A couple years ago I attended my first rodeo. The most impressive part of the experience was an event I imagine was called “kids being mauled by baby animals.”
It went something like this: A farmhand would release a baby calf, weighing maybe 250 pounds, and hundreds of children would chase the calf around the ring. The first child to wrestle the calf to the ground would win a new belt buckle. The chaos was about as impressive as you’d imagine, but more impressive was the strategy of the winner. While the main pack of children chased directly behind the cow, this little guy (I imagine his name is Colt or Clint or Bullseye) ran to the side, eventually vectoring in head-on with the animal. Sure, the kid was dragged (and practically torn) by the calf, but he won that belt buckle.
It’s funny how the memory works, as this episode popped into my mind during a recent conversation on innovation. How does this apply to us? Are we chasing the cow with the rest of the pack? Or are we thinking about the equation in an entirely different way?
Sure, I’m a technology guy, but I’m also a student of history because history can reveal directions that seem obvious in hindsight. If you follow financial news, you’ve likely been hearing about the waning days of Dotcom 2.0. Valuations are too high, and profits are too low—just like the end of Dotcom 1.0. While it’s easy to compare the two events, there’s value in looking at the contrast as we ponder the future direction of innovation for our industry.
Dotcom 1.0—Connecting Systems
The early 1990s were an interesting time. The Internet was in its infancy, with a high barrier to entry. As businesses started to deploy their own networks, information was siloed, stored in separate systems that didn’t talk to each other. It created inefficiencies and in some cases multiple copies of the same data. The idea of connecting these disparate networks revealed a tremendous benefit. Dotcom 1.0 focused on connecting networks and systems to provide easy access to information. Yahoo is a great example. Today most people can’t figure out why this company is still around, but back in the day Yahoo provided one of the first portals to connected information.
Need another example? Think about the travel industry. A travel agent basically had access to multiple unconnected systems. From individual hotels to individual airlines, a human was required to navigate multiple companies and create a customized itinerary for clients. Navigating this mess was confusing and cumbersome, which made the travel agent a necessity. Today we take for granted that we can book airfare, hotel, a rental car and activities in a matter of minutes on a single website.
Ultimately, Dotcom 1.0 was born from the realization that connecting disparate systems provides a broad view of all available options. Need a certain book? Search, buy, done. Need a filter for your Whirlpool refrigerator model WRS325FDAM? Search, buy, done. Need to know the weather or the answer to a piece of trivia? Click, click, click. The answers are seconds away. While the end result of this interconnectedness takes many forms—from e-commerce to B2B connectivity—the core enabler that allows us to use the Internet in this way is the connection between different systems around the world.
Dotcom 2.0—Connecting People
Like most trends, Dotcom 1.0 fell from grace via oversaturation. Too many players were attempting to capitalize on the same model. Valuations became ridiculous, and the inevitable correction came along. With all of this interconnected technology, the advent of the smartphone and ultraportable computing, people started to find new things to do with the capacity.
Rather than connecting systems, Dotcom 2.0 began to connect people. Capitalizing on the popularity of older systems like AOL Instant Messenger, social media operates on the idea that the consumer is the content provider. Rather than developing and aggregating information, Dotcom 2.0 companies provide tools for individuals to generate their own content to share first with their friends, then the world.
While it wasn’t the first social network, Facebook has so far proven to be the most successful, having drawn its tremendous following by offering generalized tools for self-expression and connection. Other services soon joined in, focusing on distinct ways of communicating. Instagram allows expression through photos. Tumblr provides a blog-type space to post “literally anything” that reflects how you feel. The list goes on and on, but the key defining factor is these companies produce little to no actual content. They simply provide a forum and an experience.
And the revenue model? Social media companies derive revenue through targeted ad placements and data mining. It became apparent to an insightful few that the aggregated data from millions of people could be valuable. And while those of us old enough to be “raised right” struggled with the idea of revealing our random thoughts and pictures of our lunch, the members of Generation Me became immediately enamored with this new way to define and express themselves.
From a business perspective, social media provides behavioral tracking and market segmentation built not from market research firms but from the consumers themselves. My circle of friends and colleagues are just like me. They act like me, and we share the same behavioral habits. By consuming social media, we provide high-quality marketing information that is unattainable through other means.
But as with all bubbles of innovation, the field has become too saturated. A select few companies hold the majority of the revenues, and the bubble is fading away. So what’s next?
Imagining Dotcom 3.0
If the first wave is connecting systems and the second wave is connecting people, what will be connected next? If we want to stop chasing the cow, in what direction should we run? When I’m thinking about innovation, I like to ask myself a few simple questions: How do I want to interact? What do I expect? When you ask these questions of Dotcom 1.0, the answers are obvious. I want to make finding and acquiring things easier. The solution? Amazon, Google, Wikipedia. When you apply them to Dotcom 2.0, the answers are also obvious: I want to be heard, I want to connect with others who share a common trait. The solution? Facebook, Twitter, LinkedIn. The key to identifying innovative new directions is to figure out what you want.
So where will Dotcom 3.0 take us? We all live to regret our predictions, but my bet is that everything will come together. Connecting information systems and business transactional systems with the behavioral analytics provided by social media interactions will fundamentally change the way products are purchased. I can see my friend’s new television posted on social media, click it and buy it all in one motion. The buyer of insurance will become the producer because friends will gravitate toward solutions that work for their social networks. Product reviews will become irrelevant, as people will be able to see the buying behaviors and satisfaction of all consumers of a product.
These predictions may sound a little weird, but so did Facebook when it first launched. To innovate, we have to remove ourselves from the world and imagine a better way.