as web2.0.

From an internet business perspective key to web 2.0 is: “The embracing of harnessing collective intelligence”. The new technologies and use of the web to allow a collective intelligence to be formed and created online. Businesses who succeed in embracing this can use it to their advantage.

According to O’Reilly (2007) internet businesses need to embrace this as a core competence and understand that: “Network effects from user contributions are the key to market dominance in the web 2.0 era”. This stresses even more the need for companies -especially internet business related- to understand this shift towards web 2.0 and the changes that it has brought.

Definition of web 2.0

While O’Reilly’s paper mainly focuses on the changes after the dot-com bubble for internet businesses it helped identify the general business aspect of web 2.0 as the ‘harnessing of collective intelligence’. It is hard to have a clear definition of a concept like web 2.0, because it doesn’t have clear boundaries (O’Reilly, 2007) and web 2.0 cannot be reduced to one principle (Hoegg et al. 2006).

Web 2.0 technologies can be used to develop different web 2.0 services and platforms. These web 2.0 services include: Blogs, Wikis, Podcasts, Social Networks and Social Bookmarking. Technologies like AJAX, API’s and RSS have made these new web 2.0 services possible and feasible ( Hoegg et al. 2006) .

Anderson(2007) presents a list of principles that he sees as key ideas that help define web 2.0. These key principles are in line with O’Reilly’s ‘collective intelligence’ definition and add to the definition of web 2.0 not only being a collection of technologies.

All these key principles offer new possibilities for communication, collaboration and business. The key idea of openness refers to the social philosophy of web 2.0 and data on an epic scale refers to the amounts of data we produce electronically. Some argue that maximizing the collective intelligence of the participants is fundamental to web 2.0 (Hoegg et al.2006). Web 2.0 isn’t just only about technological aspects, but also about social aspects like collective intelligence, communication and collaboration.

Definition of social media

From a sociological perspective, social media can be described as “collective goods produced through computer-mediated collective action”. An example is Wikipedia, where the collective goods are articles, and the collective action is the co-editing process of article writing (Smith et al. 2008). These goods are produced and shared on web 2.0 computer-mediated platforms.

Social media platforms offer valuable high quality content that is embedded in socially constructed repositories and the structure of these content collections is different from the web 1.0 structure (Smith et al. 2008). Social media uses the possibilities of the web 2.0 structure to enable the social aspect of collaboration, communication, media sharing and more.

Conclusion: Technology, services and platform aspects of web 2.0

Web 2.0 is not just a collection of technologies, but is a broader concept where technologies, services and platforms come together (Hoegg et al. 2006). To get a clear view of what web 2.0 and social media is and how these affect organizations a distinction is made between the different aspects of web 2.0.

Web 2.0 is a combination of technologies, services and platforms. For organizations to better understand web 2.0 and social media we make a distinction between three aspects of web 2.0. First we have web 2.0 technologies like AJAX, API’s and RSS. These enable web 2.0 services like Blogs, Wikis and Podcasts. These services come together on web 2.0 platforms like Facebook (social networks), Google, Blogger and Twitter. These platforms also allow new applications to be created on top of them like crowd sourcing, viral marketing campaigns and real-time information. On this platform aspect of web 2.0 is where social networks are found and where Social Media operates.

I argue that Social media can be identified in web 2.0 services and platforms and thus overlaps with the application aspect of web 2.0. Defining social media as: collective goods produced through computer-mediated action on web 2.0 services and platforms, gives a better indication on which level of web 2.0 social media operates. This has led to the following distinction between web 2.0 aspects and gives a clear overview of both web 2.0 and social media definitions, that can help identify where the business use of both can be found.

I argue that the business use of web 2.0 can be found in social media. Social media is where the application and platforms that are interesting for the business use of web 2.0 come together and where strategic decisions are made. These platforms offer opportunities for organizations like crowd sourcing, collecting data, marketing and many more. Making use of the collective intelligence aspect of web 2.0 and using social media platforms to collect and share this collective intelligence among the users. In this paper social media is identified as the services and platforms that are interesting for business use and where we the focus will lay on in this paper.

Part 2 follows soon!

Related posts:

1. Impact of Social Media and Web 2.0 on Organizations – Thesis Part 2
2. Business Strategy and Social Media (IT) alignment – Thesis part 3
3. Business types and approach to use Social Media – Thesis part 4

The book from Hislop offers an good overview of the KM field, it’s developments and a critical view on KM. Knowledge Management in Organizations: a critical introduction, Hislop D. (2005), Oxford University Press

The list of  Knowledge Management academic papers:

• Keeping the Wheels Turning: The Dynamics of Managing Networks of Practice, Marlous Agterberg et al., Journal of Management Studies 2009
• Supporting Knowledge Creation and Sharing in Social Networks, Rob Cross et al., Organizational Dynamics Vol. 30  2001
• Managing knowledge sharing: Emergent and engineering approaches,
  Hooff & Huysman, Information & Management 46 2009
• The contribution of shared knowledge to IS group performance, Nelson & Cooprider, MIS Quarterly 20 1996
• Transformation Networks in Innovation Alliances – The Development of Volvo C70, Harryson et al., Journal of Management Studies 45:4 June 2008
• Why Should I Share? Examining Social Capital and Knowledge Contribution in Electronic Networks of Practice, Molly McLure Wasko et al., MIS Quarterly Vol. 29 March 2005

Organizations are confronted with the challenge to manage their ‘intellectual capital’ such that they can improve their competitive value. Our teachers have formed a research group on “Knowledge Information and Networks” at KINresearch.nl to help organizations better understand how to manage knowledge.

Related posts:

1. Business Intelligence and Data Warehousing papers

There are a few problems which startups seem to face in the process of rolling out invitations. In the case of Google Wave many people with an invite discovered they had non of their friends on the service to interact with. This is not beneficial for the user experience of your new service. Another problem is seasonality in user activity. Startups receiving a lot of publicity when a new invite batch is released.  Shortly after the buzz has passed user activity flattens with only some active users remaining.

Both problems can be solved by focusing on the social experience of users in the beta invitation process. Beta invites should be send out in batches of two, just like concert tickets in a prize giveaway. This can increase the probability of users to remain active by channeling their social behavior through your service. (I only became an active foursquare user after finding someone offline to share the experience with.)

Something to think about and which should be fairly easy to integrate in the invitation process on your website. What do you think?

No related posts.

One of the biggest eParticipation projects in The Netherlands is AiAmsterdam which was formed in a response to the local government that then had prohibited drinking while standing in Amsterdam. The online and offline movement has more members than many politicle parties in our country, showing the power of the social web as a ‘shortcut to democracy’. Currently they are planning their next big secret project.

While things are developing in the Netherlands, it looks like the UK  is  ahead of us in terms of open information laws enabling citizens to request open data.

You can read the whole report I wrote for bijgespijkerd.nl here (in Dutch).

foto via: ter-burg

Related posts:

1. Business Strategy and Social Media (IT) alignment – Thesis part 3

Currently newspapers struggle with innovation, many seems only to focus on digitalizing their news product while not offering real new value to the readers.
I believe newspaper should add services to their product instead of just digitalizing their product. Internet and mobile technologies offer many opportunities for delivering information products, but also to economically customize products and delivery.
One of the biggest problems of the current web is information overload. My concept solves this problem and allows subscribers to receive customized news based on interests and the time factor they want to spend on consuming news.

If I pass the first rounds I’ll have more words to explain the concept, now it is more of an indication of the problem.

Related posts:

1. e-Service vs e-Commerce: A new paradigm for Business

Interested in Business Intelligence, Decision Support Systems, Expert Systems, Data Warehousing and Data Mining? Here follows an overview of all the academic papers on Business Intelligence that we had to read for our exam:

• A framework for the development of Decision Support Systems, R.H. Sprague, MIS Quarterly, Volume 4, Issue 4 (Dec. 1980).
• The science, not art, of business intelligence, M.C. O’Guin, et al.,  CompetitiveIntelligence Review vol 12(4) 15-24 (2001).
• Towards real-time business intelligence, D. Azvine, Z Cui, D.D. Nauck, BT Technology Journal, Vol 23 No 3, July 2005.
• Intelligence generation and superior customer value, S.F. Slater, J.C. Narver, Journal of the Academy of Marketing Science, Vol 28 No. 1 120-127.
• Specifying an expanded framework for classifying and describing decision support systems, Daniel J. Power, Communications of the Association for information Systems, Vol. 13, 158-166 (2004)
• Competing on Analytics, Thomas H. Davenport, Harvard Business Review, January 2006.

• Integrated decision support systems: A data warehousing perspective, Salvatore T.
  March, Alan R. Hevner, Decision Support Systems, Vol. 43 (2007)
• The benefits of data warehousing: Why some organizations realize exceptional payoffs, H.J.Watson, et al., Information & Management 39 (2002) 491-502.
• Data Warehousing Supports Corporate Strategy At First American Corportation, Brian L. Cooper et al., MIS Quarterly Vol. 24 No. 4, pp. 547-567/December 2000
• An overview of data warehousing and OLAP technology, S. Chauduri & U. Dayal.
  Paragraph 6 is not mandatory, reading this paragraph will be sufficient.
• Building the data warehouse, Stephen R. Gardner, Communications of the ACM, 41(9) (1998).

• Determining Information Requirements for an EIS, Hugh J. Watson, Mark N. Frolick, MIS Quarterly, Volume 17, Issue 3 (Spe. 1993), 255-269.
• Critical Success factors revisited: success and failure cases of information systems for senior executives, Decision Support Systems 30 (2001) 393-418.
• What does it take for successful executive information systems?, Decision Support Systems 14 (1995) 147-156.

• The evolution of expert systems., Ovidiu S. Noran,
• An introduction to Expert Systems, Michael Will, Picodoc Corporation, 2001.
• Knowledge management and data mining for marketing, M.J. Shaw, et al., Decision Support Systems 31 (2001) 127 – 137.
• From Data Mining to Knowledge Discovery in Databases; Usama Fayyad, et al., American Association for Artificial Intelligence, Fall 1996, p. 37-54.
• Assessing Loan Risks: A Data Mining Case Study, Rob Gerritsen, IT Pro, November/December 1999.

• Data to knowledge to results: Building an analytic capability, Thomas H. Davenport, et al., California Management Review Vol 43, No.2, Winter 2001.
• Evolving from Information to Insight, G. Ferguson et al., MIT Sloan Management Review, Winter 2005, vol. 46, no.2.
• Data quality in context, D.M. Strong, et al., Communications of the ACM, May 1997/Vol. 40.No.5.
• The impact of Data Integration on the Costs and Benefits of Information Systems, MIS Quarterly, September 1992, p 293-311.
• A business case framework for group support technology, Post, Brad Quinn, Journal of Management Information Systems, Winter 1992-1993, Vol. 9, iss. 3

• Management issues in data warehousing: insights from the Housing and Development Board, J. Ang & T.S.H. Teo, Decsion Support Systems 29 (2000) 11-20.
• An empirical investigation of the factors affecting data warehousing success, B.H. Wixom, H.J. Watson, MIS Quarterly, Vol. 25 no. 1, march 2001.
• An empirical investigation of the key determinants of data warehouse adoption, Ramamurthy, Sen & Sinha, Decision Suppport Systems, vol. 44 (2008) p 817-841.
• Strategic actions in information technology investment based on real option theory, Yong Jin Kim, G. Lawrence Sanders, Decision Support Systems 33 (2002) 1-11.
• The measurement of business intelligence, Lönnqvist & Pirttimäki, Information Systems Management, Vol. 23 (2006).
• Price and Value of Decision Support Systems, Dan R. Pieptea, Evan Anderson, MIS Quarterly December 1987, p515-528
• Past, present and future of decision support technology; J.P. Shim et al., Decision Support Systems 33 (2002) 111-126.
• Progress in Web-based decision support technologies, Hermant K. Bhargava, Daniel J. Power, Daewon Sun, Decision Support Systems 43 (2007) 1083-1095.

I’ve highlighted some of my favorite papers and the most important ones, enojoy!

Related posts:

1. Knowledge Management papers
2. Business use and Definitions of Web 2.0 and Social Media – Thesis Part 1
3. Business Strategy and Social Media (IT) alignment – Thesis part 3