While social technologies hold potential to raise productivity of knowledge workers by 20-25 percent and create $900 billion to $1.3 trillion in value annually, around 70% businesses using social technologies are naive of such potential, according to a report.
“Yet the impact of social technologies on the economy, and their potential to create value across industries, are only just beginning to be understood, according to the social economy: Unlocking value and productivity through social technologies,” a new report by the McKinsey Global Institute (MGI), McKinsey’s business and economics research arm, revealed.
“While 70 percent of companies are using social technologies in some way, very few are anywhere near achieving the full potential benefit. The report finds that the largest opportunity for value creation for business is in using social technologies to improve communication and collaboration within and across enterprises,” it added.
In a few short years, social technologies, the products and services that enable social interactions in the digital realm, have brought profound change to the global economy, altering how people interact, connect, and share information. Today, more than 1.5 billion consumers around the globe have an account on a social networking site and almost one in five online hours is spent on social networks—increasingly via mobile devices. Whether discussing consumer products or organizing political movements, people around the world are constantly using social media platforms to both seek and share information. Consumer-facing companies quickly recognized that social technologies provide entirely new ways of connecting to and influencing customers—and highly effective ways to gather rich, unfiltered insights to guide product development and create precisely targeted messages and offers.
“By fully implementing social technologies, companies can raise the productivity of “interaction workers” (high-skill knowledge workers including managers and professionals) by 20 to 25 percent,” MGI estimates.
“There’s rightly a lot of focus on the big opportunities for companies to use social media to connect with consumers. But we find the opportunity for companies that apply social technologies across the organization is twice the size,” Michael Chui, principal and senior fellow at the McKinsey Global Institute, said.
“When it comes to organizational knowledge, there is a huge amount of ‘dark matter’ trapped in email inboxes. Using social technologies can make that ‘dark matter’ visible to the rest of the organization.”
MGI researchers analyzed four commercial sectors of the US economy (consumer packaged goods, retail financial services, professional services, and advanced manufacturing) and the social sector (non-profit groups). Across the commercial sectors, they estimate that a total of $900 billion to $1.3 trillion in annual value could be created if each of these industries could derive the maximum benefits of social technologies. About $345 billion of this value potential would be available from product development and operations; $500 billion from marketing, sales and after-sales support activities; and $230 billion from improvements in business support activities. The value contribution from improved communication, coordination, and collaboration—potentially two thirds of all potential value from use of social technologies in business organizations—is embedded in these projections.
Individual firms can gain even more. MGI estimates that consumer packaged goods companies that embrace social technologies across all value chain steps can increase margins by as much as 60 percent by using social technologies to connect with customers and to generate sharper consumer insights, as well as by using social technologies to improve the productivity of knowledge workers. As in other sectors, however, much of the value created will flow to consumers in the form of more competitive prices and better products and features.
Capturing the full value available from the use of social technologies will be a challenge for enterprises—primarily because they will have to transform their organizational structures, processes and culture to become extended networked enterprises. For social technologies to deliver their potential economic benefits, enterprises must be open to information sharing and create cultures of trust and cooperation. They must also deal with significant risks to confidentiality, intellectual property, and reputation. Policy makers are confronted with similar challenges to ensure that personal and property rights are protected in online communities.
“Over time, we believe that the benefits are so compelling that business leaders, policy makers, and individuals will find ways to meet these challenges,” Michael Chui, said.