Enterprise 2.0 technologies make companies stronger. This is what we read in almost every analytical blog and in many business publications. More and more companies are announcing the introduction of Enterprise 2.0 technologies to their business. One of the recent examples is IBM’s Lotus Connections. It’s an enterprise-wide IT controlled social networking package, which was presented earlier this year. The company representatives called it one of the features designed to take advantage of "real-time presence and communications capabilities."

Well, even technological giants are opening up to Enterprise 2.0, having realized that it will drive corporate innovation and facilitate communication from the boardroom to employees and back. Previously closed corporations turn open with the help of new-generation software. But what are the advantages of being open? To answer this question it would be useful to examine the key differences of open and closed organizations.

Let me explain what I mean by “open” and “closed” first. I should note that I will depart from the traditional economical definitions.

Closed organizations usually are hierarchical, strongly regulated and not sensitive to their environment. Hierarchy as an organizational system is often criticized due to its multi-level structure; I mentioned this in one of my previous posts. It can be hard to implement innovation in a hierarchical organization, as its structure is not flexible. Innovations require people and groups to communicate and work together in new ways. Hierarchical organizations are limited in communications and knowledge-sharing between different departments. It can be hard to get necessary information due to the superfluous bureaucracy. Let’s take a situation when an employee desperately needs an answer to some question. He is ready to search, but it seems almost impossible for him to find anything in an enterprise’s closed email environments and file systems where so much knowledge resides. The most experienced workers in organizations of the closed type are often burdened with providing the same information over and over again, year after year. Very often they have to go through complex and time-consuming processes to get information collected in series of files, which can be used by newcomers later. A lot of data is just not being collected, which means the precious knowledge is getting lost. Poor information-sharing can prevent enterprises from successfully implementing innovative processes, rapidly developing and immediately responding to market changes.

However, it would be hard to find completely closed organizations nowadays. Apparently, they won’t be able to survive in the ever-changing business environment. It’s much easier, however, to find companies closed in some aspects. A good example here might be market leaders that believe that they are using the most effective technology and producing the products well demanded by the major customers. These companies are confident in their leading positions, and it results in the narrowing of their strategic vision. They don't have to struggle in strong competition; that’s why they stop listening to their consumers. Such organizations are closed for the knowledge coming from outside of the company, and they might miss development ideas produced by consumers. These enterprises support only one-way communication. This one-way communication goes from a company to its customers. This type of communication can result in the slowdown of their evolutionary processes.

Here’s an example: Microsoft Internet Explorer has been a market leader for a long time in the browser market. Microsoft had a great market share and almost no competition. At the same time, users were struggling to get tabbed browsing for years, but Microsoft ignored their requests. It switched to one-way communication. Then Firefox entered the market, taking users from Internet Explorer. This fact made Microsoft finally wake up and listen to customers. However, it was too late, and now there’s real competition between two. Another example is searching within e-mail. Outlook users were crying for years asking Microsoft to implement indexing and fast searching in e-mail. Their cry was heard, but not by Microsoft. New search initiatives came from Google (including Gmail and Google Desktop Search) and Apple. Only after that did Microsoft start to pay attention.

So big companies become closed in some aspects and turn to one-way communication, when they are pretty happy with their market share and current market position. They can be either too lazy to change anything or afraid of changes.

Today top management of many companies realizes that it can be much more profitable for an enterprise to be open. An open organization can be defined as an organization open to anyone who agrees to abide by its purpose and principles, with complete transparency and clearly defined decision making structures, ownership patterns, and exchange mechanisms. Open companies are more flexible and mobile due to their internal organization. Enterprises of this type are democratized and have better communications within a company. Wikis, blogs, social networks and other "weapons of mass collaboration," as Don Trapscott calls them in his Wikinomics, change collaboration patterns in organizations. Now every employee is welcome to participate in an enterprise activity and influence the corporate policy and development of the whole company. This change can be started by the top management, when CEOs in search of the right direction for innovation decide to initiate the creation of social networking systems for collaboration with customers. It can also be started at other levels, for instance, when individuals start using planning or project management software and then involve others into the on-line collaboration process. Mike Sigal, CEO of Guidewire Group, a research firm focused on emerging technologies, said in one of his interviews that more and more companies are getting “ready to enter in a dialog with their market, as opposed to having a one-way conversation.” With the help of Enterprise 2.0 tools, organizations become open in every way: open to customers, open to new markets, open to new technologies and techniques, open to learning. Perhaps one of the most prominent examples here is Procter & Gamble fundamentally changing of its company culture. P&G turned its Research & Develop (R&D) group to Connect & Develop (C&D) after the company went into a crisis. P&G CEO A. G. Lafley decided to broaden the horizon by looking at external sources for innovation. P&G's new strategy, called Connect and Develop, uses technology and networks to seek out new ideas for future products. The corporation discovered that important innovation was increasingly being developed at small and midsize companies. Even individuals were eager to license and sell their intellectual property. University and government labs had become more interested in forming industry partnerships, and they were hungry for ways to monetize their research. The Internet had opened up access to talent markets throughout the world. That’s why P&G decided to experiment with the new concept of open innovation building and exploiting innovation networks of all kinds. So today, more than 35% of P&G’s new products contain elements originally developed outside of the company. Approximately 45% of all initiatives within the product development portfolio possess key elements discovered externally. Procter & Gamble R&D productivity has increased by almost 60%. Introduction of Enterprise 2.0 technologies allowed to double the success rate of innovations and to diminish the costs of innovations. Investments in R&D relative to sales have been reduced from 4.8 % in 2000 to 3.4 % today. Some other examples: companies like Microsoft, IBM, Google, Sun Microsystems and SAP write corporate blogs on a regular basis. The number of non-technology firms that have their own corporate blogs is rapidly growing too. For example, the vice chairman of General Motors, Bob Lutz, maintains one of the most widely read corporate blogs on the Web.

Openness of an enterprise means open communications among employees, partners, customers and shareholders. An open organization is a transparent organization. Enterprise 2.0 software enables customers to closely follow the product development process and to make valuable contributions. That is why one of the global financial services firms, Morgan Stanley, announced its wish to bring the company up to speed with Enterprise 2.0. The announcement was made at the Office 2.0 conference, which took place this September. Adam Carson of Morgan Stanley said that the corporation has 70 to 80 social networking projects underway, many involving creating online communities with clients and wikis. This can be a good example of how vendors and customer relations turn into “peer production” (a term coined by Yochai Benkler), that is when customers and service providers collaborate effectively achieving better results.

Open organizations empowered by Enterprise 2.0 technologies unleash the power of collective intelligence. They involve partners and customers in their collaboration process. Collaboration within such organizations is much more efficient and makes the whole organization stronger in the market. So organizations, that are closed even in just a few aspects will most probably yield to a more flexible and innovative company.

Enterprise 2.0 culture empowers organizations and makes them more competitive. This is proved by hundreds of companies that adopted the new technologies at the early stage. In the course of time, the number of closed enterprises will gradually decrease, influenced by the new technologies and business collaboration patterns. So if you want to be more competitive, you should think of bringing Enterprise 2.0 tools to your business and empowering your enterprise with the vigor of collective intelligence.