There’s plenty of debate about how to measure the value of social media at the moment, and, in some cases, whether sites like Facebook and Twitter are at ‘the heart of a fallacy‘ around online advertising. But, according to a new study by McKinsey Global Institute (MGI), the business and economics research arm of McKinsey & Company, social technologies have the potential to raise the productivity of knowledge workers by 20 to 25 percent, as information is made more accessible and searchable and communication streamlined.
The study states a huge amount of knowledge is locked up in email inboxes and collaborative social technologies could reduce not only the amount of time spent on writing, reading, and answering email, but time spent searching for content and expertise.
The social economy: Unlocking value and productivity through social technologies estimates total email use by interaction workers could be reduced by 25 percent, freeing up 7 to 8 percent of the workweek for more productive activities, and reduce information searching time by as much as 35 percent. Some of these gains are based on shifting communications among interaction workers from channels designed for one-to-one communication (email, phone calls) to social channels, which are optimised for many-to-many communication.
“Social technology has evolved from simply another new media platform to an increasingly important business tool, with wide-ranging capabilities. Thousands of companies have found that social technologies can generate rich new forms of consumer insights—at lower cost and faster than conventional methods. Moreover, in addition to engaging consumers directly through social media, companies are watching what consumers do and say to one another on social platforms, which provides unfiltered feedback and behavioral data (e.g., do people who ‘like’ this movie also ‘like’ that brand of vodka?).”
For starters, companies are crowdsourcing product ideas, labour, funds, and using social networks to educate, engage and find support for their causes.
Social platforms have also become a tool for managing procurement and logistics, allowing instant communication between different parties on B2B supply chains.
As the report points out, social is a feature, not a product. “Social features can be applied to almost any technology that could involve interactions among people (e.g., the internet, telephone, or television). A social component—a button to like or comment— can be added to virtually any IT-enabled interaction, suggesting an almost limitless range of applications.”
McKinsey analysed four industries in detail (consumer packaged goods, consumer financial services, professional services, and advanced manufacturing), and came up with an estimated total annual value creation potential of $900 billion to $1.3 trillion. About $345 billion of this value potential would hail from product development and operations; $500 billion from marketing, sales and after-sales support activities; and $230 billion from improvements in business support activities.
Individual firms can gain even more, with the companies that stand to benefit most having one or more of the following characteristics:
* A high percentage of knowledge workers
* Heavy reliance on brand recognition and consumer perception
* A need to maintain a strong reputation to build credibility and consumer trust
* A digital distribution method for products or services
* An experiential (hotels) or inspirational (a popular sports drink) product or service offering
The research shows consumer companies that rely heavily on brand recognition can increase margins by as much as 60 percent, by using social technologies to connect with customers and to generate sharper consumer insights. Benefits apply only to individual firms and not the entire industry, though, since they are based on initiatives that increase market share at the expense of other players.
McKinsey also points out that simply shifting advertising and consumer insight budgets to social media will not suffice.
“In the past few years it has become clear that only well-planned and well-executed programmes (often incorporating non-social components such as mass media) will capture the potential value of social technologies.”
The study also cautions that capturing the full potential value of social technologies will require “transformational changes in organisational structures, processes, and practices, as well as a culture compatible with sharing and openness”.
“As with earlier waves of IT innovation, it could take years for the benefits to be fully realised, because these management innovations must accompany technological innovations. The greatest benefits will be realised by organizations that have or can develop open, non-hierarchical, knowledge-sharing cultures.”
* More than 1.5 billion social networking users globally
* 70 percent of companies use social technologies
* 90 percent of those report some business benefit from social technologies
- This story originally appeared on idealog.co.nz.