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Virtual World Business Intelligence

Virtual worlds not only offer philosophers whole new universes to contemplate, but novel, confusing and most of all scary opportunities for businesses as well. If a virtual tree falls down in a virtual forest and no virtual person is around to hear it, does it still make a sound?

 

Many of the senior corporate executives I have spoken with, if they know of them at all, don’t quite know what to make of virtual worlds like Second Life or There. They read news reports that say companies like KPMG have found virtual communities very useful recruiting tools; or read that IBM, Cisco and Toyota have built major presences in them; or that even the Conference Board has published a major report telling companies of the need to take virtual worlds seriously, start crafting their entry strategies or risk being left behind.

 

From a business risk management perspective, virtual worlds highlight an interesting collision of three realities that companies – even high tech ones – are struggling to deal with.

 

The first reality is the rapid technological obsolescence of even the digital cognoscenti. Simply, so much new technology is pouring into the market place that it is hard for even the most technologically literate to keep up with it all. I have advanced degrees in electrical and computer systems engineering, I work with a high-tech venture investment bank in New York, I spend a lot of my time with techno-geeks, and I can barely keep abreast what is happening let alone understand it all.

 

What’s worse, it is getting increasingly harder to predict what the overall impact of any one of these new technologies might be.

 

For instance, the ubiquitous Apple iPod only hit the street in October 2001.  When it first came out, the iPod created some excitement, but no one – except maybe Apple CEO Steve Jobs – saw what it could do beyond “putting 1,000 songs in your pocket.”

 

Yet the iPod is now in its fifth generation, has moved from being able to put 1,000 songs in your pocket to 16,000, has sold over 120 million units, inspired Volkswagen to advertise its models as essentially an iPod accessory, brought the music industry to its knees, and is promising to do the same to the television, if not the movies.

 

The Apple iPhone launched just this year has already had a major impact on the mobile telephone industry, and given all the iPod features built in, will only increase the pressure on the music and television industries. The success of the iPod and iPhone has also spawned competitors who add still more woe to the entertainment and telephony industries.

 

So, when something like Second Life appears in 2003, and grows to over a half-million users, companies have to take it somewhat seriously, even if they don’t know exactly why anyone would bother. As one senior executive friend of mine likes to say, “I barely have time to live my first life; how does anyone have time to live a virtual second?” 

 

This brings us to the second collision of reality that I spoke of. For my friend, and for myself, information technology has always been a way of improving productivity or easing the process of communication. We took analog ways of performing functions and transformed them into their digital equivalents.  That is how we have mentally framed the “proper use” of information technology and quantified its value.

 

However, the current generation looks at information technology primarily as a means for creating entertainment and for socializing. Just look at MySpace, a social networking Web site that started in August 2003 and now has over 250 million registered members with 230,000 new members each day. Facebook, which started six months later, has 34 million active users, the vast majority appearing to be college students.

 

The underlying assumptions of how technology is used and what it should be used to provide is changing, and companies are having a hard time recognizing or adjusting to this. For instance, when Second Life first appeared, Cisco moved quickly to create a large presence, not wanting to miss a potential digital revolution. But after spending quite a bit of effort and money, Cisco discovered that no one came around to visit. In its own words, “It was a ghost town. Digital tumbleweeds”

 

What Cisco discovered was that people belong to Second Life to hang out, socialize, and play games. They weren’t interested in visiting a virtual representation of Cisco. As a result of this experience, Cisco completely tore down its first virtual world attempt, and rebuilt it with the purpose of creating conversations among its employees and customers.  Cisco also reset its own expectations about what it wanted out of Second Life and virtual worlds in general; it’s more about fostering meaningful communication than about creating a new sales channel.

 

The third collision of reality with virtual worlds is that they portend a change in what business intelligence needs to encompass. Over this year, I have written about the use of internal futures markets to predict the success or failure of technology trends or internally-developed products; I’ve also written about the increasing availability of machine readable news, both which increases the amount, speed, and (hopefully) accuracy of the information available to corporate decision-makers.

 

Virtual worlds, their social networking brethren like MySpace and Facebook, (and who knows what else is coming next), are creating new sources of business intelligence that remain largely ignored and untapped by corporations. The very concept of corporate business intelligence in a social community environment is something I don’t think many companies are thinking about. They are still trying to figure out how BI can be used to transform analog decision-making to digital.

 

I can easily see that improving social or group decision-making – rather than individual executive decision making – may be a better future objective of business intelligence. And if this is the case, it is probably important to think about, even if it adds one more thing to the already overflowing to do list.

 

So, does a virtual tree make a sound when it falls in a virtual forest? The only way is to join a virtual world and find out.

Robert Charette is president of risk management consultancy ITABHI Corp. and director of the Cutler Consortium's ERM & Governance practice. He can be reached at charette@itabhi.com.

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