Is Michael Porter’s thinking redundant? It’s a fair question. In a business world where everything is changing: marketing; project management; HR and customer management; even funding models and opportunities for innovation – business needs a whole new paradigm for success.
“One of the drivers of this change is social media,” says Dave Duarte, the programme director of Social Business Strategy at the UCT Graduate School of Business. “Yes, it has been around for a while, but evidence is that it has gathered momentum in a way that makes it impossible for business to now ignore.”
According toDuarte, Forrester Research shows that spending on social business software is growing at 61% per year, and will do so right into 2016. In that year it is estimated that spending on these products will be over $6 billion.
Investing in social media
But what exactly is it that these companies are investing in? “Well, transformation and opportunity really,” says Duarte. “They’re buying their ticket to becoming what everyone from the Economist to the McKinsey Global Institute is calling a ‘networked enterprise’.
“In some cases the term ‘extended enterprise’ is used to describe organisations that have adopted so successfully these technologies that they have practically blurred the boundaries between the organisation, the customer, and partners and suppliers.”
Many companies are starting to report that this investment is paying dividends. The latest web 2.0 annual survey by the McKinsey Global Institute surveyed more than 4 200 global executives, across an array of industries, and found that there is an increase in the amount of companies investing in these technologies – and that most report that, if deployed strategically, this is benefitting them in some way.
Based on the responses, 86% of high tech and telecommunications companies, 77% of business, legal, and professional services companies, 74% of public administration as well as pharmaceutical companies, 69% of retailing companies and transportation companies, 67% of healthcare and social services companies, 64% of manufacturing companies and financial services companies, and 62% of energy companies, use at least one social media technology such as blogging, microblogging and social networks.
The survey also showed that those companies that fully integrated the technology into all aspects of their business, including into employee work processes, experienced most gain.
Out of 1 949 companies using these technologies for internal purposes, 74% of them experienced an increase in the speed to access knowledge, 58% reduced communication costs, and 51% increased the speed of accessing internal expertise.
Among those that used the technologies for customer relations purposes, of which there were 2 227, 69% increased their marketing effectiveness, 475 increased customer satisfaction, and 43% reduced marketing costs.
For external purposes, companies that used the technology for relations with partners, suppliers, and external expertise, of which there were 1 142, 655 increased the speed of access to knowledge, and 61% reduced communication costs.
Overall respondents felt that social media technology offered competitive gain and improved organisational performance. Some saying that if organisational barriers to the adoption of social media technologies – buy-in, trust, uncertainty, and resources, for example – had to drop, they could become a strategic core of how the business operates.
Using social media wisely
But it’s not all a one-way ticket to success. “The research also shows that some organisations experienced a drop in benefits, due mainly to a strategic fault,” says Duarte. “The effort to maintain social media within an organisation is a complex and difficult exercise, especially in integrating them into the workflow of every employee, and if left to slack reaps little benefit or can even cause harm.”
According toDuarte, to reap the full benefits of social media technologies, leaders must realise that it is an essential, strategic element in a business. More than a mildly effective marketing tool or just another tactical element, it is a whole new way of getting things done. And as more companies enter the space competition intensifies.
“Businesses that are not doing it yet need to get in on the act. Start small, so any risk is contained, while educating people across the organisation – who are already using these platforms anyway – to use them more effectively. What is required here is a small-scale adaptive, responsive approach.”
Going the way of the networked or extended organisation is a good bet – there’s enough evidence to support this. If done right, it makes business sense. “Everything from employee performance to matching certain skills with certain projects is enhanced; logistical planning and project management is improved, made easier; connecting to customers and finding new opportunities are made far more possible and are greatly encouraged. One just needs be strategic about it.
“In fact, IBM is calling social media in business a ‘necessity to survive today’s volatile business climate’.
“It used to be called a nice-to-have.”
Dave Duarte is the director of the Social Business Strategy – Adopting Social Media in Business programme at the Graduate School of Business.
Dave Duarte is the programme director of Social Business Strategy which runs at the Graduate School of Business on August 1 and August 2.