McKinsey Global Institute (MGI) recently released its report, “The Social Economy: Unlocking Value and Productivity through Social Technologies.” The research offers a wealth of practical insights on the transformative power of social technologies and how it creates almost a trillion dollars in unrealized value across four industry verticals. You can download the summary as well as the full research report (184 pages) from the embedded link above, but here are some key takeaways:
- While 72% of companies use social technologies in some way and 90% of those companies report some business benefit, 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. Between $900 billion and $1.3 trillion in total value creation can be unlocked through the use of social technologies in four industry sectors (i.e., consumer packaged goods, consumer financial services, professional services and advanced/complex manufacturing).
- There are 10 value levers (see the graphics below) that enterprises use to generate value from social technologies in different aspects of the value chain from product development, operations and distribution, marketing and sales and customer service. About $345 billion of value potential is from product development and operations; $500 billion is from marketing, sales and after-sales support activities; and $230 billion is from improvements in business support activities.
- Two-thirds of the value-creation opportunity lies in using social tools to enhance communications, knowledge sharing and collaboration within and across enterprises. 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%.
- For advanced or complex manufacturing industries, the social technologies enable $200 billion in untapped value potential (see the graphics below). MGI’s research focus within this vertical was on three sub-segments: semiconductors (annual gross revenues of $300 billion), automotive (AGR of $3.3 trillion) and aerospace (AGR of $140 billion). These three segments offer complex, engineered products. They are capital-intensive and require extensive R&D with a high proportion of highly educated knowledge workers. Many of these companies also must integrate components or subsystems from specialized suppliers in global supply chains. Therefore, companies in these sectors can gain significantly from more effective collaboration and coordination across the entire value chain from buying, designing, manufacturing, selling and servicing. The graphics shown below further break down value potential based on individual value-chain components, along with key levers for value creation.
- To reap the full benefit of social technologies, organizations must transform their structures, processes, practices and cultures. They need to become more open and nonhierarchical and create a culture of knowledge-sharing and mutual trust. Ultimately, the power of social technologies hinges on the full and enthusiastic participation of employees who are not afraid to share their thoughts and trust that their contributions will be respected. Creating these conditions will be far more challenging than implementing the technologies themselves.
We discussed the seven “Ps” of complexity (i.e. Periphery, Planning, People, Processes, Products, Projects and Pricing) in the “Complex Enterprise White Paper.” For complex enterprises, social technologies have broader implications across the board. The key to enterprises’ long-term success thus is leveraging the social technologies to capitalize the good complexity and eradicate the bad complexity.