03/20/07

As an entrepreneur starting a Web 2.0 company, I have often made the mistake of adopting the “build-it-and-they-will-come” attitude toward our offerings. As I mentioned in a previous article, it is seductive to draw comparisons with significant trends (social networking, Web 2.0, SaaS, Enterprise 2.0, Services 2.0 etc) and large success stories (Google, Yahoo, eBay, MFG.com, SalesForce.com) and think “If only we could capture 3% of that market …” There are a slew of Web 2.0 entrepreneurs out there today who are thoroughly convinced that their offerings will change the world, but are not seeing any market traction.

I was reading a book called Freakonomics on a flight home and had a moment of clarity. In this book, the authors talk about all human behavior being influenced by three types of incentives; financial, social and moral. They go on to explain several confounding phenomenon just based on this premise.

I started thinking about using just this approach to predict whether Web 2.0 offerings would gain traction. Very simply, think of your offerings as an incentive program. What is in it for the user to get excited about using your offerings? What is his financial incentive to do so? What is his social incentive to do so? And in the case of not-for-profit organizations, what is his moral incentive to do so? If you have compelling answers to do the above questions, you offerings will probably gain traction. If not, starting working on your next idea.

Now I realize that taking a hard look at the value of a company’s offerings is not really a novel idea. But I do think that thinking about Web 2.0 offerings (the audience for which is typically an individual) as an incentive program makes a lot of sense.

Thoughts?

Sampath

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