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By Matthew Fraser, Soumitra Dutta, 22 January 2009 09:00

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Web 2.0 technologies can be a boon to businesses - find out how in this excerpt from Throwing Sheep in the Boardroom by Matthew Fraser and Soumitra Dutta.

The web 2.0 revolution has been frustrated by a powerful irony. The one place where web 2.0 tools hold out the most promise to transform social organisation is precisely the location where there has been the most resistance to change. That place is the corporation.

Online social platforms are revolutionising the way we interact with others, build social capital, and even achieve fame and riches. Yet when web 2.0 social technologies permeate corporate bureaucracies, they are often regarded as invasive and potentially threatening.

This should not be surprising. The fundamental dynamic of social networking is essentially horizontal and open. The classic design of corporate bureaucracies, by contrast, is based on the opposite dynamic. Traditionally, the social architecture of corporations has been vertical and closed. Corporate cultures are characterised by rigid hierarchies managed as top-down organisations. Corporations are not cocktail parties. The idea of open-ended wikis or Facebook Fridays would be a non-starter in most companies. Indeed some employees are getting dismissed or disciplined when caught logged onto social networking sites at the office.

Say what?

Bust through the jargon with these Cheat Sheets:

♦ Social networking

♦ Web 2.0

Web 2.0 evangelists nonetheless believe that an imminent social revolution is about to transform corporate bureaucracies. The buzzwords employed to describe this e-ruption are numerous: mass collaboration, self-organisation, open innovation, distributed co-creation, bottom-up management, networked organisation, virtual corporation. When web 2.0 adoption reaches a tipping point, the major impact in corporations will be a diffusion of power towards employees and consumers.

C.K. Prahalad, arguably the world's most prominent management guru, wrote a decade ago about this new economy power shift towards consumers. "Thanks largely to the internet, consumers have been increasingly engaging themselves in an active and explicit dialogue with manufacturers of products and services," wrote Prahalad in the Harvard Business Review. "What's more, that dialogue is no longer being controlled by corporations. Individual consumers can address and learn about businesses either on their own or through the collective knowledge of other customers. Consumers can now initiate the dialogue; they have moved out of the audience and onto the stage."

The companies that understand this, and adapting their organisational behaviour accordingly, are adopting so-called 'enterprise 2.0' models. The generally accepted definition of enterprise 2.0 is a corporation that - thanks to web 2.0 software tools like wikis and blogs - encourages horizontal collaboration and harnesses the power of collective intelligence to boost productivity, foster innovation and create enhanced value. It also signifies a company where software tools allow top management to have a unified view of the entire operations, instead of managing disparate corporate silos that don't communicate with one another. In its broader definition, enterprise 2.0 encompasses a vision advocating new modes of capitalist production and social organisation.

In some respects, the enterprise 2.0 vision is old wine in new bottles. It was trumpeted several decades ago by Alvin Toffler, who in his bestselling book Future Shock predicted that archaic corporate bureaucracies would be replaced by dynamic horizontal adhocracies. At the end of the counter-culture 1960s when Toffler's book was an international bestseller, this was exciting stuff. Toffler's concept of adhocracy captured the spirit of the times. Adhocracy was proclaimed as a new form of organisation that would kick down bureaucratic walls and bring people together to capture opportunities and find innovative solutions.

The same vision found eloquent expression in a 1988 book, In the Age of the Smart Machine, by Harvard business professor Shoshana Zuboff, who described how information technology was leading to new networked forms of corporate organisation. Zuboff was a leading evangelist in the 1980s for computer-based technologies that she believed would topple rigid corporate hierarchies and encourage horizontal information flows and power-sharing among employees. A decade later, however, Zuboff was forced to acknowledge that her social vision of the workplace was not happening.

"The paradise of shared knowledge and a more egalitarian working environment just isn't happening," she said. "Knowledge isn't really shared because management doesn't want to share authority and power."

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