Ten social media and technology mega-trends to watch

I just read a fascinating (and lengthy!) report from McKinsey on tech-enabled business trends to watch and thought it was important enough to summarize for our community.  Here are some highlights from this excellent report:

1. Crowd-sourcing moves into the mainstream

In the past few years, the ability to organize communities of Web participants to develop, market, and support products and services has moved from the margins of business practice to the mainstream. Wikipedia and a handful of open-source software developers were the pioneers. But in signs of the steady march forward, 70 percent of executives recently surveyed said that their companies regularly created value through Web communities.

  • Intuit hosts customer support communities for its financial and tax return products to lower customer service costs by 90 percent.
  • P&G created a social network of influential mothers (Vocalpoint) to drive word-of-mouth marketing. In markets where Vocalpoint influencers are active, product revenues have doubled.
  • Facebook has marshaled its community for product development, recruiting 300,000 users to translate its site into 70 language. The entire French Facebook site was translated in one day.

2. Making the network the organization

Companies are pushing substantially beyond crowdsourcing to build and manage flexible employee networks that extend across internal and external borders. The recession underscored the value of such flexibility in managing volatility.

  • At one global energy services company, geographic and business unit boundaries prevented managers from accessing the best talent across the organization to solve client problems. Help desks supported engineers, for example, but rarely provided creative solutions for the most difficult issues. Using social-network analysis, the company mapped information flows and knowledge resources among its worldwide staff. The analysis identified several bottlenecks but also pointed to a set of solutions. Using Web technologies to expand access to experts around the world, the company set up new innovation communities across siloed business units. These networks have helped speed up service delivery while improving quality by 48 percent.
  • Dow Chemical set up its own social network to help managers identify the talent they need to execute projects across different business units and functions. To broaden the pool of talent, Dow has even extended the network to include former employees, such as retirees.
  • Other companies are using networks to tap external talent pools. These networks include online labor markets (such as Amazon.com’s Mechanical Turk) and contest services (such as Innocentive and Zooppa) that help solve business problems.

3. Knowledge worker productivity

Knowledge workers typically are highly-paid employees, so increasing their productivity is critical.  Collaboration technologies are emerging to do just that.

  • Video and web conferencing are expected to grow at a rate of 20 percent annually.
  • At one high-tech enterprise, the sales force became a crucible for testing collaboration tools. The savings on travel were four times the company’s technology investment. Customer contacts per salesperson rose by 45 percent, while 80 percent of the sales staff reported higher productivity and a better lifestyle.
  • The US intelligence community made wikis, documents, and blogs available to analysts across agencies (with appropriate security controls, of course).
  • Bechtel established a centralized, open-collaboration database of design and engineering information to support global projects. Engineers starting new ones found that the database, which contained up to 25 percent of the material they needed, lowered launch costs and sped up times to completion.

The next leap forward in the productivity of knowledge workers will come from interactive technologies combined with complementary investments in process innovations and training.

4. Growing the ‘Internet of Things’

With RFID technologies, products themselves are becoming elements of an information system, with the ability to capture, compute, communicate, and collaborate around information — something that has come to be known as the “Internet of Things.”

Embedded with sensors, actuators, and communications capabilities, such objects will soon be able to absorb and transmit information on a massive scale and, in some cases, to adapt and react to changes in the environment automatically. These “smart” assets can make processes more efficient, give products new capabilities, and spark novel business models.

  • Auto insurers in Europe and the United States are installing sensors in customer’s vehicles. The result is new pricing models that base charges for risk on driving behavior rather than on a driver’s demographic characteristics.
  • In medicine, sensors embedded in patients continuously report changes in health conditions to physicians, who can adjust treatments when necessary.
  • Sensors in manufacturing lines for products as diverse as computer chips and pulp and paper take detailed readings on process conditions and automatically make adjustments to reduce waste, downtime, and costly human interventions.

5. Experimentation and big data

Data are flooding in at rates never seen before — doubling every 18 months— as a result of greater access to customer data from public, proprietary, and purchased sources, as well as new information gathered from the social web and these newly-deployed smart assets. These trends are broadly known as “big data.” Companies are taking data use to new levels, using IT to support rigorous, constant business experimentation that guides decisions and to test new products, business models, and innovations in customer experience. This trend has the potential to drive a radical transformation in research, innovation, and marketing.

  • Web-based companies, such as Amazon.com, eBay, and Google, have been early leaders, testing factors that drive performance — from where to place buttons on a website to the sequence of content displayed — to determine what will increase sales and user engagement.
  • Capital One continues to refine its methods for segmenting credit card customers and for tailoring products to individual risk profiles. Financial analysts, IT specialists, and marketers conduct more than 65,000 tests each year, experimenting with combinations of market segments and new products.
  • Tesco gathers transaction data on its 10 million customers through a loyalty card program. It then uses the information to analyze new business opportunities—for example, how to create the most effective promotions for specific customer segments — and to inform decisions on pricing, promotions, and shelf allocation.
  • Ford, Pepsi, and Southwest Airlines analyze social web data in real-time to gauge the immediate impact of their marketing campaigns and to understand how consumer sentiment about their brands is changing.

6. Wiring for a sustainable world

Information technology’s share of the world’s environmental footprint is growing because of the ever-increasing demand for IT capacity and services. Electricity produced to power the world’s data centers generates greenhouse gases on the scale of countries such as Argentina or the Netherlands, and these emissions could increase fourfold by 2020. The use of IT in areas such as smart power grids, efficient buildings, and better logistics planning could eliminate five times the carbon emissions that the IT industry produces.

  • Businesses are adopting “green data center” technologies to reduce sharply the energy demand of the ever-multiplying numbers of servers.
  • IT manufacturers are organizing programs to collect and recycle hazardous electronics.
  • Smart buildings embedded with IT that monitors and optimizes energy use could be one of the most important ways of reducing energy consumption in developed economies. And powerful analytic software that improves logistics and routing for planes, trains, and trucks is already reducing the transportation industry’s environmental footprint.

7. Imagining anything as a service

Technology now enables companies to monitor, measure, customize, and bill for asset use at a more granular level than ever before. Asset owners can therefore create services around what have traditionally been sold as products, or even by-products. B2B customers enjoy these service offerings because they allow companies to purchase units of a service and to account for them as a variable cost rather than undertake large capital investments. Consumers also like this “paying only for what you use” model, which helps them avoid large expenditures, as well as the hassles of buying and maintaining a product.

  • In the IT industry, the growth of “cloud computing” exemplifies this shift. Software as a service (SaaS), which enables organizations to access services such as customer relationship management, is growing at a 17 percent annual rate.
  • The biotechnology company Genentech, uses Google Apps for e-mail and to create documents and spreadsheets, bypassing capital investments in servers and software licenses.
  • Many urban consumers are drawn to the idea of buying transportation services by the hour from companies like CarShare and ZipCar rather than purchasing autos.  This service is growing 25% annually.
  • A number of companies are employing technology to market salable services from business capabilities they first developed for their own purposes. British Airways and GE, for instance, have spun off their successful business-process-outsourcing businesses, based in India, as separate corporations.

8. The age of the multi-sided business model

Multi-sided business models create value through interactions among multiple players rather than traditional one-on-one transactions or information exchanges.

  • Spiceworks offers IT-management applications to 950,000 users at no cost, while it collects advertising from B2B companies that want access to IT professionals.
  • Sermo, an online community of physicians who join (free of charge) to pose questions to other members, participate in discussion groups, and read medical articles. Third parties such as pharmaceutical companies, health care organizations, financial institutions, and government bodies pay for access to the anonymous interactions and polls of Sermo’s members.
  • Flickr, Pandora (online music), and Skype not only use this kind of cross-subsidization but also demonstrate the leveraging effect of networks — the greater the number of free users, the more valuable the service becomes for all customers. Pandora harnesses the massive amounts of data from its free users to refine its music recommendations. All Flickr users benefit from a larger photo-posting community, all Skype members from an expanded universe of people with whom to connect.
  • MasterCard analyzes consumer purchasing patterns and sells aggregated findings to merchants.

9. Innovating from Third World countries

Disruptive business models arise when technology combines with extreme market conditions, such as customer demand for very low price points, poor infrastructure, hard-to-access suppliers, and low cost curves for talent. In other words, developing nations may be a wellspring of innovation. Some of these “extreme” business models are spreading to traditional markets thereby creating new global competitors.

  • In parts of rural Africa, traditional retail-banking models have difficulty taking root. But Safaricom, a telecom provider, offers banking services to 8 million Africans by allowing a network of shops and gas stations to load virtual cash onto cell phones.
  • Alibaba, China’s leading B2B exchange, helps more than 30 million members share data on their manufacturing services with potential customers — in effect, offering Chinese manufacturing capacity as a service, enabling small businesses anywhere in the world to identify suppliers quickly.
  • Hundreds of companies are now appearing on the global scene from emerging markets, with offerings ranging from a low-cost tutoring service to the remote monitoring of sophisticated air-conditioning systems around the world.
  • Some global companies, such as GE, are locating research centers in these cauldrons of creativity to spur their own innovations there. Others, such as Philips and SAP, are now investing in local companies to nurture new, innovative products for export that complement their core businesses.

10. Producing public good on the grid

The role of governments in shaping global economic policy will expand in coming years.  Technology will be an important factor in this evolution by facilitating the creation of new types of public goods while helping to manage them more effectively. This last trend is broad in scope and draws upon many of the other trends described above.

  • “Wired” cities such as London, Singapore, and Stockholm have used smart assets to manage traffic congestion in their urban cores, and many cities are deploying these technologies to improve the reliability and predictability of mass-transit systems. Sensors in buses and trains provide transportation planners with real-time status reports to optimize routing and give riders tools to adjust their commuting plans.
  • Networked smart water grids will be critical to address the need for clean water. Embedded sensors can not only ensure that the water flowing through systems is uncontaminated and safe to drink but also sense leaks.
  • Law-enforcement agencies are using smart assets—video cameras and data analytics—to create maps that define high-crime zones and direct additional police resources to them.
  • Cloud computing and collaboration technologies can improve educational services, giving young and adult students alike access to low-cost content, online instructors, and communities of fellow learners.
  • Through the Web, governments are improving access to many other services, such as tax filing, vehicle registration, benefits administration, and employment services.

Whew. That was quite a long post!  Let’s turn it over to you and your thoughts on these megatrends …

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