Social Media ROI – You’re looking in the wrong place

About two years ago, I forecast that the real value of social media would be in applying it across the enterprise for INTERNAL uses that would break down barriers, speed communication, and enable collaboration.

It just makes so much sense. Employees already enjoy using fun applications like social networks and wikis and the power of these tools in the external environment to unleash creativity, collaboration, and productivity is proven.  A new report from McKinsey validates this premise and places an actual number value on the potential savings of using similar tools internally.

The real ROI of social media

The report states that the speed and scale of adopting social technologies by consumers is unprecedented, yet companies are far from capturing the impact of these platforms.  Almost any human interaction that can be conducted electronically can be made “social,” but only 5 percent of all potential uses now take place through social networks.

The consulting firm identified 10 ways in which social technologies can create savings across the value chain. They estimated that between $900 billion and $1.3 trillion in value can be unlocked in the U.S. alone from these technologies:

  • Social networks
  • Blogs and micro-blogs
  • Ratings and reviews
  • Social commerce
  • Wikis
  • Discussion forums
  • Co-created content
  • Crowd-sourcing
  • Media and file sharing
  • Social gaming

social media statistics

Spanning across all these categories is social analytics to enable better-informed decisions.

Two-thirds of the projected value comes from improving communications and collaboration across the enterprise. It gets at this idea of organizing a company around problem-solving instead of silos. For example, in a large company, the expert company employee to solve a problem in the U.S. might actually be based in Australia.  Social platforms can make employees aware of these problems and unleash their skills through social technologies. McKinsey estimates implementing internal social systems could raise the productivity of knowledge workers by at least 20 percent. What a revolutionary opportunity!

Social influence may change the way we sell

One of the most fascinating predictions in the report is that the ability to identify the social influence of employees might “disintermediate commercial relationships and upend traditional business models.” In other words, the power to deputize all of your employees for marketing, sales, and service can change the way you sell.  I reported on an example of this in a post a few weeks ago about using social scoring measures to assess the “Internet impact” of employees.  Quite interesting that McKinsey is already picking up on this as a global organizational trend.

As you can imagine, realizing these financial gains wil require significant transformations in management practices and organizational behaviors — HR will be leading the way toward social media success.  As in most cases involving transformational change, the technolgy is the easy part!

What’s keeping companies from moving ahead with these ideas?  Fear of risk.  There are undoubtedly legitimate risks involved, including potential loss of intellectual property, violations of privacy, abuse, and potential PR problems. Also, social technologies can disrupt traditional business models, creating internal resistance from bureaucracies.

However, competitive pressures will eventually drive companies to overcome these risks. Companies that fail to invest in social technologies will fall behind.

Are internal social media platforms right for you?

The industries most likely to benefit from integrating social technologies have these characteristics:

  • A high percentage of knowledge workers.
  • Heavy reliance on brand recognition or consumer perception
  • A need to maintain a strong reputation to build credibility and consumer trust
  • A digital distribution method for products or services
  • An experiential (hotels) or inspirational product or service (sports products)

Particularly fit for the social overhaul are consumer goods companies, education, professional services, media, and software companies, which have a high number of knowledge workers and a high reliance on brand recognition.

social media statistics

The report concluded that social technology is not an IT issue and will depend on multiple factors for success, including an ability to create trust in the platforms, a critical mass or participation, and positive community cultures.

But I think the McKinsey report only hits the tip of the iceberg.  The value calculations are based on an ability to improve or replace existing communication structures.  But I think the most exciting aspects of the potential benefits are not found in the bottom line savings, but the unknown creativity that will be ignited when you turn these tools over to the hands of employees who will use them in ways we cannot even imagine!

I would love to hear about your experiences.  Are you beginning to use social platforms internally at your company?

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