Last year, my son (a freshman in high school) came home and proudly announced that he had gotten into the Web 2.0 program at school. I really wanted to share in his joy, but the phrase "Web 2.0" was only vaguely familiar to me and my impression at the time was that it was another catchphrase invented to re-inflate the internet investment bubble of the '90s. In the year that has followed, a whole lot of people have learned and shaped what Web 2.0 is or may be.

"Web 2.0," coined by O'Reilly Media in 2003, refers to a perceived second generation of Web-based communities and hosted services that facilitate collaboration and sharing between users. Some of the better-known examples are eBay, craigslist, Wikipedia, del.icio.us, dodgeball, and AdSense, all of which derive their power from the human connections and networking effects they make possible. In other words, they offer genuine interactivity if you like, simply because people can upload as well as download.

It is not actually a new technology or even a new version of existing technology (as the 2.0 might imply), but rather a new use of the Web's existing capabilities. Many of the ideas of Web 2.0 were already in play well before the term "Web 2.0" emerged. Amazon.com, for instance, in a form of self-publishing, has allowed users to write reviews and consumer guides since its launch in 1995. The key to understanding Web 2.0 is to think about harnessing social network effects to create products or services that get better the more people use them. O'Reilly has identified core competencies of Web 2.0 companies:

• Services, not packaged software, with cost-effective scalability
• Control over unique, hard-to-recreate data sources that get richer as more people use them
• Trust in users as co-developers
• Ability to harness collective intelligence
• Leveraging the long trail through customer self-service (for example, the ability to develop products or services that individually may have low demand or have low sales volume, but can collectively make a significant revenue and profit stream, such as Amazon or Netflix)

So, what is the potential for the financial services industry? How might you harness network effects for your business? Here are some ideas:

1. Make it easier for people to sample or recommend your services.
2. Help your customers network. Is there some social networking angle to what you do? Let them annotate, review, and share information about your product or service. Amazon is a great company to study in this regard. They don't have a single big Web 2.0 competitive advantage like Google or eBay—they just work harder than anyone else to involve their customers in adding value to their product.
3. Build services that learn from your customers. If your product requires configuration or customization, document and export these cases so that it's easier for the second customer who encounters the special situation to use your product or service.

Wells Fargo bank recently announced that its "Internet services group has an internal Wiki where engineers, marketing, product managers, and operations teams all submit ideas—creating an open, inclusive environment where points of view are shared." This try-it-internally-first approach to stimulate thinking on how it may be of value to markets and customers will most likely be the early adaptor approach in our industry. While blogs, Wikis (variations of Web 2.0), and their ilk are now only at a few leading-edge companies, they will most likely become more common and eventually pervasive. In the not-too-distant future, organizations will use these tools to enhance collaboration and harness collective intelligence. Is it time to try one in your organization?