"This Networked Social Media Stuff..and my Revenue??"
Over the past few weeks I have been involved in several separate discussions with clients about the use of technology to create collaborative platforms to enable better external networks; for both customers and suppliers.
The intensity of interest in each of these encounters is a little surprising, entirely coincidental and completely unrelated. There is an air of urgency and wonder.
Anyway the level of interest or more correctly curiosity, about the networked enterprise has suddenly increased; and there are several commonly asked questions that arise. The first one I get asked is, "How does this networked social media stuff increase my revenue and profit?"
Of course there is no short answer to that question; at least not an understandable one. The topic needs some investigation and digestion, and to my mind reflects a naïve and dangerously short-sighted view of the world. There is a transformation in the way business is being done.
In the same way that the PC transformed the way businesses worked in the 1980's so too has WEB 2.0 and the networked enterprise. The social interactions that are enabled by these technologies are changing the way we do business. I can remember when companies only had one or two PC's because the bosses didn't see how the PC would add to the revenue line and profits. You couldn't do without them today. Senior executives asked the same questions about PC's back then that are being asked about social networking platforms today.
Execs are not alone in missing the significance of technological transformation of business. Remember Robert Solow a world renowned economist who said in 1987 "You can see the computer age everywhere but in the productivity statistics."
Or the quote attributed to Thomas Watson, Chairman of IBM in 1924, "I think there is a world market for about five computers".
Or Ken Olsen founder of Digital Equipment Corporation who said in 1977, "There is no reason for any individual to have a computer in his home."
I think the most enlightening view of the impact of the networked enterprise and the Social Business phenomenon is a report from McKinsey. McKinsey published the results of a very comprehensive survey in December 2010 titled The rise of the networked enterprise: Web 2.0 finds its payday. I recommend you read because it shows that those who have adopted WEB 2.0 are gaining measureable benefits. The following is an exhibit from that report.
One statement from the report highlights the key message of the results: "The implications are far reaching: in many industries, new competitive battle lines may form between companies that use the Web in sophisticated ways and companies that feel uncomfortable with new Web-inspired management styles or simply can't execute at a sufficiently high level"
The McKinsey report focuses on three main categories or areas of application: Internal purposes, Customer-related purposes, and Working with External partners and suppliers. For Internal purposes, what we also refer to as Enterprise 2.0, the top three measurable business benefits lie in increasing speed of access to knowledge (77% of respondents agree on achieving value), reducing communications costs (60%), and increasing speed of access to internal experts. In fact, survey respondents agree that the first and third items produce a median improvement of 30% over existing means—this is the highest level of improvement across all the categories.
But note this; in going down the list, top-line results of increasing revenue ranks the lowest in all three categories.
So the main question being asked is not the right question. The question is "How does this networked social media stuff create value?" rather than "How does this networked social media stuff increase my revenue and profit?" The focus is primarily on gaining operational efficiencies in the internal environment, improving customer relations, and efficiencies through improved partner access.
The report distinguishes several states of being a networked organisation: developing, internally networked, externally networked, and fully networked. Looking at the number of respondents (n=1711) compared to the other levels—where n=287 and even less for the others—most organisations still consider themselves at an early stage of adopting these practices and implementing these systems. A fully networked organisation showed the highest degrees of improvement several times over the internally and externally networked organisations, and about five times more than those still in the early developmental stage.
Also interesting to note is even among the fully networked organisations, the mean percentage of employees using this collaborative technology is only 47%. It is similar for externally networked (47%) and internally networked (42%) organisations. This follows another statement that I heard: you don't need everybody in your company to be using the collaborative environment to gain significant value from it.
The report also did fantastic work in their correlational analysis between corporate performance metrics and web2.0 tools. Per the report, "Market share gains reported by respondents were significantly correlated with fully networked and externally networked organisations. This, we believe, is statistically significant evidence that technology-enabled collaboration with external stakeholders helps organisations gain market share from the competition."
In the Twitter stream, Michael Chui, Senior Fellow at McKinsey and co-author of this report, indicated: "The #McKWeb2 research suggests that fully networked enterprises could be learning faster, and lengthen their competitive leads."
Furthermore, it also works on the inside: "Respondents at companies that used Web 2.0 to collaborate across organisational silos and to share information more broadly also reported improved market shares." Internally networked organisations also correlate with being market leaders. It is easier to see how collaborative technologies can improve market share externally, but the latter two statements towards the value of internal collaboration are quite eye-opening (and smile-inducing to me). Furthermore, it also provides supporting evidence that distributed decision making and pushing that capability lower in the organisational hierarchy correlates to improved operating margins.
These findings together become compelling evidence for the value of social business. The evidence is there but I still hold the question: Can this apply to your business? To answer that requires a deeper dive into the specifics of each organisation, its work culture, its business processes, and its customer-, partner- and employee-engagement strategies. The cultural transformation itself can be quite difficult; per Mr. Chui on Twitter: "… [there is] great value data flowing thru org. But getting participation can be surprisingly hard." Through a close examination of these specific factors in your organisation, you can better understand where it will find its value through getting connected.