Web 2.0 principles will not only revolutionize the web experience, the design pattern and the business models of software companies. They can indeed be applied to a lot of industries for new approaches to product development. The web can be used to put users in control and co-create better and richer products in a reduced timeframe.web 2.0; user generated; product development and web as a platform

Hinchcliffe, Dion

English

Research Papers in Economics

 
Product Development 2.0 
Dion HINCLIFFE 
Web Services Journal, USA 
 
 
 
Abstract: Web 2.0 principles will not only revolutionize the web experience, the design 
pattern and the business models of software companies. They can indeed be applied to a 
lot of industries for new approaches to product development. The web can be used to put 
users in control and co-create better and richer products in a reduced timeframe. 
Key words: web 2.0, user generated, product development and web as a platform. 
 
hile the window on using the "2.0" suffix is probably closing, it is 
still worthwhile exploring an especially significant trend in 2006 
that is likely to see much more widespread uptake in 2007.   
Specifically, I'm talking about building highly competitive online products by 
turning over non-essential control to users directly via the Web. For now, I'm 
calling this online business trend "Product Development 2.0", a concept that 
embodies the use of Web 2.0 concepts such as harnessing collective 
intelligence, users as co-creators, and turning applications into platforms - 
three of the most powerful techniques in the Web 2.0 arsenal. 
  W
What is Product Development 2.0 exactly? It's an informal term applied to 
something that online startups and traditional businesses both are 
increasingly doing, namely leveraging mass user contributions, providing 
open architectures for others to build on as they like, and even handing 
control over key product decisions directly to users. The reasoning behind 
doing this is simple: satisfied customers have always been essential to 
having the most successful business, both online and offline. But how best 
can you ensure that customers get exactly what they want from you, as 
customized and quickly as possible?  
This is where the scale, new tools, and business models of Web 2.0 have 
stepped in, giving the potential to provide customers with better, rich 
products, much more quickly, and with more of what they want. Taken as a 
whole, it's increasingly clear that there are new business models afoot that 
are just now being well understood. 
 
 
COMMUNICATIONS & STRATEGIES, no. 65, 1
st quarter 2007, p. 105. 106     No. 65, 1
st Q. 2007 
Product development 2.0:  
using the Web to put users in control and co-create better, richer products faster 
 
Source: http://web2.wsj2.com   
 
Given that any business typically is vastly outnumbered by its customers 
and potential customers, putting a bureaucratic, centralized product 
development team into the critical path of product creation and ongoing 
maintenance highlights how little a company can actually serve them, 
especially in an individualized way. And with everyone online, it's 
increasingly obvious where the biggest source of talent, engagement, 
innovation, agility, and worker bandwidth really lies: with customers.  
Using the techniques and technologies that have emerged in just the last 
few years, a company can now finally give them the tools and motivation to 
tweak, tune, refine, and contribute to its products and services. And 
increasingly, they'll probably do it. YouTube is still currently one of the best 
examples of user co-development of a world-class product in its pure form 
(65,000+ videos uploaded by users per day), but sites like eBay, Slashdot, 
and many others have been leveraging their users in product development 
for a long time now. As it turns out, Product Development 2.0 is not a small 
topic and starts off with collecting explicit user contributions, leveraging the 
Database of Intentions, and putting in automated real-time feedback loops to 
identify the best or most popular new content or capabilities for other users 
that come along later. 
It's important to note that it's a fundamental shift for a business to turn 
over a large part of its product development to its users, becoming more of a D. HINCHCLIFFE  107 
mediator and facilitator than a product creator or owner. This is the shift of 
control from institutions to individuals that the apparently relentlessly 
democratizing force of the Web has begun exerting on the business models 
of organizations of every description around the world.  
As more organizations figure out how to apply Product Development 2.0 
to their individual offerings, they will reap significant competitive advantage 
over those not harnessing the Web to directly connect to customers and 
begin a rapid and never-ending innovation cycle. This is another aspect of 
the perpetual beta concept that reflects the fact that increasingly, products 
and services online are never finished, and indeed, can't ever be finished as 
changes and additions seamlessly pour in over thousands of millions of 
internet connections.  
But enough about the possibilities. Let's talk some examples, both in 
terms of what older style product development did versus what this new style 
is doing. Like the recently discussed Programming 2.0 concept - a set of 
software development tools, techniques, and attitudes that is, not 
incidentally, enabling much of this - and the original Web 2.0 definition, it is 
examples in lieu of principles that is one of the best ways to paint a picture of 
what appears to be happening in the evolution of product development (see 
table below). 
It's worth noting a couple of key points about the table above. One is that 
the web makes the shift of control possible by putting every business in 
direct contact with every one of its customers. No small system can remain 
unchanged by sustained contact with a much larger system, and this means 
that any business (which is the small system in this scenario) which 
embraces its customers over the web in a two-way fashion is likely to 
undergo a move fairly quickly from the first column to the second. The fact 
is, if you have loyal customers who like the products and services that you 
offer online, you're going to have a hard time avoiding the shift of control and 
opening up of your product designs and architecture. 
The second point is that those that play to the strengths of the web as a 
platform, instead of trying to fight it, can exploit the most powerful software 
platform, or indeed, platform of any kind, that has been created to date. 
Triggering network effects, building an extensible platform out of the product 
offerings (whether it's an online software application or an insurance 
company doesn't matter), and a business can see the advantage to be had 
in the assyemtric model of business on the web; all of the potential is on the 
edge of our networks now (where the users are) instead of the middle.  108     No. 65, 1
st Q. 2007 
The Move to Product Development 2.0 
  Product Development 1.0  Product Development 2.0 
Primary Customer 
Interaction Channel 
Telephone, Mail, Face-to-
Face, One Way Media (Print, 
TV, Radio, etc.), e-mail 
World Wide Web, e-mail, IM 
Source of Innovation  Organizations  Customers 
Innovation Cycle  Months, Years  Minutes, Hours, Days, Weeks 
Content Creators  Internal Producers  External Producers 
Feedback Mechanisms  Market research, satisfaction 
surveys, complaints, focus 
groups 
Analytics, online requests, user 
contributed changes 
Feedback Mechanisms  Market research, satisfaction 
surveys, complaints, focus 
groups 
Analytics, online requests, user 
contributed changes 
Product Development 
Process 
Upfront design  Less upfront, much more emergent 
Product Architecture  Closed, not designed for easy 
extension or reuse by others; 
walled garden 
Open, very easy to extend, refine, 
change and add on to, ecosystem 
friendly, designed (and legal) for 
widespread remixing and mashups 
Product Development 
Culture  
Hierarchical, centralized, Not 
Invented Here, somewhat 
collaborative, expert-driven 
Egalitarian, decentralized, remix 
instead of reinvent, highly collaborative, 
Wisdom of Crowds 
Product Testing  Internal, dedicated test 
groups, hand-picked select 
customers 
Users as testers 
Customer Support  Customer Service  User Community 
Product Promotion  One-Way Marketing and 
Advertising 
Viral propagation, explicit leveraging of 
network effects, word of mouth, user 
generated and other two-way 
advertising 
Business Model  Product Sales, Customer 
Service and Support Fees, 
Service Access Charges, 
Servicing High Demand 
Products 
Advertising, Subscriptions, Product 
Sales, Servicing All Product Niches 
(The Long Tail), Unintended Uses 
Customer Relationship  External Buyer (Consumer)  Partner and -- increasingly 
remunerated -- Supplier (Consumers as 
Producers ) 
Product Ownership  Institution, particularly 
executive management and 
shareholders 
Entire User Community 
Partnering Process  Formal, explicit, infrequent, 
mediated 
Ad hoc, thousands of partners online, 
disintermediated 
Product Development 
and Integration Tools 
Heavyweight, formal, complex, 
expensive, time-consuming, 
enterprise-oriented 
Lightweight, informal, simple, free, fast, 
consumer-oriented 
Competitive Advantage  Superior products, legal 
barriers to entry (IP 
protections), brand name 
advantage, price, popularity, 
distribution channel 
agreements 
#1 or #2 market leader, leveraging 
crowdsourcing effectively, mass 
customization, control over hard-to-
create data, end-user sense of 
ownership, popularity, cost-effective 
customer self-service, audience size, 
best-of-breed architectures of 
participation D. HINCHCLIFFE  109 
And waiting too long to enter the Product Development 2.0 arena 
potentially means waiting for competitors to get their ahead. The longer a 
business wait to get the clock started on collected the Database of Intentions 
(continuously turning 100% of all customer interaction into enriching your 
product dynamically), the more likely it will face competitive dislocation and 
even lock-out. Amazon is famous for collecting user contributions to enrich 
their product database and they are about a decade ahead of potential 
competitors of in terms of the enriched, hard-to-recreate database they have 
built. 
Now on to a few examples to highlight what companies are actually doing 
that has many of the elements of Product Development 2.0. Firstly, the usual 
preamble about checklists of features; just like Web 2.0, one doesn't have to 
implement every one of these in order to deliver better results, just the ones 
that apply in your situation.  
So let's look at a couple of stories of companies that are going part of the 
way down the Product Development 2.0 path and getting valuable early 
experience. I selected real-world companies since that's the majority of 
companies that have to figure out whether they're going to play in this space 
or let others do it for them. 
   Product Development 2.0 examples  
XM Radio is a satellite radio provider that has recently embraced some of 
the tenets of Product Development 2.0. Compellingly, the Top 20 on 20 
channel is one of the most popular channels XM has yet created. Why? 
Because control of it has been entirely handed over to its users. According 
to the Wikipedia entry on Top 20 on 20:  
"The channel plays everything new from rock to rap, with the songs 
chosen by online votes to the XM website. One can also vote their 
favorite songs by calling the station number, or text messaging. The 
channel is completely automated by listener voting with no DJ 
interruption. Top 20 on 20 is also one of the most popular music 
channels on XM. According to XM's internal research, the channel 
achieves 1.8 million listeners a week."  
Although the channel was relaunched with some changes in December 
2006 that have proven unpopular to many (less music, live DJs), it presents 
the cautionary tale of what happens when you assert bureaucratic authority 110     No. 65, 1
st Q. 2007 
over something that you've co-developed with your users; the possibility that 
you'll kill the goose that lays the golden eggs of user contribution and 
engagement. 
General Motors conducted its highly innovative Chevy Apprentice 
campaign early last year and made quite a demonstration of convincing 
users by the thousands to generate online video commercials for its new 
Chevy Tahoe SUV. By opening up the contest to anyone on the web and 
only screening submissions for truly objectionable content, they were able to 
elicit a stunning 22,000 user generated commercials exhibiting an 
impressive variety of creativity with both positive and negative messages. 
From the beginning of the effort, they realized that in a freeform environment 
created by Web 2.0 tools, they would only be able to respond to criticism 
and not control the message. As expected, environmentalists famously 
picked up the tools to create ads savaging SUVs in general, but GM's Ed 
Peper understood that only by engaging in conversation instead of censoring 
dissent could they gain trust and get more information into people's hands 
than they could otherwise.  
Ultimately, GM created its own ads that highlighted the high amount of 
recycled parts and the best fuel-efficiency in its class of the Tahoe. A brave 
piece of Product Development 2.0 for sure and one that many traditional 
business followers probably viewed incredulously as GM truly let their 
customers and potential customers co-create their advertising campaign with 
them on the world stage. (For the curious: many Chevy Apprentice 
commercials are still up on YouTube). 
   The potential for disruption and opportunity 
The web is a fundamentally different platform from any platform we've 
seen before. Unlike previous general-purpose platforms, the web is 
fundamentally communications-oriented instead of computing-oriented.   
Sure, computing still happens but what the web does that's so important is 
its ability to connect information and people together.   
The hyperlink is the intrinsic unit of thought on the web. So, it's 
information connected by links instead of programs that operate on data, 
that's the basic difference. But why does this hold the potential to put 
traditional product development on its head and usher in Product 
Development 2.0? Firstly, because the aforementioned information can now D. HINCHCLIFFE  111 
truly be generated by anyone; and secondly, because we are all almost 
universally connected to this new medium by the devices on our desktops, in 
our briefcases and in our pockets.   
All of us can now be directly and continuously connected to the products 
and services which we need, which increasingly, is the rest of us and not a 
handful of large companies. The very best companies in the future are likely 
to be those that will create innovative new ways to facilitate innovation and 
collaboration by the hundreds of millions of us that can be reached and 
embraced by effective architectures of participation. The big winners will 
enable us and encourage us to take control, contribute, shape, and direct 
the designs of the products and services that we in turn consume.  
The good news: only a few industry leaders and early adopters fully 
appreciate the significance of these trends as yet or even how to fully exploit 
and monetize them. There's still enormous opportunity, and for existing 
businesses with large investments in existing business models, blowing your 
business model up before someone else does will be the order of the day.  
This will prove though very hard for most to do successfully; and therein lies 
the potential for significant industry disruption in the next 5 years as new 
players with core competency in Product Development 2.0 push older, slow-
to-adapt businesses off the stage. 
 

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