The Dharmesh Test is a quick, simple set of yes/no questions to gauge the likelihood of long-term success of a SaaS (Software as a Service) company.  It is inspired by the highly popular “Joel Test” for measuring software development teams.  [Disclosure: I am an angel investor in Joel’s company Stack Overflow]

Now, if you know me, and you know Joel, you know that I'm no Joel.  He's smarter and is a better writer.  So, why did I have the audacity to write the "Dharmesh Test"?  Because I'm passionate about SaaS companies and have spent the better part of the last 6 years studying them and learning from folks that should have written this article.  And, I've taken what I've learned and applied it to my own company, HubSpot -- which is doing very well and scores a respectable 13/16 on the test (yes, I've got work to do).

This is alpha Version 0.80 of this test.  Will be iterating on it based on community feedback.

The Dharmesh Test: 16 Questions For Better SaaS Companies

1. Is there exactly one version of your software that services all users?

Or stated differently, have you resisted the temptation to have custom code for an individual customer or small group of customers?  Ideally, in steady state, the same master code-base would be servicingall customers.  Any customizations are done through application configuration or via APIs and plugins.  If you have different versions running temporarily to test new versions with a subset of customers, that’s fine.

Read the rest of this post »

Read the rest of this post »

Cisco acknowledge their mistakes and their CEO John Chambers explain how they have been innovative in business - through teamwork and collaboration they have abandoned command and control management as explained in this Harvard Business Publishing interview
"

Source:

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From SpinAct Blog earlier today..

SAP recently decided to solicit ideas for business-friendly social networking applications from a crowdsourcing platform, Innocentive. SAP got 1,239 responses, which it is currently evaluating to find the best proposed solution. The experiment went so well that SAP submitted another idea to crowdsourcing, this time in search of a vendor-independent way to handle Web services errors, and got a viable solution by December.

When SAP debuts its next social networking functionality or Web service error-handling capability, odds are some freelance developer far from Walldorf came up with some of the code. This marks a true revolution in the evolution of service delivery, which we visualize as follows:

Insource: Use your own employee(s) to do the customization.

Outsource: Hire an outside developer or development team.

Crowdsource: Post your need on a platform and let the crowd respond.

As you move up the pyramid, cost increases, time to value goes down, and breadth of solutions decreases.

Tasking employees to do customization and other services work is expensive. Hence, most companies outsource. Provisioning services from a partner is cheaper, since you don’t have to maintain that capacity in-house and can pay for it as needed. But outsourcing is still more expensive than many companies realize. In Jeff Howe’s The Rise of Crowdsourcing in Wired, the example is a company that needs to buy some stock photography. The first option would be for the company to do the photography itself, but insourcing would be expensive, and the company isn’t equipped for it. The second option is outsourcing, and the company finds a photographer willing to charge $100 a picture. The third option is crowdsourcing. When the company finds a stock photography platform on the Web, the cost is $1 per picture. No contest—game over.

That’s the power of crowdsourcing in a nutshell. Someone out there has a $1 solution to your $100 problem.

If you think that example doesn’t apply to SAP, think again. SAP’s own Web services error-handling challenge paid $10,000. If SAP’s own employees were tasked to create this functionality, it might well cost ten FTEs a month of labor each to come up with it, costing SAP $100,000. If SAP bought it from a professional development firm, the cost might be even more. But going to crowdsourcing reduced the sticker price on the solution by an order of magnitude. SAP is pleased enough with the quality of the solution, as it chose—from among 485 submissions—and made a reward.

If you’re in the market to buy SAP services, this should be a signal to you. If SAP is crowdsourcing development, you should crowdsource your use of SAP services. Don’t do it in-house; don’t even outsource it to a dedicated services organization, like a systems integrator or consultancy; use the power of the crowd to find what you need.

Say you go to a consultancy and ask them to customize an SAP solution for you. It’s a fairly complex customization, requiring a lot of creativity. How many consultants do you think will give thought to your problem? One? Three? Ten? How much will it cost you to retain their services? Now take a page out of SAP’s book and imagine posting your need to the crowd. SAP got 1,219 responses to their social networking tender. Do you really think SAP wanted to pay 1,219 consultants to come up with individual project ideas for social networking, or could have pulled 1,219 employees off their jobs to concentrate on this feature?

SpinAct is an SAP services crowdsourcing platform. Using the SpinAct crowd for your SAP services, training, and customization needs is designed to be cheap, quick, and broad, in terms of the number and quality of solutions you can find. Our search box replaces the black box of doing it yourself, or hiring a company to do it. Hire the crowd to do it, and reap the benefits.

Source: Global Logic

Web 2.0 tools present a vast array of opportunities—for companies that know how to use them.

Technologies known collectively as Web 2.0 have spread widely among consumers over the past five years. Social-networking Web sites, such as Facebook and MySpace, now attract more than 100 million visitors a month. As the popularity of Web 2.0 has grown, companies have noted the intense consumer engagement and creativity surrounding these technologies. Many organizations, keen to harness Web 2.0 internally, are experimenting with the tools or deploying them on a trial basis.

Over the past two years, McKinsey has studied more than 50 early adopters to garner insights into successful efforts to use Web 2.0 as a way of unlocking participation. We have surveyed, independently, a range of executives on Web 2.0 adoption. Our work suggests the challenges that lie ahead. To date, as many survey respondents are dissatisfied with their use of Web 2.0 technologies as are satisfied. Many of the dissenters cite impediments such as organizational structure, the inability of managers to understand the new levers of change, and a lack of understanding about how value is created using Web 2.0 tools. We have found that, unless a number of success factors are present, Web 2.0 efforts often fail to launch or to reach expected heights of usage. Executives who are suspicious or uncomfortable with perceived changes or risks often call off these efforts. Others fail because managers simply don’t know how to encourage the type of participation that will produce meaningful results.

Some historical perspective is useful. Web 2.0, the latest wave in corporate technology adoptions, could have a more far-reaching organizational impact than technologies adopted in the 1990s—such as enterprise resource planning (ERP), customer relationship management (CRM), and supply chain management. The latest Web tools have a strong bottom-up element and engage a broad base of workers. They also demand a mind-set different from that of earlier IT programs, which were instituted primarily by edicts from senior managers.

Web 2.0 covers a range of technologies. The most widely used are blogs, wikis, podcasts, information tagging, prediction markets, and social networks. New technologies constantly appear as the Internet continues to evolve. Of the companies we interviewed for our research, all were using at least one of these tools. What distinguishes them from previous technologies is the high degree of participation they require to be effective. Unlike ERP and CRM, where most users either simply process information in the form of reports or use the technology to execute transactions (such as issuing payments or entering customer orders), Web 2.0 technologies are interactive and require users to generate new information and content or to edit the work of other participants.

Earlier technologies often required expensive and lengthy technical implementations, as well as the realignment of formal business processes. With such memories still fresh, some executives naturally remain wary of Web 2.0. But the new tools are different. While they are inherently disruptive and often challenge an organization and its culture, they are not technically complex to implement. Rather, they are a relatively lightweight overlay to the existing infrastructure and do not necessarily require complex technology integration.

Gains from participation

Clay Shirky, an adjunct professor at New York University, calls the underused human potential at companies an immense “cognitive surplus” and one that could be tapped by participatory tools. Corporate leaders are, of course, eager to find new ways to add value. Over the past 15 years, using a combination of technology investments and process reengineering, they have substantially raised the productivity of transactional processes. Web 2.0 promises further gains, although the capabilities differ from those of the past technologies.

Research by our colleagues shows how differences in collaboration are correlated with large differences in corporate performance.¹ Our most recent Web 2.0 survey demonstrates that despite early frustrations, a growing number of companies remain committed to capturing the collaborative benefits of Web 2.0.² Since we first polled global executives two years ago, the adoption of these tools has continued. Spending on them is now a relatively modest $1 billion, but the level of investment is expected to grow by more than 15 percent annually over the next five years, despite the current recession.³

Management imperatives for unlocking participation

To help companies navigate the Web 2.0 landscape, we have identified six critical factors that determine the outcome of efforts to implement these technologies.

1. The transformation to a bottom-up culture needs help from the top. Web 2.0 projects often are seen as grassroots experiments, and leaders sometimes believe the technologies will be adopted without management intervention—a “build it and they will come” philosophy. These business leaders are correct in thinking that participatory technologies are founded upon bottom-up involvement from frontline staffers and that this pattern is fundamentally different from the rollout of ERP systems, for example, where compliance with rules is mandatory. Successful participation, however, requires not only grassroots activity but also a different leadership approach: senior executives often become role models and lead through informal channels.

At Lockheed Martin, for instance, a direct report to the CIO championed the use of blogs and wikis when they were introduced. The executive evangelized the benefits of Web 2.0 technologies to other senior leaders and acted as a role model by establishing his own blog. He set goals for adoption across the organization, as well as for the volume of contributions. The result was widespread acceptance and collaboration across the company’s divisions.

2. The best uses come from users—but they require help to scale. In earlier IT campaigns, identifying and prioritizing the applications that would generate the greatest business value was relatively easy. These applications focused primarily on improving the effectiveness and efficiency of known business processes within functional silos (for example, supply-chain-management software to improve coordination across the network). By contrast, our research shows the applications that drive the most value through participatory technologies often aren’t those that management expects.

Efforts go awry when organizations try to dictate their preferred uses of the technologies—a strategy that fits applications designed specifically to improve the performance of known processes—rather than observing what works and then scaling it up. When management chooses the wrong uses, organizations often don’t regroup by switching to applications that might be successful. One global technology player, for example, introduced a collection of participatory tools that management judged would help the company’s new hires quickly get up to speed in their jobs. The intended use never caught on, but people in the company’s recruiting staff began using the tools to share recruiting tips and pass along information about specific candidates and their qualifications. The company, however, has yet to scale up this successful, albeit unintended, use.

At AT&T, it was frontline staffers who found the best use for a participatory technology—in this case, using Web 2.0 for collaborative project management. Rather than dictating the use, management broadened participation by supporting an awareness campaign to seed further experimentation. Over a 12-month period, the use of the technology rose to 95 percent of employees, from 65 percent.

3. What’s in the workflow is what gets used. Perhaps because of the novelty of Web 2.0 initiatives, they’re often considered separate from mainstream work. Earlier generations of technologies, by contrast, often explicitly replaced the tools employees used to accomplish tasks. Thus, using Web 2.0 and participating in online work communities often becomes just another “to do” on an already crowded list of tasks.

Participatory technologies have the highest chance of success when incorporated into a user’s daily workflow. The importance of this principle is sometimes masked by short-term success when technologies are unveiled with great fanfare; with the excitement of the launch, contributions seem to flourish. As normal daily workloads pile up, however, the energy and attention surrounding the rollout decline, as does participation. One professional-services firm introduced a wiki-based knowledge-management system, to which employees were expected to contribute, in addition to their daily tasks. Immediately following the launch, a group of enthusiasts used the wikis vigorously, but as time passed they gave the effort less personal time—outside their daily workflow—and participation levels fell.

Google is an instructive case to the contrary. It has modified the way work is typically done and has made Web tools relevant to how employees actually do their jobs. The company’s engineers use blogs and wikis as core tools for reporting on the progress of their work. Managers stay abreast of their progress and provide direction by using tools that make it easy to mine data on workflows. Engineers are better able to coordinate work with one another and can request or provide backup help when needed. The easily accessible project data allows senior managers to allocate resources to the most important and time-sensitive projects.

Pixar moved in a similar direction when it upgraded a Web 2.0 tool that didn’t quite mesh with the way animators did their jobs. The company started with basic text-based wikis to share information about films in production and to document meeting notes. That was unsatisfactory, since collaborative problem solving at the studio works best when animators, software engineers, managers, and directors analyze and discuss real clips and frames from a movie.⁴ Once Pixar built video into the wikis, their quality improved as critiques became more relevant. The efficiency of the project groups increased as well.

4. Appeal to the participants’ egos and needs—not just their wallets. Traditional management incentives aren’t particularly useful for encouraging participation.⁵ Earlier technology adoptions could be guided readily with techniques such as management by objectives, as well as standardized bonus pay or individual feedback. The failure of employees to use a mandated application would affect their performance metrics and reviews. These methods tend to fall short when applied to unlocking participation. In one failed attempt, a leading Web company set performance evaluation criteria that included the frequency of postings on the company’s newly launched wiki. While individuals were posting enough entries to meet the benchmarks, the contributions were generally of low quality. Similarly, a professional-services firm tried to use steady management pressure to get individuals to post on wikis. Participation increased when managers doled out frequent feedback but never reached self-sustaining levels.

A more effective approach plays to the Web’s ethos and the participants’ desire for recognition: bolstering the reputation of participants in relevant communities, rewarding enthusiasm, or acknowledging the quality and usefulness of contributions. ArcelorMittal, for instance, found that when prizes for contributions were handed out at prominent company meetings, employees submitted many more ideas for business improvements than they did when the awards were given in less-public forums.

5. The right solution comes from the right participants. Targeting users who can create a critical mass for participation as well as add value is another key to success. With an ERP rollout, the process is straightforward: a company simply identifies the number of installations (or “seats”) it needs to buy for functions such as purchasing or finance and accounting. With participatory technologies, it’s far from obvious which individuals will be the best participants. Without the right base, efforts are often ineffective. A pharmaceutical company tried to generate new product ideas by tapping suggestions from visitors to its corporate Web site. It soon discovered that most of them had neither the skills nor the knowledge to make meaningful contributions, so the quality of the ideas was very low.

To select users who will help drive a self-sustaining effort (often enthusiastic early technology adopters who have rich personal networks and will thus share knowledge and exchange ideas), a thoughtful approach is required. When P&G introduced wikis and blogs to foster collaboration among its workgroups, the company targeted technology-savvy and respected opinion leaders within the organization. Some of these people ranked high in the corporate hierarchy, while others were influential scientists or employees to whom other colleagues would turn for advice or other assistance.

When Best Buy experimented with internal information markets, the goal was to ensure that participation helped to create value. In these markets, employees place bets on business outcomes, such as sales forecasts.⁶ To improve the chances of success, Best Buy cast its net widely, going beyond in-house forecasting experts; it also sought out participants with a more diverse base of operational knowledge who could apply independent judgment to the prediction markets. The resulting forecasts were more accurate than those produced by the company’s experts.

6. Balance the top-down and self-management of risk. A common reason for failed participation is discomfort with it, or even fear. In some cases, the lack of management control over the self-organizing nature and power of dissent is the issue. In others, it’s the potential repercussions of content—through blogs, social networks, and other venues—that is detrimental to the company. Numerous executives we interviewed said that participatory initiatives had been stalled by legal and HR concerns. These risks differ markedly from those of previous technology adoptions, where the chief downside was high costs and poor execution.

Companies often have difficulty maintaining the right balance of freedom and control. Some organizations, trying to accommodate new Web standards, have adopted total laissez-faire policies, eschewing even basic controls that screen out inappropriate postings. In some cases, these organizations have been burned.

Prudent managers should work with the legal, HR, and IT security functions to establish reasonable policies, such as prohibiting anonymous posting. Fears are often overblown, however, and the social norms enforced by users in the participating communities can be very effective at policing user exchanges and thus mitigating risks. The sites of some companies incorporate “flag as inappropriate” buttons, which temporarily remove suspect postings until they can be reviewed, though officials report that these functions are rarely used. Participatory technologies should include auditing functions, similar to those for e-mail, that track all contributions and their authors. Ultimately, however, companies must recognize that successful participation means engaging in authentic conversations with participants.

Next steps

Acceptance of Web 2.0 technologies in business is growing. Encouraging participation calls for new approaches that break with the methods used to deploy IT in the past. Company leaders first need to survey their current practices. Once they feel comfortable with some level of controlled disruption, they can begin testing the new participatory tools. The management imperatives we have outlined should improve the likelihood of success.

Source: McKinsey Quarterly

As IT budgets threaten to follow the same trend lines as financial markets, it's a natural impulse for managers to circle the wagons, concentrate on core projects and put off innovation for another day.

Natural, but wrong.

For proof, look at what happened after the Internet bubble burst earlier this decade. Sure, that tech bust pales in comparison with the current worldwide credit crunch in terms of overall effect, but if you consider the Internet sector alone, the money drought and corporate failures were pretty stunning.

So, how did Google emerge from that wreckage to become not another Pets.com, but a multibillion-dollar company and the world's most influential Web brand? A key part of the equation has been constant innovation (either in-house or by acquisition). It's not easy to innovate when money is drying up all around you. But Google managed to do just that during those lean years.

One important policy has increased both employee satisfaction and innovation at Google: the "20% rule," which allows engineers to spend one-fifth of their time on corporate projects of their choosing -- creating something new or making something work better -- even if the project isn't part of their job descriptions.

For one day each week, Google's engineering staffers get to work on projects they think are important for the business, not what management has prioritized for them.

Before you scoff at that as a tech-bubble luxury that only an overstaffed company can afford, look at some numbers. Google's AdSense for Content was developed as an engineer's "20% time" project. Last quarter, Google generated more than $1.6 billion in revenue from AdSense partner sites; that's almost one-third of the company's total revenue.

A few other companies have similar policies that have yielded noteworthy results. 3M's "bootlegging" rule allows research engineers to spend up to 15% of their time on projects of their choice. One well-known outgrowth: Post-it notes.

What the 20% rule has done at Google is turn a significant chunk of the company into something akin to a venture-capital innovation laboratory, but without outside funding to seed the work.

"There is a big difference between pet projects being permitted and being encouraged," Google software developer Joe Beda wrote several years ago on his blog. "At Google, it is actively encouraged for engineers to do a 20% project."

Beda outlined aspects of the environment that makes 20%-time success more likely, such as a single code base that makes it "really easy to look at and contribute to code in other projects without having to talk to anyone, get special permissions or fill out forms in triplicate," and a culture of transparency so teams share "the most intimate details of their project."

Only exceptional managers are going to buy into the idea that their most valuable assets -- their people -- will be available for company-directed work just 80% of the time. And there have been some rumblings on the Web that Google's 20% rule has come under pressure, especially if main projects are falling behind schedule.

It will be interesting to see whether Google's 20% rule can survive the current downturn. The company said earlier this month that it's shutting down a number of fledgling, experimental Web products and services.

Some of those decisions made a lot of sense, such as ending user uploads at Google Video (hardly needed, now that Google owns YouTube). Some other promising services that were shuttered -- such as a mashup editor that had been in "limited private beta" -- may have been victims of the down economy.

But great things can happen when tech workers in the trenches can spend time pursuing their own ideas. Even when budgets are tight.

Source

Twitter is an incredible medium for listening, learning, and sharing. And, for those in the media and communications industries, it's also a rapid and immersive education in meaningful, two-way micro messaging that helps both parties walk away with a new form of value.

While there are no shortage of posts that offer tips and tricks to help you boost your Twitter followers, it is by no means a popularity contest. The surmounting ploys, friending races, theatrics, and contests to tempt those into following individuals can be fun, but short-sighted, when in fact the true technique for building relationships, regardless of volume, is the genuine act of earning and investing in them. It's rooted in selflessness and rewarded with a rich stream of relevance and a network of valuable contacts that can also help you in the real world.

Twitter is a unique and vibrant community that thrives because of your participation and interaction. The Twitter culture evolves and matures though the greater collective of those who invest in the caliber and meaningful dynamic of the micro exchanges and relationships that we earn and forge everyday.

Our experience is defined by what we share, learn, and discover, what and who we follow and spotlight, and how we give back to those who help us and others.

Brevity speaks volumes.

So, to give back to the Twitter community and start building more mutually beneficial relationships on Twitter, here are the top tips to pay back and pay it forward on Twitter:

- Twitter asks what your are doing. Instead answer the question, What do you think we are better off knowing right now? Other questions to consider...What/who inspires you? What just happened? What am I missing? What did you learn today? What's out on the Web worth sharing on Twitter?

- Curate and share helpful and applicable content on the stream and apply relevance and/or context. Offer perspective. You are unique and your ideas, opinions, and experience can help or offer value to those who are learning.

- The public should feel included in almost everything you share.

- Build a brand or a theme that complements who you are and what you do. Earn a reputation and authority based on the niche you establish for yourself, reinforced by the tweets your post and share. Dan Schawbel has tips to help you do this more effectively.

- Engage with individuals in the public timeline around a given topic. But, draw a line between a public @message and a DM. Not everyone needs to follow your 1:1 dialog in the public timeline, especially as the volume increases everyday. Some things are just better left for the backchannel. If it's an A and B conversation, your followers may "C" there way out of it.

- Try to thank or acknowledge, in some way, those who RT your updates or promote your outside activity. Personally, this is an area where I'm working on devoting more time. Everyone who takes the time out of their busy day to share something you posted deserves recognition.

- Ask questions and share the results. Twitter is a magnificent forum for sparking conversations that pull responses from your friends as well as from friends of friends. Most vanish without closure or results. Share highlights and observations.

- Pay it forward. This is important. About two months ago, I Tweeted, "Remember, Always Pay it Forward and Never Forget to Pay it Back...it's how you got here and it defines where you're going."

- Don't just follow the Twitterati. Find and follow everyone who can help you learn and improve your skills as well as the value of your overall network. I recommend using TweepSearch, which is the first search engine that allows anyone to search and discover relevant Twitter bios and location information using keywords. It's ideal for learning more about those following any given username as well. Mr. Tweet is your personal networking assistant on Twitter. It helps you easily build meaningful relationships by looking through your network and tweets. Mr. Tweet will then suggest new and relevant tweeps and existing followers you should also follow.

- 120 is the new 140. Retweeting is one of the most valuable currencies in the Twitter economy. Leave room in your tweets to make it easier for someone to RT and also add a short reaction or endorsement. The magic number seems to hover around 120 characters.

- Listen AND respond to those who offer insight tied to keywords that are important to you, not just those who send messages in public with your @username. Follow conversations related to the keywords that are important to your ecosystem. Make new friends. Offer value and insight to those conversations related to your industry. Give back to those seeking guidance.

- Don't share anything you wouldn't want a co-worker, your boss, friends, or family to see.

- Learn from your tweets by analyzing the statistics associated with your activity. The criteria associated with defining Influence and authority on Twitter are still debatable. However, your numbers of associated followers, RTs, and unfollowers, are undeniable. Tools such as TwitterCounter provides an interactive chart that chronicles the quantity of Twitter followers for any given username. TwitterFriends is one of the most compelling analytical tools for identifying relevant conversationalists, revealing conversation patterns, and visualizing material conversation networks, by Twitter ID. On the other side of the equation, Qwitter is a humbling and instantaneous solution for honing your updates to better match what your friends and followers hope to see or not see. Qwitter will send an email to you when someone unfollows you and will link the action to the most recent tweet that you posted.

- Host or attend tweetups, conferences, events, etc., where your Twitter friends and contacts are participating. It's important to remember, as it's easy to forget, that relationships count online and in the real world. Investing in meaningful relationships requires in-person engagement over time.

- Respond to negative criticism as well as the accolades. There may be points worth considering to embrace and visualize a broader perspective. Those who respectfully push back, contribute to what we learn, while also push things forward. But, sometimes there's also a point of diminishing return. Certain individuals are steadfast in their views and it's their right to maintain an opposing viewpoint. Beware: Don't feed the trolls.

- Be helpful.

- Make this about conversations, sharing, and learning. Tweetcasters and self-promoters are eventually tuned out.

- This one is a bit of a controversial subject. Do you follow everyone who follows you back? Some say yes, some say no. It's a personal choice and a topic that usually ignites a passionate discussion. I treasure the tweets of those I follow and everyday, I follow new people whom I believe to add value to my Twitter stream. It's important to listen to those you follow and regard and by amplifying the quantity of people simply to return the favor of a follow, makes it incredibly difficult to actually hear anyone. There are those who follow everyone and that may work for them. There are also those who create an alternative account to simply listen to those individuals whom they appreciate and respect. PeopleBrowsr is an incredible Twitter service that allows you to follow everyone back, but also create a column for "VIPs" to see only their tweets on your visual dashboard. In the end, do what's right for you and your network of friends, followers, and mentors. This is something that I'm thinking about quite a bit these days.

- Relationships, whether they're on Twitter, Facebook, or any other social network, are held to the same guiding and ethical principles of those we cherish in the real world. Think of them as investments where the ROI is intelligence, social capital, respect, trust, and friendship. Individuals on both sides must realize mutual benefits and advantages for cultivating short-term or long-term relationships. You are equally responsible for contributing ongoing value.

But don't just take my word for it. Leave your tip in the comments section below...

Also, I took the conversation to Twitter and here are some of the highlights(I tried to include everyone, apologies in advance if I missed something):

Question: If you could share 1 tip to build new & more meaningful relationships on Twitter, what would it be?

Be Engaged @VirtueIMC

be yourself. it's the only sustainable voice you've got. @alexknowshtml

business comes second. @spotcher

always (or at least most of the time) reply back to people when they @ reply you @pepstein

Adopt the Tit-for-Tat version of the Golden Rule. And always say "please" and "thank you." @cheeky_geeky

don't get hung up on the numbers, instead...focus on genuine connections. More isn't always better. @promodiva

just think it goes back to what Doc Searls once said: "screw popularity, just make yourself useful" @triciabuck

Give support. @SavvyAuntie

Be honest. @justinmwhitaker

Make the effort to help followers and followees out (not just to the twelebs!) @seanfee80

Personally send a DM thanking every new person who follows you. @DixonTam

help people solve their problems. don't just twisten (twitter listen) but also respond @healthworldweb

Take ur time; treat it like the adventure it is. Other people are so fascinating! Enjoy it! @ROICoaching

Make it a habit to respond to people not just to what they post @Taiwriter

Don't try to be anything but yourself. @jtnt

Simple, just TALK to people. Isn't that how you create relationships in person? @GlazrKenndyCopy

Follow people within your industry and also follow people with similar interests. @pliadesigns

I'd change the prompt question of Twitter to: "What has just captured your attention?" @barbaranixon

express all the different sides of your personality, don't just twitter about one topic @woodlandalyssa

would say reach out specific requests & support via DMs, just do not auto DM as it feels careless, meaningless @PinkOliveFamily

It matters much more who you're following than who is following you. (Don't get me wrong - I love my followers!) @jfraga

Eagerly follow industry peers. No matter where you are in your career you can learn from others. Share ideas and opinions. @rachelakay

It is about engagement - from all sides... I call it the world's largest cocktail party conversation for clients @VirtueIMC

Find a way to meet in person. Conference, events in your local area, while traveling. And make the effort to follow through. @sloane

Respond to direct questions/feedback. This might not build bigger followings but would build better links across the 'brands'. @jenajean

engage, don't just be a listener or a monologuist, engage, engage, engage. And don't mass follow. Ugh! @tyamdm

Be genuine. You are what you are - be that same person on Twitter not someone you are trying to be. @keithdon

share relevant, new content. Engage in dialogue. @gogocomm

find interesting people and engage them. Ask them questions about themselves, their projects, be genuinely interested in them. @gingerw

Be real, be transparent, don't sell, don't fall into the follower ego thing. @davidfeldt

find out more about your followers and try to engage them in converstaions. like this one. @kmvictory

Be open minded. You never know who is going to be a valuable relationship until you start interacting, listening and learning. @aarond22

To never be afraid to put a bit of yourself and your real thoughts out there when Twittering,no matter how drastic or dynamic(: @themissingsock

Notice. Really notice. Whether you're an A-lister with a huge blog/ gig. Or new-ish. Notice who's supporting you & return love. @Ed

be yourself in all the glory 140 letters let you be... @dgourlay

Like any relationship building activity, I'd say "Listen, engage and converse" is extremely important - especially "Listen". @zubintavaria

it might help if u actually "talked" 2 them instead of adding people like they're poker chips.. Have at least 1 meaningful convo @MarcMeyer

answer the questions others are asking. @gbender26

Hottwiitertips says, "GET REAL." to make twitter more meaningful. What does that mean anyway, "meaningful?" @jmacofearth

Stop calling your followers..."followers." :) @jaculynn

Attend Tweet-Ups, without a doubt. Physical interaction is still the key to connecting. @andrewlockhart

share your connections @1day4me

Meeting people IRL is the best way to have meaningful twitter relationships. I'm excited to meet tweeps upcoming events. @khartline

Listen, react, converse, and be informative. Reply to others' questions, and ask questions yourselves. @emd5005

Don't feel obligated to follow everyone who knocks on your virtual door. Sometimes less is more. Take time to read profiles. @TobyDiva

focus on real-life relationships @Jesse

Be curious and talk to people. @JohnCannon

have real convo-tweets with people. Respond to replies always, and keep the convo going. It's tough to do in 140 characters. @adenasf

Create an "inner circle" or a subset of your subscriptions that you interact with on a regular basis. Feed that stream! @BostonDave

Add as much value as possible in every reply and RT @JodiEchakowitz

always try to give more than you take. @getshust

join the conversation. Meaning don't always be a watcher: share, discuss, react, repeat. @jacquelynmogol

2 Build meaningful relationships on Twitter, connect & engage. Don't just push your info; interaction = trust; It's addictive 2. @CathyWebSavvyPR

Tip #1-Read the tweets, bio, and any links to see who person is and begin convo on what you find. @3keyscoach

Be authentic: Do not self-censor and do not Be Safe. Numbers are meaningless. @AdRanchJason

Follow people who are unlike you, too. Different industries, different beliefs, different geos, etc @jaculynn

Actually read some of the Tweets from those you follow. I have 1200 followers, but I'd guess 20-30 read my Tweets. @chucklasker

Arrange for a tweetup or phone meeting with interesting tweeps. I'm meeting fab people this way. @3keyscoach

Be seen elsewhere. @MaryannM

do stuff for people: quid pro quo @scriber

introduce my network to people who can benefit from knowing them @ducttape

Add value to other peoples tweets, not only the ones that serve your agenda. Be a giver always. @MikeAbrams

Being honest, direct, and "real". @MikeMathia

It will ALWAYS be: be yourself...in 140 characters or less, or more, or whatever -- just always!!! @SteveRepetti

2-way comm, provide info to help others succeed @relth

i like connecting around specific subjects. as u tweet consistently about one thing you converse with people who do the same @rgujral

Go beyond just using Twitter :) @rloughery

Give helpful, honest and friendly replies. Many just post their own updates, toot their own horn, and don't form relationships. @PluginPR

Be authentic: Do not self-censor and do not Be Safe. Numbers are meaningless. @Twensored

Answer questions and offer help because you TRULY want to serve -- with no expectation of reciprocation. @baylan

reply to tweets that responate with you - take the next step beyond reading and act, respond, connect @dahawe

only follow the people who mean something to you, mix it up, RTs, Replies, Daily Garbage, Promotion of stuff you care about @ChrisSaad

Direct message about a shared personal interest or helpful info specific to that person's twitter activity/profile. @katiewinchell

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McKinsey's continue to have some interesting news - here is some of their latest on technology in 2008...

Eight emerging trends are transforming many markets and businesses. Executives should learn to shape the outcome rather than just react to it.

Technology alone is rarely the key to unlocking economic value: companies create real wealth when they combine technology with new ways of doing business. Through our work and research, we have identified eight technology-enabled trends that will help shape businesses and the economy in coming years. These trends fall within three broad areas of business activity: managing relationships, managing capital and assets, and leveraging information in new ways.

Managing relationships

1. Distributing cocreation

The Internet and related technologies give companies radical new ways to harvest the talents of innovators working outside corporate boundaries. Today, in the high-technology, consumer product, and automotive sectors, among others, companies routinely involve customers, suppliers, small specialist businesses, and independent contractors in the creation of new products. Outsiders offer insights that help shape product development, but companies typically control the innovation process. Technology now allows companies to delegate substantial control to outsiders—cocreation—in essence by outsourcing innovation to business partners that work together in networks. By distributing innovation through the value chain, companies may reduce their costs and usher new products to market faster by eliminating the bottlenecks that come with total control.

Information goods such as software and editorial content are ripe for this kind of decentralized innovation; the Linux operating system, for example, was developed over the Internet by a network of specialists. But companies can also create physical goods in this way. Loncin, a leading Chinese motorcycle manufacturer, sets broad specifications for products and then lets its suppliers work with one another to design the components, make sure everything fits together, and reduce costs. In the past, Loncin didn’t make extensive use of information technology to manage the supplier community—an approach reflecting business realities in China and in this specific industrial market. But recent advances in open-standards-based computing (for example, computer-aided-design programs that work well with other kinds of software) are making it easier to cocreate physical goods for more complex value chains in competitive markets.

If this approach to innovation becomes broadly accepted, the impact on companies and industries could be substantial. We estimate, for instance, that in the US economy alone roughly 12 percent of all labor activity could be transformed by more distributed and networked forms of innovation—from reducing the amount of legal and administrative activity that intellectual property involves to restructuring or eliminating some traditional R&D work.

Companies pursuing this trend will have less control over innovation and the intellectual property that goes with it, however. They will also have to compete for the attention and time of the best and most capable contributors.

Further reading:
Yochai Benkler, The Wealth of Networks: How Social Production Transforms Markets and Freedom, Cambridge, MA: Yale University Press, 2006.
Henry Chesbrough, Open Innovation: The New Imperative for Creating and Profiting from Technology, Boston: Harvard Business School Press, 2003.
James Surowiecki, The Wisdom of Crowds: Why the Many Are Smarter than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations, New York: Doubleday, 2004.
Eric von Hippel, Democratizing Innovation, Cambridge, MA: MIT Press, 2005.

2. Using consumers as innovators

Consumers also cocreate with companies; the online encyclopedia Wikipedia, for instance, could be viewed as a service or product created by its distributed customers. But the differences between the way companies cocreate with partners, on the one hand, and with customers, on the other, are so marked that the consumer side is really a separate trend. These differences include the nature and range of the interactions, the economics of making them work, and the management challenges associated with them.

As the Internet has evolved—an evolution prompted in part by new Web 2.0 technologies—it has become a more widespread platform for interaction, communication, and activism. Consumers increasingly want to engage online with one another and with organizations of all kinds. Companies can tap this new mood of customer engagement for their economic benefit.

OhmyNews, for instance, is a popular South Korean online newspaper written by upwards of 60,000 contributing “citizen reporters.” It has quickly become one of South Korea’s most influential media outlets, with around 700,000 site visits a day. Another company that goes out of its way to engage customers, the online clothing store Threadless, asks people to submit new designs for T-shirts. Each week, hundreds of participants propose ideas and the community at large votes for its favorites. The top four to six designs are printed on shirts and sold in the store; the winners receive a combination of cash prizes and store credit. In September 2007 Threadless opened its first physical retail operation, in Chicago.

Companies that involve customers in design, testing, marketing (such as viral marketing), and the after-sales process get better insights into customer needs and behavior and may be able to cut the cost of acquiring customers, engender greater loyalty, and speed up development cycles. But a company open to allowing customers to help it innovate must ensure that it isn’t unduly influenced by information gleaned from a vocal minority. It must also be wary of focusing on the immediate rather than longer-range needs of customers and be careful to avoid raising and then failing to meet their expectations.

Further reading:
C. K. Prahalad and Venkat Ramaswamy, The Future of Competition: Co-Creating Unique Value with Customers, Boston: Harvard Business School Press, 2004.
Don Tapscott and Anthony D. Williams, Wikinomics: How Mass Collaboration Changes Everything, New York: Portfolio Hardcover, 2006.

3. Tapping into a world of talent

As more and more sophisticated work takes place interactively online and new collaboration and communications tools emerge, companies can outsource increasingly specialized aspects of their work and still maintain organizational coherence. Much as technology permits them to decentralize innovation through networks or customers, it also allows them to parcel out more work to specialists, free agents, and talent networks.

Top talent for a range of activities—from finance to marketing and IT to operations—can be found anywhere. The best person for a task may be a free agent in India or an employee of a small company in Italy rather than someone who works for a global business services provider. Software and Internet technologies are making it easier and less costly for companies to integrate and manage the work of an expanding number of outsiders, and this development opens up many contracting options for managers of corporate functions.

The implications of shifting more work to freelancers are interesting. For one thing, new talent-deployment models could emerge. TopCoder, a company that has created a network of software developers, may represent one such model. TopCoder gives organizations that want to have software developed for them access to its talent pool. Customers explain the kind of software they want and offer prizes to the developers who do the best job creating it—an approach that costs less than employing experienced engineers. Furthermore, changes in the nature of labor relationships could lead to new pricing models that would shift payment schemes from time and materials to compensation for results.

This trend should gather steam in sectors such as software, health care delivery, professional services, and real estate, where companies can easily segment work into discrete tasks for independent contractors and then reaggregate it. As companies move in this direction, they will need to understand the value of their human capital more fully and manage different classes of contributors accordingly. They will also have to build capabilities to engage talent globally or contract with talent aggregators that specialize in providing such services. Competitive advantage will shift to companies that can master the art of breaking down and recomposing tasks.

Further reading:
Richard Florida, The Rise of the Creative Class: And How It’s Transforming Work, Leisure, Community, and Everyday Life, New York: Basic Books, 2004.
Daniel H. Pink, Free Agent Nation: How America’s New Independent Workers Are Transforming the Way We Live, New York: Warner Books, 2001.

4. Extracting more value from interactions

Companies have been automating or offshoring an increasing proportion of their production and manufacturing (transformational) activities and their clerical or simple rule-based (transactional) activities. As a result, a growing proportion of the labor force in developed economies engages primarily in work that involves negotiations and conversations, knowledge, judgment, and ad hoc collaboration—tacit interactions, as we call them. By 2015 we expect employment in jobs primarily involving such interactions to account for about 44 percent of total US employment, up from 40 percent today. Europe and Japan will experience similar changes in the composition of their workforces.

The application of technology has reduced differences among the productivity of transformational and transactional employees, but huge inconsistencies persist in the productivity of high-value tacit ones. Improving it is more about increasing their effectiveness—for instance, by focusing them on interactions that create value and ensuring that they have the right information and context—than about efficiency. Technology tools that promote tacit interactions, such as wikis, virtual team environments, and videoconferencing, may become no less ubiquitous than computers are now. As companies learn to use these tools, they will develop managerial innovations—smarter and faster ways for individuals and teams to create value through interactions—that will be difficult for their rivals to replicate. Companies in sectors such as health care and banking are already moving down this road.

As companies improve the productivity of these workers, it will be necessary to couple investments in technologies with the right combination of incentives and organizational values to drive their adoption and use by employees. There is still substantial room for automating transactional activities, and the payoff can typically be realized much more quickly and measured much more clearly than the payoff from investments to make tacit work more effective. Creating the business case for investing in interactions will be challenging—but critical—for managers.

Further reading:
Bradford C. Johnson, James M. Manyika, and Lareina A. Yee, “The next revolution in interactions,” mckinseyquarterly.com, November 2005.
Scott C. Beardsley, Bradford C. Johnson, and James M. Manyika, “Competitive advantage from better interactions,” mckinseyquarterly.com, May 2006.
Thomas W. Malone, The Future of Work: How the New Order of Business Will Shape Your Organization, Your Management Style, and Your Life, Boston: Harvard Business School Press, 2004.

Managing capital and assets

5. Expanding the frontiers of automation

Companies, governments, and other organizations have put in place systems to automate tasks and processes: forecasting and supply chain technologies; systems for enterprise resource planning, customer relationship management, and HR; product and customer databases; and Web sites. Now these systems are becoming interconnected through common standards for exchanging data and representing business processes in bits and bytes. What’s more, this information can be combined in new ways to automate an increasing array of broader activities, from inventory management to customer service.

During the late 1990s FedEx and UPS linked data flowing through their internal tracking systems to the Internet—no trivial task at the time—to let customers track packages from their Web sites, with no human intervention required on the part of either company. By leveraging and linking systems to automate processes for answering inquiries from customers, both dramatically reduced the cost of serving them while increasing their satisfaction and loyalty. More recently, Carrefour, Metro, Wal-Mart Stores, and other large retailers have adopted (and asked suppliers to adopt) digital-tagging technologies, such as radio frequency identification (RFID), and integrated them with other supply chain systems in order to automate the supply chain and inventory management further. The rate of adoption to date disappoints the advocates of these technologies, but as the price of digital tags falls they could very well reduce the costs of managing distribution and increase revenues by helping companies to manage supply more effectively.

Companies still have substantial headroom to automate many repetitive tasks that aren’t yet mediated by computers—particularly in sectors and regions where IT marches at a slower pace—and to interlink “islands of automation” and so give managers and customers the ability to do new things. Automation is a good investment if it not only lowers costs but also helps users to get what they want more quickly and easily, though it may not be a good idea if it gives them unpleasant experiences. The trick is to strike the right balance between raising margins and making customers happy.

Further reading:
John Hagel III, Out of the Box: Strategies for Achieving Profits Today and Growth Tomorrow through Web Services, Boston: Harvard Business School Press, 2002.
Claus Heinrich, RFID and Beyond: Growing Your Business with Real World Awareness, Indianapolis, IN: Wiley Publishing, 2005.
Jeanne W. Ross, Peter Weill, and David C. Robertson, Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, Boston: Harvard Business School Press, 2006.

6. Unbundling production from delivery

Technology helps companies to utilize fixed assets more efficiently by disaggregating monolithic systems into reusable components, measuring and metering the use of each, and billing for that use in ever-smaller increments cost effectively. Information and communications technologies handle the tracking and metering critical to the new models and make it possible to have effective allocation and capacity-planning systems.

Amazon.com, for example, has expanded its business model to let other retailers use its logistics and distribution services. It also gives independent software developers opportunities to buy processing power on its IT infrastructure so that they don’t have to buy their own. Mobile virtual-network operators, another example of this trend, provide wireless services without investing in a network infrastructure. At the most basic level of unbundled production, 80 percent of all companies responding to a recent survey on Web trends say they are investing in Web services and related technologies. Although the applications vary, many are using these technologies to offer other companies—suppliers, customers, and other ecosystem participants—access to parts of their IT architectures through standard protocols.¹

Unbundling works in the physical world too. Today you can buy fractional time on a jet, in a high-end sports car, or even for designer handbags. Unbundling is attractive from the supply side because it lets asset-intensive businesses—factories, warehouses, truck fleets, office buildings, data centers, networks, and so on—raise their utilization rates and therefore their returns on invested capital. On the demand side, unbundling offers access to resources and assets that might otherwise require a large fixed investment or significant scale to achieve competitive marginal costs. For companies and entrepreneurs seeking capacity (or variable additional capacity), unbundling makes it possible to gain access to assets quickly, to scale up businesses yet keep their balance sheets asset light, and to use attractive consumption and contracting models that are easier on their income statements.

Companies that make their assets available for internal and external use will need to manage conflicts if demand exceeds supply. A competitive advantage through scale may be hard to maintain when many players, large and small, have equal access to resources at low marginal costs.

Further reading:
“Jeff Bezos’ risky bet,” BusinessWeek, November 13, 2006.

Leveraging information in new ways

7. Putting more science into management

Just as the Internet and productivity tools extend the reach of and provide leverage to desk-based workers, technology is helping managers exploit ever-greater amounts of data to make smarter decisions and develop the insights that create competitive advantages and new business models. From “ideagoras” (eBay-like marketplaces for ideas) to predictive markets to performance-management approaches, ubiquitous standards-based technologies promote aggregation, processing, and decision making based on the use of growing pools of rich data.

Leading players are exploiting this information explosion with a diverse set of management techniques. Google fosters innovation through an internal market: employees submit ideas, and other employees decide if an idea is worth pursuing or if they would be willing to work on it full-time. Intel integrates a “prediction market” with regular short-term forecasting processes to build more accurate and less volatile estimates of demand. The cement manufacturer Cemex optimizes loads and routes by combining complex analytics with a wireless tracking and communications network for its trucks.

The amount of information and a manager’s ability to use it have increased explosively not only for internal processes but also for the engagement of customers. The more a company knows about them, the better able it is to create offerings they want, to target them with messages that get a response, and to extract the value that an offering gives them. The holy grail of deep customer insight—more granular segmentation, low-cost experimentation, and mass customization—becomes increasingly accessible through technological innovations in data collection and processing and in manufacturing.

Examples are emerging across a wide range of industries. Amazon.com stands at the forefront of advanced customer segmentation. Its recommendation engine correlates the purchase histories of each individual customer with those of others who made similar purchases to come up with suggestions for things that he or she might buy. Although the jury is still out on the true value of recommendation engines, the techniques seem to be paying off: CleverSet, a pure-play recommendation-engine provider, claims that the 75 online retailers using the engine are averaging a 22 percent increase in revenue per visitor.² Meanwhile, toll road operators are beginning to segment drivers and charge them differential prices based on static conditions (such as time of day) and dynamic ones (traffic). Technology is also dramatically bringing down the costs of experimentation and giving creative leaders opportunities to think like scientists by constructing and analyzing alternatives. The financial-services concern Capital One conducts hundreds of experiments daily to determine the appropriate mix of products it should direct to specific customer profiles. Similarly, Harrah’s casinos mine customer data to target promotions and drive exemplary customer service.

Given the vast resources going into storing and processing information today, it’s hard to believe that we are only at an early stage in this trend. Yet we are. The quality and quantity of information available to any business will continue to grow explosively as the costs of monitoring and managing processes fall.

Leaders should get out ahead of this trend to ensure that information makes organizations more rather than less effective. Information is often power; broadening access and increasing transparency will inevitably influence organizational politics and power structures. Environments that celebrate making choices on a factual basis must beware of analysis paralysis.

Further reading:
Thomas H. Davenport and Jeanne G. Harris, Competing on Analytics: The New Science of Winning, Boston: Harvard Business School Press, 2007.
John Riedl and Joseph Konstan with Eric Vrooman, Word of Mouse: The Marketing Power of Collaborative Filtering, New York: Warner Books, 2002.
Stefan H. Thomke, Experimentation Matters: Unlocking the Potential of New Technologies for Innovation, Boston: Harvard Business School Press, 2003.
David Weinberger, Everything Is Miscellaneous: The Power of the New Digital Disorder, New York: Times Books, 2007.

8. Making businesses from information

Accumulated pools of data captured in a number of systems within large organizations or pulled together from many points of origin on the Web are the raw material for new information-based business opportunities.

Frequent contributors to what economists call market imperfections include information asymmetries and the frequent inability of decision makers to get all the relevant data about new market opportunities, potential acquisitions, pricing differences among suppliers, and other business situations. These imperfections often allow middlemen and players with more and better information to extract higher rents by aggregating and creating businesses around it. The Internet has brought greater transparency to many markets, from airline tickets to stocks, but many other sectors need similar illumination. Real estate is one of them. In a sector where agencies have thrived by keeping buyers and sellers partly in the dark, new sites have popped up to shine “a light up into the dark reaches of the supply curve,” as Rich Barton, the founder of Zillow (a portal for real-estate information), puts it. Barton, the former leader of the e-travel site Expedia, has been down this road before.

Moreover, the aggregation of data through the digitization of processes and activities may create by-products, or “exhaust data,” that companies can exploit for profit. A retailer with digital cameras to prevent shoplifting, for example, could also analyze the shopping patterns and traffic flows of customers through its stores and use these insights to improve its layout or the placement of promotional displays. It might also sell the data to its vendors so that they could use real observations of consumer behavior to reshape their merchandising approaches.

Another kind of information business plays a pure aggregation and visualization role, scouring the Web to assemble data on particular topics. Many business-to-consumer shopping sites and business-to-business product directories operate in this fashion. But that sword can cut both ways; today’s aggregators, for instance, may themselves be aggregated tomorrow. Companies relying on information-based market imperfections need to assess the impact of the new transparency levels that are continually opening up in today’s information economy.

Further reading:
Hal R. Varian, Joseph Farrell, and Carl Shapiro, The Economics of Information Technology: An Introduction (Raffaele Mattioli Lectures), New York: Cambridge University Press, 2004.
Carl Shapiro and Hal R. Varian, Information Rules: A Strategic Guide to the Network Economy, Boston: Harvard Business School Press, 1999.

Conclusion

Creative leaders can use a broad spectrum of new, technology-enabled options to craft their strategies. These trends are best seen as emerging patterns that can be applied in a wide variety of businesses. Executives should reflect on which patterns may start to reshape their markets and industries next—and on whether they have opportunities to catalyze change and shape the outcome rather than merely react to it.

About the Authors

James Manyika is a director and Kara Sprague is a consultant in McKinsey’s San Francisco office; Roger Roberts is a principal in the Silicon Valley office.

The authors wish to thank their McKinsey colleagues Jacques Bughin, Michael Chui, Tony Huie, Brad Johnson, Markus Löffler, and Suman Prasad for their substantial contributions to this article.

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