Why Web 2.0?

I spend about half of my time working with large enterprises helping them understand, embrace and profit from the philosophy, approach and applications of Web 2.0 and social media technologies. My passion for Web 2.0 comes from three experiences.

1. At Sports Loyalty Systems, I didn’t get the importance of social media.

During the last half of 2006, the Board of Sports Loyalty Systems asked me to step in as CEO and try to turn the struggling business around. At the time, we had pilot coalition loyalty (fan reward) programs running with the Los Angeles Dodgers and Arizona Diamondbacks.

Soon after I came on as CEO, one of our younger employees told me we needed to invest in a full time person to focus solely on reading and interacting with “blogs.” Although I don’t remember exactly what I said, I am sure it was something like “You just don’t get it; we are a start-up and cash is king.  We can’t afford to dedicate any of our resources to something like that.”

After spending over 18 months in the Web 2.0 space, I now realize 2 things:


  • My response was typical for a C-level exec of my genre. Forrester Research uses something they call Technographics analysis to categorize consumer involvement with Web 2.0 into six categories: Inactives, Spectators, Joiners, Collectors, Critics, and Creators. They publish annual results from a nationwide survey categorizing US consumers by, among other things, age groupings. This chart shows that the majority of those over 40 (e.g. the vast majority of C-Level execs) were “Inactive” in 2007.

  • I was the one who “didn’t get it,” although I now realize I started to get it. To increase fan engagement with our program, our brilliant CMO Steve Lamoreaux introduced a number of new elements to the program, including transforming a pedestrian enrollment letter into an Official Dodger Rewards Club Lanyard. One of the ways we knew fans liked this initiative was – you guessed it – it appeared on Dodger fan blogs. One popular one wrote, “They are even giving us these really cool lanyards now.”

During the final days at Sports Loyalty, Jason Cianchette, one of my favorite team members and now founder of Liquid Mobile gave me a tutorial on “the new internet.”   I believe this was the first time I heard the term Web 2.0.  I realized at that time that I had a lot to learn, but I also knew there was a “there there” to what Jason was patiently explaining to me. [Although I was only able to secure commitments for $8 of the $5MM we needed to fully turn the business around, to this day I believe building a coalition loyalty program around major sports teams remains one of the best business opportunities anywhere.]

2. At The Loyalty Group, I got the philosophy and approach of Web 2.0 before the technology existed to fully enable it.

Although I missed the emerging importance of Web 2.0 in 2004-2006, I was an early adopter of much of “Web 1.0.”   I was a Prodigy user in 1992; launched airmiles.com in 1995 – the first loyalty program on the web; still own the url governor.com, which I bought in 1996 and then developed one of the earlier political web sites for my father, Cecil H Underwood’s successful gubernatorial campaign; and Loyalty developed a side business creating web sites for our Canadian Sponsors, including Shell Canada, who had a web site before Shell US.

Although not an early adopter of Web 2.0 applications, I got the philosophy of Web 2.0 years before the technology enabled it or even the term “Web 2.0″ was coined.  I have always been a collaboration evangelist; social media technology has just made it a lot easier for employees, business partners and customers to communicate, collaborate and contribute to business success.  A few examples of my earliest attempts:

  • The first online digital facebook (HERB) was created by then VP Information Technology Norm Rosner for Loyalty Management Group Canada in 1994 (with all due respect, not by Mark Zuckerberg at Harvard in 2004).

While on a kayaking trip in rural North Carolina, I spotted a copy of Popular Science Magazine with a digital camera on the cover.  I don’t recall if I read the article or not, but I know as soon as I found a pay phone I called Norm and asked if we could use a digital camera to take pictures of our employees and put them on “our computers” (I am sure I didn’t say server) so that it would be easier for our employees to find and know each other.  It was around that time that Loyalty’s employee count passed 150 and I found that my own CPU (i.e. memory) was maxing out on its ability to remember everyone’s name.  I suggested we put pictures, bio’s and “your favorite T-shirt slogan” on each person’s page (i.e. profile). Within a few weeks, Norm and his team programmed HERB (which I think stood for Human Resource Browser as in HRB) which enabled all employees to search on a first or last name basis and find people by either scanning group photos (e.g. technology, marketing) or moving up or down the org chart.  My T-shirt slogan was something about coming back from the wilderness a changed person; our very buttoned down HR VP’s was much hipper; something like “Snoop Dog rules.”

  • The first employee generated wiki at AIR MILES was created by our new and youngest employee Jen Dalton in 1992 when she started the Collector Information library so managers could find the data they needed and analysts could go back to doing their “day jobs.”

Sometime during the latter part of the year we launched the program, a relatively new employee booked time on my calendar.  When we met, she had a brief presentation that demonstrated how much time our analysts were spending looking up information for more senior employees.  At the time, we did not have multiple seat access to our Collector Information Database, so most of the data came in the format of large “green lined” printouts (I realize this is unfathomable for those of you born after we started the company).  Jen and the other analysts spent most of their days looking up answers to questions like “How many Collectors living in Vancouver with four or more people in their households spent less than $80 a week at Safeway last month?” That meant they spend most of their nights and weekends doing results analysis and opportunity identification, the roles we hired them for.

Her proposal was simple.  The analyst would build a “library” of the reports in large yellow binders and develop a training program teaching our consultants and managers (and CEO) how to use the reports. Anyone could update the binders and new “best demonstrated practices” could be added to the library.

  • The first attempt to develop user generated ads at AIR MILES was a 1994 initiative by the company’s CEO (me) and his assistant (Michelle) that offered redeemers 500 AIR MILES for video tapes of how they earned their miles and what they redeemed for.

Frustrated by my failure to get our marketing team to do “Collector Testimonial Ads,” Michelle and I stuffed 500 redeemer ticket envelopes with a letter from me asking Collectors to send in a video tape of their experiences with a bonus of more miles if we used their video in a commercial.  My dreams of creating the next great ad campaign were quickly dashed as Michelle reported that we only received one video and it was “so bad you don’t want to see it.”

3. Because I have the experience of both a CEO and a Bain trained strategist and the genetic wiring of a collaboration evangelist, I see the full profit potential of Web 2.0 from what we call a “3 Sphere, 5 C” perspective.

I give full credit to John Della Volpe, the Founder of Social Sphere Strategies and the Director of Polling for Harvard’s Institute of Politics for giving me the opportunity to fully understand the potential of Web 2.0 and social media technologies and to realize this is an incredibly natural space for me because of the unique combination of experiences I have had.      

I was introduced to John in early 2007 by Tim Dibble, a Founder and Managing General Partner at Alta Communications, a Boston based private equity firm.  Tim and I were in on the early stages of helping Gerald Chertavian create Year Up, and I look at deals for Alta in my spaces.  John had seen firsthand how Harvard students were using Facebook as their primary communications channel and was involved with Deval Patrick’s incredible 2006 campaign that leveraged all of the new media tools to enable Patrick to come from a political unknown to be elected Governor of Massachusetts.  He was committed to starting a new company to help businesses understand and profit from Web 2.0 and I spent a lot of 2006 helping him get Social Sphere off the ground.

With John, I attended several conferences, read thousands of pages of articles, books and O’Reilly, McKinsey and Forrester reports.  After my crash course in Web 2.0,  I stepped back and began to pull together two documents:  a Web 2.0 reading list and our Web 2.0 “Bible,” otherwise known as “everything you wanted to know about Web 2.0, but were afraid to ask.”  I also forced myself to look at these incredibly cool, relatively stable and easy to use tools through the eyes of a CFO by asking the same question over and over again: “How could this application be deployed to increase a company’s profits?”   This rigor led me to what we call the “CEO’s Three Sphere Five C View” of  Web 2.0.  Let me explain.

The genesis of the 5 C’s was my earliest training at Bain, where as a summer associate in 1983 I learned the analytical foundation of Bain strategy: a data driven understanding our client’s Customers, Costs and Competitors.  I quickly realized that a team of smart consultants armed with 3 C data could add value to almost any business and thought that when I realized my dream of being a CEO/entrepreneur, I would use this model to run my business.  The additional 2 C’s were added after I left Bain and made the “trial by fire” transition from being a Bain Partner  to learning to be a CEO.  I quickly realized that the 3 C’s were necessary, but terribly insufficient:  with them, you could develop a brilliant strategy, but without the requisite Capabilities (e.g. capital, talent and technology) and employee and business partner Commitment, your brilliant strategy would never achieve its full potential, if have any impact at all.  The chart Web 2.0 Potential Strategic Value will begin to give you an idea of some of the sources of 5 C Value companies can capture from developing and implementing a Web 2.0 strategy.

The 3 Sphere’s came from the realization that the philosophy (communication = engagement + collaboration = contribution) and applications (e.g. forums, wikis, blogs, user content) of Web 2.0 and social media technologies should be applied to all of a business’s stakeholder communities or spheres:  employees, business partners, and employees.

The 3 Sphere/5 C view of Web 2.0 is one of the ways we differentiate ourselves. Most others in the space focus either entirely on the Customer “C” and sphere, or the customer and employee spheres; few if any take our CEO view of engaging all stakeholders and demanding that applications deliver 5 C strategic value across the enterprise.

Based on my own experiences and the case studies of other Web 2.0 pioneers, I believe applying the collaborative philosophy and technical applications of Web 2.0 to business challenges and opportunities is, simply put, a smarter, more profitable way to run a company, create competitive advantage and maximize shareholder value.