Is Web 2.0 simply a passing fad or an enduring trend? We no longer have to rely on the evangelists’ opinion. A recent McKinsey study of more than 3,000 executives has come up with statistically significant proof that the intensive organisation-wide adoption of Web 2.0 technologies is closely correlated with margin and market share gains.
The study identified significant increases in the number of companies that reported that they were already leveraging social networking (40%) or blogs (38%) within their business. Nearly two-thirds of the respondents reported that their investment in these technologies would continue to rise into 2011 and beyond.
Creating a New Generation of “Learning Organisation”
Some of the most commonly reported benefits included increased speed of access to expert knowledge both internally and externally, reduced communication costs and increased marketing effectiveness – as well as increased customer satisfaction and reduced time-to-market for new products and services.
It’s clear that the intelligent application of Web 2.0 technologies is creating more agile organisational structures, capable of reacting more quickly to changing circumstances and sharing learning more effectively both within the company and with customers, partners, suppliers and other collaborators.
Less Hierarchy, Improved Collaboration, Better Decisions
The impact on organisational behaviour was equally impressive. Highly networked organisations reported that information flows had become less hierarchical, that collaboration had improved across organisational silos, and that decisions were being made lower in the corporate hierarchy.
McKinsey identified three clusters of Web 2.0 enabled companies – Internally Networked organisations that derived most of the benefits within their corporate walls, Externally Networked organisations that leveraged technology in their interactions with customers and suppliers, and Fully Networked Enterprises that managed to widely engage employees, customers and partners.
Accelerating Advantages
It’s this latter group – a small but growing minority of those surveyed today – who most clearly offer a vision of what every organisation could achieve if they can find the will and the commitment to act. McKinsey suggests that these pioneers are likely to enjoy accelerating advantages over their competition as network effects kick in.
These fully networked enterprises are already enjoying tangible and real advantage. McKinsey’s research uncovered statistically significant proof that they were already showing market share gains over their less network-literate competitors
Towards the Fully Networked Enterprise
I’d like to offer a handful of suggestions that can help any organisation accelerate their progress towards becoming a fully networked enterprise:
- Incorporate commercially available technologies into your employees day-to-day work activities. If you’re a Salesforce.com user, then be sure to take advantage of their Chatter application. Make it part of the way you do business. Encourage and reward the people who contribute the most. Seek to achieve a critical mass of usage
- Diagnose and deal with the factors – people, processes and systems – that may be creating or perpetuating organisational barriers. Break down the silos. If necessary, identify a handful of symbolic acts that clearly communicate the “no barriers” message
- Find out how your customers and partners prefer to receive information. Map out the BuyerSphere that surrounds and informs their decision making. Rather than imposing your system on them, integrate with theirs. Make collaboration a natural act
- Challenge unnecessary hierarchies. Seek to devolve decision making down the organisation and closer to the customer. Share war stories. Create some heroes!
What are your experiences of Web 2.0? Can you point to the sort of gains that McKinsey identified? And what are your priorities for 2011 and beyond?
Bob, thanks for sharing this study.
We’ve also found in our research that industry leaders (those that preform better than the average) are better at collaboration. And web 2.0 tools can certainly help.
But you stretch the point too far by saying the study “proves” that Web 2.0 “drives” market share gains.
Correlation does not mean causation. To “drive” something, the study would have to show that Web 2.0 tools independently of other factors, caused these market share gains. So far as I can tell, McKinsey did not reach this conclusion.
From the blog post you referenced:
Sure, market leaders are more likely to be doing all sorts of things. In fact, in my opinion it’s the “management practices” that are the more likely driver of success. These practices tend to lead companies to deploy the right tools, not the other way around.
This is the problem we’ve experienced with CRM. Industry leaders used CRM technology, so if you want to be an industry leader, buy/use CRM technology. But it doesn’t work that way, of course. Technology helps enable the strategy, it doesn’t “drive” anything.
All that said, it’s fair to say that Web 2.0 (AKA social business tools) are probably necessary for large companies to enable a collaborative/networked working environment. Just like we needed a phone in the good old days. But did we every say the phone was a driver of success?
Hi Bob
You’re right to point out the distinction between Correlation and Causality, and careless of me to have caused confusion in the title of the piece – which I’ve now corrected in the original post.
My experiences – like yours – show that whilst technology can be a powerful enabler, it is an insufficient condition in the absence of good process and management intent.
Technology can complement and reinforce good management practice. As you properly point out, it can’t compensate for its absence. Mea culpa!
Bob Apollo | Inflexion-Point Strategy Partners
http://www.inflexion-point.com