The social economy: Unlocking value and productivity through social technologies


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In a few short years, social technologies have given social interactions the speed and scale of the Internet. Whether discussing consumer products or organizing political movements, people around the world constantly use social-media platforms to seek and share information. Companies use them to reach consumers in new ways too; by tapping into these conversations, organizations can generate richer insights and create precisely targeted messages and offers.

While 72 percent of companies use social technologies in some way, very few are anywhere near to achieving the full potential benefit. In fact, the most powerful applications of social technologies in the global economy are largely untapped. Companies will go on developing ways to reach consumers through social technologies and gathering insights for product development, marketing, and customer service. Yet the McKinsey Global Institute (MGI) finds that twice as much potential value lies in using social tools to enhance communications, knowledge sharing, and collaboration within and across enterprises. MGI’s estimates suggest that by fully implementing social technologies, companies have an opportunity to raise the productivity of interaction workers—high-skill knowledge workers, including managers and professionals—by 20 to 25 percent.

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The social economy: Unlocking value and productivity through social technologies

  1. 1. Any use of this material without specific permission of McKinsey & Company is strictly prohibitedThe social economy:Unlocking value and productivitythrough social technologiesDiscussion document for Alumni WebcastAugust 9, 2012
  2. 2. McKinsey & Company | 1Social technologies share three key characteristicsSOURCE: McKinsey Global InstituteWe define social technologies as digital technologies used by people tointeract socially and together to create, enhance, and exchangecontent. Social technologies distinguish themselves through thefollowing three characteristics:1. They are enabled by information technology.2. They provide distributed rights to create, add, and/or modifycontent and communications.3. They enable distributed access to consume content andcommunications.
  3. 3. McKinsey & Company | 2Social technologies include a broad range of applicationsthat can be used both by consumers and enterprisesNOT EXHAUSTIVE1 Social analytics is the practice of measuring and analyzing interactions across social technology platforms to inform decisions.SOURCE: McKinsey Global Institute analysisRatingsandreviewsEvaluate and rateproducts, services,and experiences;share opinionsSocialcommercePurchasing ingroups, on socialplatforms, and sharingopinionsWikisSearch, create and adaptarticles; rapidly accessstored knowledgeDiscussionforumsDiscuss topics in opencommunities; rapidlyaccess expertiseSharedwork-spacesCo-create content;coordinate jointprojects and tasksCrowd-sourcingHarness collectiveknowledge andgenerate collectivelyderived answersSocialgamingConnect with friendsand strangers toplay gamesMediaand filesharingUpload, share, andcomment on photos,videos, and audioSocialnetworksKeep connectedthrough personal andbusiness profilesBlogs/microblogsPublish anddiscuss opinionsand experiencesSocialanalytics1
  4. 4. McKinsey & Company | 3Social technologies have been adopted at record speedSOURCE: Various press reportsTime to reach 50 million users50 million usersRadioTViPodInternetFacebookTwitter38 years13 years4 years3 years1 year9 monthsILLUSTRATIVE
  5. 5. McKinsey & Company | 4SOURCE: eMarketer, February 2011% of total US usersUse of social networks is spreading across age groupsAgeNOTE: Numbers may not sum due to rounding.16 14 132018 172221 2120112010200965+55-6445-54381449154101535-4425-3418-2412--170-11162172182
  6. 6. McKinsey & Company | 5Communications are shifting from e-mail andinstant messaging to social mediaSOURCE: comScore Media Metrix, October 20113136-5 p.p.201169642007 5369-16 p.p.3147 4418100% =1,430+26 p.p.5682760E-mail Instant messaging Social networkingUsers of serviceNon-usersUnique monthly visitors% of global online population
  7. 7. McKinsey & Company | 6Social networking accounts for just 5 percent of the time spentcommunicating and consuming media012345678910111900In person20102000199019801970196019501940193019201910Social networksInstant messengerSMSMobile phoneOther Internet3E-mail2Recorded music1TV1Landline telephoneRadio1PrintMail1 Radio, TV, and recorded music are slightly discounted to account for the time spent using these concurrently with other media.2 Does not include e-mail sent internally within companies, which is not counted as Internet traffic.3 Includes all social technologies that cannot be explicitly separated in available data.SOURCE: Bureau of Labour Statistics; WAN-IFRA; Statistical Abstracts; National Bureau of Economic Research; US CensusBureau; Radicati Group; Yankee Group; Nielsen; ITU; eMarketer; and others; McKinsey Global Institute analysisTime spent consuming messages by technology typein the United StatesHours per dayNon-digitalPotential to be socially enabledCurrently socially enabled
  8. 8. McKinsey & Company | 7Use socialtechnology as anintra- or inter-organizationalcollaboration andcommunication toolUse socialtechnology tomatch talent totasksEnterprises can apply social technologies across the entire valuechain, as well as across and between enterprisesMarketingand salesOperationsanddistributionProductdevelopmentCo-create products1Leverage social to forecast and monitor2Use social to distribute business processes3Use social technologies for marketingcommunication/interaction5Generate and foster sales leads6Derive customer insights4Social commerce7Provide customer care via social technologies89Enterprise-wide levers1 Deriving customer insights for product development is included in customer insights ( lever 4) under marketing and sales.2 Business support functions are corporate or administrative activities such as human resources or finance and accounting.SOURCE: McKinsey Global Institute analysis10CustomerserviceBusinesssupport24 Derive customer insights1Organizational functions Across entire enterpriseImprove collaboration and communicationMatch talent to tasks
  9. 9. McKinsey & Company | 8Potential of social technologies to improve productivity at differentpoints in the value chain in major sectors of the economy% of cost base in each value chain step1–55–1010–20>20SOURCE: McKinsey Global Institute analysisPotential benefit from productivity increase along the value chainTotal valueat stake% of total costIndustry/segmentProductdevelopmentOperationsanddistributionSales andmarketingCustomerserviceBusinesssupportfunctionsFinancialservicesInsurance—P&C~2–3Insurance—life~3–4Retailbanking~6–12Consumer packaged goods ~6–9Professional services n/a ~8–11AdvancedmanufacturingSemi-conductors~5–6Automotive ~4–6Aerospaceand defense~2–3Social sector
  10. 10. McKinsey & Company | 9Potential of social technologies to improve margins acrossthe value chain in major sectors of the economyPercentage points margin potential11 Margin for the social sector is expressed as a percentage of costs.<0.50.5–1.01.0–2.0>2.0SOURCE: McKinsey Global Institute analysisPotential benefit from productivity increase along the value chainTotal valueat stake% of revenueIndustry/segmentProductdevelopmentOperationsanddistributionSales andmarketingCustomerserviceBusinesssupportfunctionsFinancialservicesInsurance—P&C~3–6Insurance—life~3–4Retailbanking~4–7Consumer packaged goods ~5–6Professional services n/a ~8–11AdvancedmanufacturingSemi-conductors~5–7Automotive ~4–6Aerospaceand defense~2–3Social sector
  11. 11. McKinsey & CompanyLastModified5/8/20135:24PMEasternStandardTimePrinted3/9/20124:10:42PM| 10Potential value and ease of capture vary across sectorsUtilitiesEnergyHealth careprovidersPharmaceuticalsEducationTelecommunicationsRetail andwholesaleTransportationElectronicsConsumerproductsFood andbeverageprocessingChemicalsConstructionIndustrialmanufacturingProfessionalservicesNationalgovernmentLocalgovernmentMedia andentertainmentInsuranceBankingSoftwareand InternetSOURCE: McKinsey Global Institute analysisValuepotentialEase of capturing value potentialLowerHigherRelative size ofGDP contributionHigherLowerDIRECTIONAL
  12. 12. McKinsey & Company | 11Value available through collaboration and other benefits ofsocial technologies varies across industries%SOURCE: McKinsey Global Institute analysis6349 4830245738 34Average66Aero-space62Auto43Semi-conductors76Profes-sionalservices98Retailbanking702Lifeinsurance52P&Cinsurance51CPG37CollaborationOther benefits
  13. 13. McKinsey & Company | 12Companies with higher volumes of interactions outperform industry peersVariation in firm-level performance1SOURCE: Compustat; McKinsey Global Institute analysis1 Defined as the ratio of standard deviation to mean for EBITDA per employee within each industry.2 Low is less than 14 percent interaction workers on payroll, medium is 14 to 62 percent, high is more than 62 percent.Strategicadvantageover industrypeersRange offirm-levelperformanceTopperformersBottomperformersAverageLevel of interactions2Low Medium High0.9x 5.5x 9.4x
  14. 14. McKinsey & Company | 1320.0–25.04.0–6.03.5–5.05.5–6.57.0–8.5Improved communication and collaboration through social technologiescould raise productivity of interaction workers by 20 to 25 percentSOURCE: International Data Corporation (IDC); McKinsey Global Institute analysis19143928100TotalRole-specific tasksCommunicating andcollaborating internallySearching andgathering informationReading andanswering e-mailTasks ofinteraction worker% of average weekProductivityimprovement%Increasedvalue-add time% of workweek25–3030–3525–3510–1520–25
  15. 15. McKinsey & CompanyLastModified5/8/20135:24PMEasternStandardTimePrinted3/9/20124:10:42PM| 14Many companies need a cultural transformation to prepare for successfulinternal implementation of social technologiesSOURCE: McKinsey Global InstituteTransformation Transaction TacitInteractionsStrategy andinnovationCentralized andtop-downDecentralized,bottom-up, evolutionaryOrganizationHierarchies,command and controlFlat, flexible,contingent, porousKnowledgeand learningRote and instruction-oriented, top-downApprenticeship,decentralized,knowledge marketplaceTechnologyleverageSubstitute, automate Substitute, automate,accelerate, scaleComplement, extend,adaptRole ofmanagementSet targets, assigntasks, optimizeSet direction, enable,learnPerformancemanagementPhysical and activityoutputs, efficiencyOutcomes,effectivenessPhysical outputs,efficiency