Aside from being innovators themselves, Digital Natives are also forcing businesses to innovate. The entertainment industries, confronted with the breakdown of traditional distribution models for music and movies, are one particular striking example. But this is also true on a more microlevel – even for local businesses. Let’s take Yelp as an example.

A website for user-generated reviews of local businesses, Yelp started in the San Francisco area and has since spread to every major US city and dozens of smaller ones. The social networking aspects of Yelp, which allowed users to interact and essentially review the reviews, catapulted it into popularity. It currently boasts 16 million unique visitors per month and personally, Yelp has become my de facto guide to the city. When I headed to Chicago on my own for two months this summer, I didn’t buy a single guide book, confident that I could find my way around with Yelp and Google Maps.

When Yelp becomes such a popular authority on local businesses, they start paying attention. For local businesses that especially rely on word of mouth, the site is probably the best place to take the pulse of customers. For Digital Natives, Yelp provides a forum for feedback and participation. Businesses themselves would be wise to join in on this conversation.
Of course, the picture isn’t always rosy and perhaps the toughest part of Yelp is the critical reviews. So how do businesses deal with negative reviews? Certainly not by further alienating your critics with signs saying, “No Yelpers.”

The San Francisco Business Times reported on a Restaurant Bootcamp in San Francisco that focused exclusively on the question, “What is your Yelp strategy?” Various restaurateurs mentioned inviting top Yelpers to pre-opening parties, personally contacting disgruntled reviewers, and taking into consideration specific feedback from Yelp reviews. The fact of the matter is, Yelp is very much on the radar for small businesses. A presence on Yelp, along with accurate information and photos, is crucial for a business craving out an online reputation.

Innovation here isn’t just about local businesses taking advantage of digital word of mouth, but also Yelp’s savvy in building its own credibility. Many of my favorite haunts around town boast a “People Love Us on Yelp” sticker, so whenever I watch into new stores with the same sticker, I know I can rely on a trusted brand. Yelp has also been leveraging its power to make and break online reputations into partnerships with local businesses. With these strategies, it has also come under a fair amount of scrutiny lately for supposedly manipulating the placement of positive/negative reviews based paid partnerships.

Yelp is of course just one site in the larger constellation of services of which businesses can take advantage. Businesses need to adjust to an environment where the customer feedback loop is constant and accessible to everyone. The Internet has opened up all these tools for communication, but the tool needs to fit the task at hand. Simply creating a Facebook Page, a Twitter account and a profile on every social networking site is a scattershot approach. Yelp, for example, is fantastic for local businesses looking to distinguish themselves from the competition, but less useful for chain stores where the goal is, essentially, an identical experience in every chain. Innovations isn’t just jumping on the social networking bandwagon, but figuring out which tools are best.

-Sarah Zhang