I was at Tim O’Reilly’s Web 2.0 conference last week in New York.  As far as I know he coined the term 2.0.  Recently, he wrote an insightful post that suggests there are three things that explain everything you need to know about web2.0 as it relates to the enterprise.

For those of you trying to generally understand how StyleHop is going to help fashion companies, this post will help ground you in the fundamental value proposition.  The only point he misses is that creating a consumer destination also allows you to create and monetize a dialogue between companies and consumers.  Yelp is proving that.

Here is the excerpt I found most illuminating:

If you understand the following three things, you know everything you need to know about Web 2.0 and the enterprise:

1. Harvest every bit of user contribution, not just the explicit. Your business has thousands of touch points with customers. When they buy from you, they contribute data as well as money. When your suppliers increase their prices, or change their delivery times, they contribute data to you. When you advertise, and people respond (or don’t), they contribute to you. When you introduce a new product, when you do something your customers love, or hate, and people talk about it, they contribute. Your data is one of your most critical business assets. Are you doing everything you can to wrest competitive advantage from it? I’ll remind you again: PageRank and the real time Adwords auction were both hidden in plain sight. Understanding what data you have, and what meaning you can extract from it, is the holy grail of Web 2.0.
2. The era of IT as a back-office function is over. It’s no longer good enough to gather data and analyze it, then propose and adjust strategies over the next budget cycle. You must infuse your organization with IT, so that, like Walmart, your supply chain responds every time a customer rings up an item at the cash register. This is how Walmart is like Google. No, not the website, but the live enterprise, which learns and responds. That’s why in my enterprise 2.0 talks, I usually end by saying “turn your IT department inside out - or wait for some innovative startup to do it for you.” Banks could be building something like Wesabe’s Value Engine and tips feature, which extracts collective intelligence from credit card data; phone companies could be doing something like Skydeck’s extraction of your social network from your phone bill. In fact, they’d be in a way better position to build integrated services against this data than startups that are having to first extract the data from corporate databases one customer at a time!
3. Web 2.0 thrives on network effects (also known as virtuous circles): data begetting more data, services getting better in such a way that they are used more often, until you are so far ahead of the next guy that he can’t catch up. That network effect is enhanced by letting other people use and build on your data, not by keeping it private. What we’ve seen is that the first company to create network effects in a particular class of data tends to end up owning that data simply through having the biggest pile, or the best results, not because they have unique data. (Again, Google: Microsoft and Yahoo! have the same data for the most part; Google is better at creating value for others from it.)