For everyone out there who doubts that social technology can produce significant hard ROI, a new report from McKinsey & Company should quell your concerns. McKinsey estimates that the use of social technologies to improve communication and collaboration within and across enterprises could contribute two-thirds of the US$ 900 billion to US$ 1.3 trillion in annual value it estimates social technology can create across the four commercial sectors of consumer packaged goods (CPG), consumer financial services, professional services and advanced manufacturing sectors.
Social Tech Numbers Look Promising
McKinsey quotes several statistics that by themselves make social technology look promising as a revenue generator. One-third of consumer spending could be affected by social shopping, and social technology can potentially produce 20 to 25 percent improvement in knowledge worker productivity. In addition, more than 1.5 billion people globally have a social networking account and almost one in five online hours is spent on social networks. By 2011, 72 percent of companies surveyed reported using social technologies in their businesses and 90 percent of those users reported that they are seeing benefits.
According to the report, “The Social Economy,” social technology’s greatest potential as a value creator lies in its ability to allow social interactions to occur with the speed, scale and economics of the Internet. Participants can publish, share and consume content within a group, and create a record of interactions and connections that can be analyzed for social influence.
Thus CPG companies in particular have an opportunity to create value that is equivalent to between 15 and 30 percent of current spending on activities with consumers on social media and monitoring social media conversations to generate consumer insights and market intelligence. See the accompanying McKinsey graph for a partial summary of consumer activities on social networks that companies can measure and analyze to make informed decisions.
The 10 ‘Value Levers’ of Social Technology
McKinsey identifies 10 “value levers” that social technology offers to organizational functions within and across enterprises. Following is a brief summary:
- Co-create products — Consumers can be invited to offer insight into creating new products, with potential for rewards programs and other promotions.
- Leverage social to forecast and monitor — Monitoring of consumer transactional behavior and comments on social networks helps produce more accurate forecasts of consumer wants and needs.
- Use social to distribute business processes — Internal social networks are a vehicle to quickly inform employees of new business processes, procedures and standards.
- Derive customer insights — Customer commentary on social product pages offers personalized insights into the individual mindset of customers.
- Use social technologies for marketing communication/interaction — Social technologies can allow ultra-targeted and personalized communication and interaction with individual consumers.
- Generate and foster sales leads — Mining of consumer social activity can generate highly specialized sales leads.
- Social commerce — Some social networks, such as Facebook, now offer full e-commerce capabilities on their platforms.
- Provide customer care via social technologies — Customer care agents can directly interact with consumers via social networks and also monitor social networks for negative comments to resolve specific issues and look for general problems as they arise.
- Improve communication — Social technologies can improve intra- or inter-organizational collaboration and communication.
- Match talent to tasks — Internally, employee profiles on corporate social networks can help managers quickly determine who in the organization has the right talent for specific tasks.
Social technology is still in the process of proving its business model. The perfect example is the struggles Facebook has endured since launching its May 2012 IPO, which have included lawsuits over alleged stock fraud and poor quarterly results of Zynga, the creator of such Facebook-based social games as “FarmVille” and CityVille.” But although Facebook and other leading social networks have not yet proven they can deliver a sustained ROI, results of the McKinsey study suggest it is a matter of “when” this will occur, rather than “if.”