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In Aikido, martial arts students study and practice katas—pre-arranged movements that enable them to deal with an opponent successfully. The centuries-old art teaches practitioners to use the force of an opponent against the opponent. This strategy gives the student a definite advantage if attacked.

In a similar way, what were strengths in Web 1.0 have become weaknesses in Web 2.0. Remember when companies had to have legions of developers, dozens of people manning the help desks, and big was best?

In Web 2.0, the flip side is what's important. Agility and intellect are critical. Co-creation provides leverage and risk is shared. Knowledge flows easily, resulting in faster development. Collaboration is pervasive and there are no enemies—just partners.

There are several things a small-to-midsize business (SMB) needs to pay attention to if it's going to gain competitive advantage in Web 2.0. Because flexibility is important, SMBs can beat large enterprises by adding value and making their internal and external environments extremely collaborative.

Some Evidence

The main point is that people tend to move toward ideas.

You can see this in a comparison of two companies: Microsoft and 37signals. One is a software juggernaut that jealously guards its intellectual property (IP). Microsoft still takes an assertive stance toward customers and markets. Its new Windows Vista, large and late, has received mixed reviews—though its contribution to revenue is staggering.

37signals is almost an exact opposite. The company appears interested in attraction and creativity, building software as a service (SaaS) applications that do just enough for the user—not more. Its Basecamp is product management with a collaborative style. Instead of time-consuming, difficult-to-use software, 37signals uses a simple font, open space, and tabs that increase ease of use and productivity.

Adobe Photoshop has been accused of being one of the most difficult applications to use. As a result, Adobe Photoshop Elements was developed—it could be called a "lite" version of Photoshop. A boxed edition of software can have difficulty competing with a great hosted idea.

Shutterfly is a site that allows users to upload photos, share them, and create items with them. With Shutterfly, there's no such thing as just a static individual album. Users are able to create a photo collage and get it printed on a mug, or build a photo album online then have it printed and delivered. It's the completeness of the services that differentiates Shutterfly—so much is possible.

Software development continues to undergo a tremendous shift away from closed platforms by Microsoft and others to the openness typified by Linux, Opera, and Ubuntu.

Corporations have seen the shift and are using open software themselves—often slashing their expenses in the process.


  1. Companies need to look more deeply at how customers might like to use their products. Maybe the company sees the product as a tissue, but the consumer sees it as a health care item, a decorative item, a short-term emergency bandage, an item to use in art projects.
  2. Crafts, knitting, sewing, quilting, and art are all enjoying renewed popularity. People are discovering that they like to make things. There's even a magazine called Make.
  3. There is a love-hate relationship with mass-produced anything. And people want craftsmanship, the unique, the unusual, and things that make them think and are interesting. While selling mass-produced items is not as attractive as it was, there's still a place for that kind of item—but maybe now it should be personalized in some way.
  4. Early customer feedback is important. Waiting until prototypes are done to ask for customer opinions on fit, finish, packaging, flavor, texture, perceived value, or price is too late. Build customer feedback into the product cycle as early as possible.

What to Do Now

  1. Find new uses. New uses for products create new markets. Expand your perception and see with new eyes what you've been producing. Put yourself in the shoes of your customer. Come up with additional uses—go out on a limb.
  2. Be part of the trend. Find ways your products or services can work with new trends.
  3. Personalize it. Find a way to make your product unique to the purchaser. Deliver it the way users want. Make it available on all platforms. Let them adapt the user interface. Give the consumer the ability to change things.
  4. Listen to a customer today. Establish systematized customer interaction as a cultural norm within your company. Make sure associates at every level get involved.

Start practicing your own Aikido moves, and use your opponent's strength to your benefit.

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Nilofer Merchant is the CEO of Rubicon Consulting (, a strategy and marketing consultancy based in Silicon Valley that solves complex business challenges for high-tech companies.