“Transforming the Business through Social Tools“
Jacques Bughin, Michael Chui, and Martin Harrysson
The folks at McKinsey have conducted a survey of 1,420 executives worldwide in an effort to understand how social media is transforming business. The results were interesting. While McKinsey clearly expected to find an impact on customer-facing processes, they did not expect that social could benefit other functions. But the data speak very clearly.
Some high points:
- 49% of the responding companies use social for recruiting and hiring
- 35% use social media for new-product development and/or R&D
- 33% use social media for talent management, development, and training
- 33% use social media for strategy development
- 32% use social media for IT management
Some of the areas where social media tools are not being used as readily:
- Order to Cash (10%)
- Risk management (12%)
- Financial planning and analysis (12%)
- Supply Chain Management (14%)
- Procurement (16%)
The one that surprised me was supply chain management. Given the systems being put into place to monitor the progress of an order through the supply chain, social seems a no-brainer way to keep groups in the loop about the progress of critical orders.
The article is a quick read with lots of charts. If for no other reason, the article is worth reading because it forces you to ask “what are we doing with social, and how much more could we do with it?”
$600B is enormous – roughly the size of the Belgium GDP in 2013. Fortunately, McKinsey’s report on The Social Economy clearly articulates bite sized chunks of the $600B in estimated business value from social technologies. The report lists 10 specific ways social tools add value – both within and across companies.
One critical ways social tools add value internally is #3 – Distributing Business Processes
Keeping the Global Team on the Same Page
Business process are the cogs that run the engine of global companies. They include a wide variety of activities – from estimating the component supply necessary to meet customer demand to setting up a new vendor in the ERP system. However, when companies have a global workforce, these processes may not be carried out uniformly in all locations.
Social tools provide an easy way for employees across the company to access the same information and keep business processes aligned. For example, rather than counting on a business manager to send an email out with all of the forms needed to set up a new vendor, a central portal can be created where everyone can download the same files. In addition, the portal can “go social” when the owner of the business process provides their contact information within the portal. This same owner can create a section in the portal where they not only maintain a dynamic list of FAQs, but also manage a on-going discussion forum about new questions that arise. Of course, colleagues who have questions about the specific business process can always pick up the phone to ask a details about setting up a new vendor. However, the social tools can provide a significant amount of context that makes the phone conversation more efficient.
Practical Ways to Capture Business Value
In the end, social tools – like the portal for approving new vendors – addressed at least two pressing operational issues that provide measurable business benefits:
- Ensure Consistency: Keeping the relevant files in a central portal ensures that everyone is accessing the latest version. The net result is a reduction in the cycle time needed to carry out fundamental business process and an increase in the company’s easy of doing business.
- Reduce Noise, Increased Productivity: The employee responsible for managing the vendors in our example will improve their productivity as they spend more time focused on getting vendors set up. It also reduce the “background noise” work of answering the same basic set up questions time and again.
In the future, I plan to provide more examples of the other 10 ways highlighted by the McKinsey report.
We must get sector specific when seeking to “double click” on the potential value of social technology tools to a given company or organization. As this helpful graphic from McKinsey’s report on The Social Economy shows the value and ease of capturing this value varies greatly by sector or industry.
Interesting Examples: It is especially interesting to note cases where the size of GDP contribution is similar, but the ease of capturing this value differs. For example, national government and banking have similar sized opportunities. However, it is easier to capture this value in banking, a largely privatized industry, than in national government institutions.
So What: When looking to leverage social tools to drive business value, not all opportunities are created equally. Clearly the opportunities and the challenges in banking and national government differ. We must stop thinking only in terms of the size of business value found in leveraging social tools, but also the industry specific factors that impact the ease of actually using these tools to drive this value.