Enterprise 2.0 Finds Its Pay Day - McKinsey

Here is some good news for the end of the year. A new McKinsey report, The rise of the networked enterprise:  Web 2.0 finds its payday, suggests that there are many benefits to be derived from using “collaborative Web 2.0 technologies.” aka enterprise 2.0.

The results from the analysis of their proprietary survey data show that the using these technologies is significantly improving reported company performance. The state that “our data show that fully networked enterprises are not only more likely to be market leaders or to be gaining market share but also use management practices that lead to margins higher than those of companies using the Web in more limited ways.”

First, the use of collaborative Web 2.0 technologies is substantial as two-thirds of the respondents reported using them in their organizations. Penetration is also strong as nearly half of the companies that use social networking have at least 51 percent of their employees using it. They are also investing as in 2010, nearly two-thirds of respondents at companies using Web 2.0 say they will increase future investments in these technologies, compared with just over half in 2009. This should be good news to all the vendors.

There are many quantified benefits. First 77% said the tools increased the speed of access to knowledge, 60% said they reduced communication coats, 52% said they increased speed of access to internal experts, 44% found a reduction in travel costs, and 40% found increased employee satisfaction. 

They segmented companies using the new technologies into the internally networked, the externally networked and the fully networked. Market share gains were significantly correlated with fully networked and externally networked organizations. This makes sense and supports social media marketing efforts.

Even more interesting was the finding that “higher operating margins (again, self-reported) than competitors correlated with a different set of factors: the ability to make decisions lower in the corporate hierarchy and a willingness to allow the formation of working teams comprising both in-house employees and individuals outside the organization.” Collaborative technologies create more agile organizations and these companies achieve higher profits.

This is a nice way to end the year. I imagine that this report will get great circulation by the vendors in the enterprise 2.0 space, as it should.  Good luck in 2011. The opportunities are there. 

 

Comments

[Claromentis]

Great post Bill.

My question is to what extent this might be a symptom, rather than a cause.

I am fortunate to meet a high number of very disparate companies that are all interested for some reason in the opportunities offered by such technology sets.

I just wonder if collaborative technologies really create such margins, or high margin companies behave in certain ways - one of which is an increased tendency to think in this way and so to embrace 2.0 ?

Nigel

[bill Ives]

Nigel

You raise a very good point. This is not a controlled experiment and thus the results are a biased sample. Companies were not randomly assigned to either using the tools or not so it may simply be that high margin companies are more likely to use the more advanced tools and use them more effectively. Thanks for pointing this out. Bill

[Rooven Pakkiri]

The key thing evidenced here is that we are rapidly approaching the tipping point for Collaboration platforms. Like all other transformative technologies, some companies will benefit more than others - that's not really the point. The point is that soon there will be mass business adoption and that very mass will drive even greater efficiency and innovation.

[Courtney Hunt]

I shared the following comment on the article, but it hasn't been posted yet:

I am encouraged by the study's findings, and ...very much appreciate McKinsey's longitudinal research on the impact of 2.0 technologies on organizations. As some of the other commenters have noted, however, these results should be viewed with some caution, for several reasons:

1. All of the data - including financial and market performance - were self reported.

2. Correlation is not the same causation, and there may be a chicken/egg phenomenon here. Does employing 2.0 technologies make an organization more effective, or are more effective organizations more likely to see the benefits of and adopt 2.0 technologies?

3. The sample is still predominated by "developing" organizations - 79% of the 2174 respondents included in Exhibit 2, for example! Comparing a group of that size with one of only 76 (the fully networked) is probably a major contributor to the relatively low correlation coefficients (and weak p values) in Exhibit 3.

It appears that we're headed in the right direction, and I'm optimistic about 2011 and beyond, but we still have a long way to go.

I look forward to next year's report.

Courtney Hunt
Founder, Social Media in Organizations (SMinOrgs) Community

[bill Ives]

Courtney and Roveen Thanks for your comments. Courtney you raised some very important cautions. As a former academic researcher i certainly agree with them. Bill