Has McKinsey Created A Tipping Point?

by Jay Deragon on 02/19/2009

leader_packThere has been plenty of discussions throughout the social web about how businesses can gain from the use of social media. Marketers from every corner of the earth promote their services to businesses and proclaim “expert status”. However their is only one name in the globe that has the power of getting business leaders attention. That name is McKinsey.

On Feb 18th McKinsey Quarterly released an article titled “Six Ways to make Web 2.0 work”. The articles states (some excerpts):

Technologies known collectively as Web 2.0 have spread widely among consumers over the past five years. Social-networking Web sites, such as Facebook and MySpace, now attract more than 100 million visitors a month. As the popularity of Web 2.0 has grown, companies have noted the intense consumer engagement and creativity surrounding these technologies. Many organizations, keen to harness Web 2.0 internally, are experimenting with the tools or deploying them on a trial basis.

We have found that, unless a number of success factors are present, Web 2.0 efforts often fail to launch or to reach expected heights of usage. Executives who are suspicious or uncomfortable with perceived changes or risks often call off these efforts. Others fail because managers simply don’t know how to encourage the type of participation that will produce meaningful results.

Clay Shirky, an adjunct professor at New York University, calls the underused human potential at companies an immense “cognitive surplus” and one that could be tapped by participatory tools. Corporate leaders are, of course, eager to find new ways to add value. Over the past 15 years, using a combination of technology investments and process reengineering, they have substantially raised the productivity of transactional processes. Web 2.0 promises further gains, although the capabilities differ from those of the past technologies (Exhibit 3).

Research by our colleagues shows how differences in collaboration are correlated with large differences in corporate performance.1 Our most recent Web 2.0 survey demonstrates that despite early frustrations, a growing number of companies remain committed to capturing the collaborative benefits of Web 2.0.2 Since we first polled global executives two years ago, the adoption of these tools has continued. Spending on them is now a relatively modest $1 billion, but the level of investment is expected to grow by more than 15 percent annually over the next five years, despite the current recession.3
Management imperatives for unlocking participation

To help companies navigate the Web 2.0 landscape, we have identified six critical factors that determine the outcome of efforts to implement these technologies.

1. The transformation to a bottom-up culture needs help from the top.

2. The best uses come from users—but they require help to scale. In earlier IT campaigns, identifying and prioritizing the applications that would generate the greatest business value was relatively easy.

3. What’s in the workflow is what gets used. Perhaps because of the novelty of Web 2.0 initiatives, they’re often considered separate from mainstream work. Earlier generations of technologies, by contrast, often explicitly replaced the tools employees used to accomplish tasks. Thus, using Web 2.0 and participating in online work communities often becomes just another “to do” on an already crowded list of tasks.

4. Appeal to the participants’ egos and needs—not just their wallets. Traditional management incentives aren’t particularly useful for encouraging participation.5 Earlier technology adoptions could be guided readily with techniques such as management by objectives, as well as standardized bonus pay or individual feedback. The failure of employees to use a mandated application would affect their performance metrics and reviews. These methods tend to fall short when applied to unlocking participation. In one failed attempt, a leading Web company set performance evaluation criteria that included the frequency of postings on the company’s newly launched wiki. While individuals were posting enough entries to meet the benchmarks, the contributions were generally of low quality. Similarly, a professional-services firm tried to use steady management pressure to get individuals to post on wikis. Participation increased when managers doled out frequent feedback but never reached self-sustaining levels.

5. The right solution comes from the right participants. Targeting users who can create a critical mass for participation as well as add value is another key to success. With an ERP rollout, the process is straightforward: a company simply identifies the number of installations (or “seats”) it needs to buy for functions such as purchasing or finance and accounting. With participatory technologies, it’s far from obvious which individuals will be the best participants. Without the right base, efforts are often ineffective. A pharmaceutical company tried to generate new product ideas by tapping suggestions from visitors to its corporate Web site. It soon discovered that most of them had neither the skills nor the knowledge to make meaningful contributions, so the quality of the ideas was very low.

6. Balance the top-down and self-management of risk. A common reason for failed participation is discomfort with it, or even fear. In some cases, the lack of management control over the self-organizing nature and power of dissent is the issue. In others, it’s the potential repercussions of content—through blogs, social networks, and other venues—that is detrimental to the company. Numerous executives we interviewed said that participatory initiatives had been stalled by legal and HR concerns. These risks differ markedly from those of previous technology adoptions, where the chief downside was high costs and poor execution.

Companies often have difficulty maintaining the right balance of freedom and control. Some organizations, trying to accommodate new Web standards, have adopted total laissez-faire policies, eschewing even basic controls that screen out inappropriate postings. In some cases, these organizations have been burned.

Acceptance of Web 2.0 technologies in business is growing.  Encouraging participation calls for new approaches that break with the methods used to deploy IT in the past. Company leaders first need to survey their current practices. Once they feel comfortable with some level of controlled disruption, they can begin testing the new participatory tools. The management imperatives we have outlined should improve the likelihood of success.

This article should be considered a tipping point. When McKinsey speaks business leaders listen and you can bet this article  will stir more engagement in social media activities from businesses around the globe.

The irony is that this one article will lift the tides of interest and all boats, those fitted for duty, will rise. Watch McKinsey’s future post and get your boat ready for the Tsunami of interest.

What say you?

{ 15 comments }

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SPBEX.org May 15, 2009 at 8:04 am

http://www.V-360.org recommends “Has McKinsey Created A Tipping Point?” article re “Six ways to make Web 2.0. Work” http://tinyurl.com/cq9ohk

[twHIVE] WEB 2.0 February 20, 2009 at 6:19 am
Chuck Peters February 20, 2009 at 6:19 am

McKinsey on Web 2.0 http://bit.ly/157qAu

JDeragon February 19, 2009 at 11:00 am

New blog post: Has McKinsey Created A Tipping Point? http://tinyurl.com/cq9ohk

JDeragon February 19, 2009 at 6:07 am

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Annalie Killian February 19, 2009 at 5:38 am

@JDeragon snap…I just read that from my RSS feed to your amazing blog. http://tinyurl.com/cq9ohk Great post!

Annalie Killian February 19, 2009 at 5:35 am

Internal prophets not recognised in own corporations, but when McKinsey says it, maybe corporates will adopt E 2.0? http://is.gd/k5lP Brand!

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JDeragon February 19, 2009 at 5:27 am

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JDeragon February 19, 2009 at 5:19 am

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