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Does using social media really lead to higher margins?

According to the latest survey research from the McKinsey Global Institute, it does. Of course, this is fantastic news for all those – including myself – who have spent the last few years evangelising the application of web 2.0 technologies in the workplace. Cue tweets and blog posts regurgitating same.

But before you join their throng, take a closer look at the data and methodology – not to mention the comments, which reveal a number of caveats – and you’ll see that the reality doesn’t quite live up to the hype.

  1. All the data is self-reported rather than empirical and therefore subject to over- or under-estimation by respondents, some of whom are no doubt evangelists for these technologies in their own organisations.
  2. The correlation coefficients are very low and don’t isolate the impact of web 2.0 technologies to show that they are the cause of any business performance indicator improvements.
  3. Only ‘market share gains’ have a moderate correlation and high statistical significance, and this metric is often estimated and may not even be relevant to many organisations.
  4. The correlations of variables associated with operating margin are actually very low.

So ultimately, this is a pretty inconclusive study and to claim that ‘Web 2.0 finds its payday’ seems a little misleading. It may further the debate, but it by no means resolves it as many social media proponents are suggesting.

Will social software change the future of work?

My core thesis in Enterprise 2.0 is that social software will change the future of work.

So in an otherwise underwhelming update of McKinsey’s global survey on the state of web 2.0 in companies, I was therefore intrigued by the finding that companies satisfied with their use of web 2.0 “are not only using more technologies but also leveraging them to change management practices and organizational structures.”

Here are some of the data points that appear to back that up:

  • 38% of respondents said that their company’s use of web 2.0 technologies and tools has changed the way they communicate with customers and suppliers;
  • 16% said it has changed the way they hire and retain talent;
  • The same number said it has created major new roles or functions in their organization;
  • 14% said it has changed the way their organization is structured.

Before we get too carried away, it’s worth noting that 36% of respondents said that it hadn’t changed the way the company is managed and organized at all, although when you break that down only 8% of those who report the highest satisfaction levels with their use of web 2.0 believe that to be the case.

For me, the report is still too lightweight for a heavyweight organization like McKinsey. Maybe there’s a lot more data or analysis that they’re not making public. If so, that’s a shame because businesses need as much as they can get at the moment. If not, then they need to look at some of their more pedestrian survey questions for next year and go much, much deeper.

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