McKinsey and Web 2.0

September 3, 2009

McKinsey’s team of thought leaders has taken the bold step of quantifying the benefits of Web 2.0. You can read the six segments of the article by navigating to the McKinsey Quarterly Web site and registering. The spine of the article is a survey of 1700 executives. The data have been crunched and the principal findings summarized. The article also contains a first for the McKinsey firm—interactive graphics.The idea is to make it more Web 2.0-like to compare data across the 36n months of the study. Blue chip consulting firms charge hefty fees to delivery direct and immediate benefits to their clients. Not surprisingly, the front-and-center data indicate that those in the survey report “greater knowledge and better marketing”. The operative word struck me as “interactive”. Other study findings quantify what many of the Web 2.0 marketers have been touting—better marketing. The tools are those that have been available for many years; for example, videos, blogs, RSS, etc. The pivot point in the essay for me was McKinsey’s comments about the benefits of these now familiar technologies. Blue chip consulting firms go where the money is and that means firms with more than $1.0 billion in sales. McKinsey’s essay states:

Companies with revenues exceeding $1 billion—along with business-to-business organizations—are more likely to report benefits than are smaller companies or consumer companies. Among functions, respondents in information technology, business development, and sales and marketing are more likely to report seeing benefits at various levels than are those in finance or purchasing. IT executives, in general, are more focused on using Web tools to achieve internal improvements, while business development and sales functions often rely on the technologies to deliver better insights into markets or to interact with consumers.

I for one cannot disagree that firms with more resources are going to derive more benefits from new technology than smaller firms. I think the reason is a result of resource availability and the pay off from having more wheels and gears in motion. An investment in a new technology may flop in a resource rich organization and cause nary a ripple. In a smaller firm, a technology miss can impair the firm, often for a considerable period of time.

Another key segment of the article is the “Looking Ahead” section. McKinsey reports that “Web 2.0 use by companies seems to be developing hardy roots.” The statement will adds amps to the individuals and organizations working to infuse Web 2.0 technology into a business process or an entire organization.

In short, McKinsey has documented that certain new technology is making its way into the McKinsey survey sample.

My observations about this report are:

  1. I may have missed the definition, but I am not sure I know what Web 2.0 means. The article provides a laundry list of technologies which, I assumed, are taken as the Lego blocks of Web 2.0. The problem with this approach to definitions is that each reader forms his or her own definition. Without a clear understanding of what Web 2.0 is and is not, I think that the likelihood of confusion is high. Is, for example, a company with an RSS feed a Web 2.0 company? I think one can hire McKinsey to answer the question, and that’s good for McKinsey, but it does little to clarify Web 2.0 in my opinion.
  2. The list of benefits is interesting. My question is, “Where are the data that tie the investment to bottom-line pay off?” I did not see this type of hard data. McKinsey clients, like many organizations, worldwide are struggling to generate new revenue. I expected to see at least one concrete case that demonstrates a documented financial pay off. I would have settled for cost reduction (the principal method of hitting numbers in the last quarter or two for publicly traded companies) to new revenue (the top line growth that is sorely needed to start the remediation process for the financial collapse of many organizations). The omission is a serious one in my opinion. I don’t think there are hard data, but the survey offers some hints. But hints don’t create growth in my experience.
  3. The survey sample is described in a general way. “Executives” is a catch all term. With a sample of older executives (for example, more respondent above the age of 40), the data provide an indication that what has been fueling the growth of Facebook, Google, and is not part of the daily equipment of doing business. In fact, the lack of uptake for mash ups (Exhibit 2) is downright scary in my opinion. “Mash up” technology – that is, knitting together disparate items of data to provide an answer – is one of the most significant needs in content processing. It ranks slightly above prediction markets as technologies in use. These two items’ low rank suggests to me that the survey sample is well behind the innovation curve.

I urge you to read and save the McKinsey report data. These data will be referenced for months, maybe years to come. McKinsey has done a good job of documenting why the Web 1.0 companies failed to deliver to their stakeholders. I don’t see much encouragement for a turnaround in the firm’s Web 2.0 data.

Stephen Arnold, September 3, 2009


6 Responses to “McKinsey and Web 2.0”

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