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Social Business gets seal of approval

by Christoph Schmaltz

Xmas came early this year for anyone involved in transforming traditional into social businesses.

In its latest Web 2.0 survey management consulting firm McKinsey gave its


to what is emerging to be known as social business. McKinsey found a strong correlation between the use of Web 2.0 technology and actual business impact like market share gains, operating profits, and market leadership. Very explicitly, the firm urges executives […] to push their organizations toward becoming fully networked enterprises.

According to McKinsey a networked enterprise is one that uses collaborative Web 2.0 technologies intensively to connect the internal efforts of employees and to extend the organization’s reach to customers, partners, and suppliers.

Three observations:

1) Social, connected or networked businesses?

Personally, I am not too fussed about the naming convention. In the end all three terms describe the same matter. It is about internal and external relationships that a business relies on no matter which industry it operates in. This covers Workforce Collaboration (heretofore e20), Customer Participation (social media, social CRM), and Business Partner Optimization (Social ERP and Supply Chain). Critics of the term ‘social business’ point to the fact that business has always been social. That is certainly true, but ‘social’ did not scale back then. To do so it needs a new type of organisation and we have now the means to build it. Furthermore, to argue that we cannot use the term ‘social business’ when talking about a well-connected organisation because it differs from its original meaning is pointless. Language is a fluid concept and develops constantly with our needs and perception. Best case in point is the term Enterprise 2.0. Today, most people (with some prominent exceptions) do regard it as limiting and have therefore adopted the term ‘social business’. And you do not have to have a crystal ball to predict that even this term may one day become obsolete or be replaced.

2) People, Processes, Technology – But what about Data?

People, processes and technology are often cited as the Three Holy Kings of businesses. No doubt, all three are important to a certain extent. But what about data? It seems that King Data is so ubiquitous that we often forget about him, even though he is the one that keeps the other three together.

Businesses produce and consume an enormous amount of data. But without context it is simply noise and therefore meaningless. At this point I always cite Mallesons Stephen Jaques, an Australian law firm that embarked on an extremely interesting journey three years ago. Clients complained that when calling the firm, partners were not available, no one knew where they were or who else could help the them. But actually the firm had all the relevant data at hand but sitting in various silos. The IT department developed a dashboard incorporating data from around 18 different databases. Now, when a call comes in, people see who is calling, who the client most likely wants to talk to, whether that person is available, where that person currently is, who else could help the caller and other information WITHOUT even picking up the phone!

Unfortunately, McKinsey does not mention the kind of Web 2.0 technologies firms are using to achieve their business objectives. In last year’s survey mash-ups were one of the least used Web 2.0 technologies (11 out of 12). But I am convinced that this will change in the very near future. In fact, we at Headshift are already working on it with our clients.

3) Business case or where is the money?

It is very encouraging to see the number of businesses using social tools that were surveyed by McKinsey. Even more encouraging is the fact that the most advanced in this regard seem to see their investments paying off.

The firms measured their success based on three performance criteria:

  • market share gains
  • operating profits
  • market leadership

I would love to know how organisations that reported this kind of improvement in the survey were able to establish a clear correlation between their Web 2.0 efforts and these performance criteria. If a company saw its market share increase by 5%, how much of that could really be attributed to functioning as a networked business? The entire 5% or just 0.5% or 1.73%? What other developments may have had an effect on the reported performance criteria?

It is not that I doubt the positive effects of being a social business. After all, I have been advising clients in this field for the past four years and would definitely not have done so if I thought it was all hocus-pocus. But the ROI question has always been in the room. Over time I have seen some meaningful approaches, metrics and scorecards to address it. However, the only comprehensive report to date that has satisfied my thirst for numbers is Forrester’s study on The Total Economic Impact of Google Apps. While the numbers should be taken with a pinch of salt (after all, Google commissioned and paid for the report), the approach of measuring what many regard as unquantifiable is interesting.

All in all, the McKinsey report does not provide any new revelations for social business practioners. However, McKinsey’s seal of approval (and not to forget Gartner’s) will hopefully be the catalyst for getting the social business engine started properly in 2011. Bring it on!

Photo credit | HT to @felix_cohen and @leebryant

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