Figure It Out - Innovation is about improvisation

by Beth Comstock - from Harvard Blogs

Big companies should keep their eyes on start-ups, and not only because of the disruptive innovations they unleash. It also pays to learn from how they work. For example, at GE our new-product development efforts got a fresh infusion of energy this year from the lean start-up methods that serial tech entrepreneur Eric Ries advocates. We’ve also been inspired by an ethos we’ve seen in the world of social enterprise: the belief that if you hire smart people, they should be able to “figure it out.”

That’s a favorite phrase of Angela Blanchard, the CEO of Neighborhood Centers, a Houston-based nonprofit that provides services for 340,000 people along the Gulf Coast. Every week her organization faces new problems for which road maps to a solution don’t yet exist and resources are never ample. Blanchard needs her people to be inventive, capable, and enterprising. Above all, they must be able to improvise—to take whatever they have to work with and make the most of it.

Sometimes when candidates who want to join Neighborhood Centers learn of Blanchard’s expectations, they start to worry that they lack the training to take on such complex challenges. Blanchard’s standard reply is tough but empowering: No one has the training. Figure it out.

The notion of the “FIO” job description resonates with us at GE because it describes what’s behind some of our most exciting innovations, especially in emerging markets. As a huge company with a long history, we’ve mastered the traditional approaches: maximizing efficiency and quality by relying on highly specialized and expert professionals and well-designed processes. But as we venture into new territory—say, a hospital or health center in rural China—we need radically different ways to solve problems. So we’ve established customer innovation centers close to where new solutions are needed, and we help our employees there abandon their assumptions about what customers need. Instead, they observe how people actually live and work. They create relevant offerings and improve on them iteratively, in real time. They figure it out.

This is how a resourceful GE team in India was able to build medical equipment that can function despite intermittent electricity. A hospital newborn unit was the first setting they focused on. Waiting for reliable power was simply not an option.

With GE’s future success dependent on creative innovation, we are now continually making such demands of our people. We expect employees to thrive in uncertainty, take initiative, and respond resiliently when their ideas fall short.

I don’t think that’s too tall an order. Today, new disruptions hit and capabilities change at a dizzying pace; figure-it-out jobs are the building blocks for what will have to be figure-it-out careers. “Forget your old job descriptions,” I tell the people on my marketing team. “You should be as central a part of the process of innovation as product managers and engineers.”

Top managers at a large enterprise like GE need to honor their side of the bargain with this new imperative. Smart employees should be able to figure it out, but they also must be enabled to do so. The organizational culture around them should celebrate ingenuity. Systems must not lock people into narrow roles.

Angela Blanchard’s management challenge is similar to the reality facing all organizations. As leaders and managers, we have to motivate our people to come up with workable solutions to problems that weren’t even on the radar screen when they were hired. There’s no operator’s manual for most of what we’ll ask people to work on. But somehow, together, we’ll figure it out.

Connected leadership

by Harold Jarche 

www.jarche.com

How is leadership in a hyper-connected workplace different? 

It’s been an ongoing conversation here, as this comment by Stephen Downes, on leadership as an emergent property, provides a counterpoint to certain popular leadership literature, especially “great man” theories.

‘Leadership’ is the trait people who have been successful ascribe as the reason for their success.

It is one of those properties that appears to be empirically unverifiable and is probably fictional.In preparing for our connected worker program, I reviewed my previous posts on leadership and created a short synthesis of the key points. With life in perpetual Beta as a guiding perspective, networked organizations have to learn how to deal with ambiguity and complexity. Those in leadership and management positions must find ways to nurture creativity and critical thinking. Too often there are organizational barriers that prevent this. The 21st century workplace is all about understanding networks, modelling network learning, and strengthening networks. 

Anyone can show leadership in these areas.Another guiding principle for modern organizational design is for loose hierarchies and strong networks. This is succinctly explained in the definition of wirearchy: a dynamic two-way flow of  power and authority, based on knowledge, trust, credibility and a focus on results, enabled by interconnected people and technology”. 

As networked, distributed work becomes the norm, trust will emerge from environments that are open, transparent, and diverse. Supporting social networks ensures that knowledge is shared and contributes to organizational longevity. Organizations need to learn as fast as their environments.As a result of improved trust in the workplace, leadership will be seen for what it is – an emergent property of a network in balance and not some special property available to only the select few. This requires leadership from everyone – an aggressively intelligent and engaged workforce, learning with each other. In today’s workplace, it is a significant disadvantage to not actively participate in social learning networks.Leadership in networks does not come from above, as there is no top. 

To know the culture of the workplace, one must be the culture. Marinate in it and understand it. This cannot be done while trying to control the culture. Organizational resilience is strengthened when those in leadership roles let go of control.

Citizenship At Work - by @drBret Simmons

by Bret L. Simmons  

On Friday, April 26, 2013, I have the privilege of sharing my thoughts about organizational citizenship atTEDxReno. My main idea is that we are all responsible for our citizenship at work because the evidence shows our citizenship matters. This will be different from any other presentation I’ve given in my career. To deliver a good TEDx talk, you have to clearly understand the format and be extremely well prepared. For the first time in my life, I have scripted my presentation and plan to practice it dozens of times before I take the TEDxReno stage.

Below is the draft of my script. I’m sure it will change again slightly between now and then, but I’ve already spent about 12 hours just getting it to this point. If you take the time to read it, I’d appreciate it if you would share your thoughts in the comment section below.

Citizenship At Work

“Ask not what your country can do for you, ask what you can do for your country.” President John Kennedy gave us this mantra of citizenship in his 1961 inaugural address.  Two hundred and seventeen words before this now famous call to action, he told us why it matters with these words: “In your hands, my fellow citizens, more than in mine, will rest the final success or failure of our course.”

Citizenship matters. Good citizenship has the power to transform not only countries, states, and local communities, but also organizations. Scientists in my field of organizational behavior and management have been studying citizenship at work since the late 1970s and the evidence strongly suggests our choice to be good citizens at work makes a difference. I want to be clear that I am talking about citizenship in the workplace; we all know people that think they are good citizens in the community but at work they either don’t carry their weight or worse are egocentric jerks.

“How can I help?” is the attitude of a good organizational citizen. Good organizational citizens help by exhibiting innovative and spontaneous behaviors and a willingness to cooperate with others.

Are you a good citizen at work? To what extent can you say you do these things:

• I willingly share expertise, knowledge, and information to help improve the effectiveness of others on my team
• I always try to lend a helping hand to those people on my team that need it.
• I try to resolve unconstructive interpersonal conflicts with my coworkers
• I touch base with other team members before taking actions that might affect them.

If you are doing things like this in addition to performing your job well, congratulations, you are a good citizen and I believe a credit to your organization.

From the C-suite executives to the frontline employees, everyone in the organization needs to see their citizenship as a personal responsibility and understand that helping others creates a sustainable competitive advantage. The evidence is clear that when aggregated over time and people, our citizenship adds up and helps our organizations become more effective.

All things being equal, an organization full of good citizens will outperform one void of good citizens. Studies have shown that across a variety of indicators, organizational citizenship accounted for anywhere from 18 to 38 percent of the variance in performance outcomes. If that were not enough, being a good citizen can also help us personally because when our boss sees us helping others, we often get a better performance evaluation.

Our attitudes, how we are lead, and to a much lesser degree our personality affect our willingness to be good citizens at work.

The evidence shows that more than anything else, our attitudes – specifically how satisfied we are with our jobs and how committed we are to our organization – determine if we are going to be good citizens at work. This is great news because we can change our attitudes. Even if our organizations don’t seem to care about our satisfaction and commitment, we should care.  We should seek work that we enjoy, people we enjoy working with, and people to work for who treat us right. And commitment, even more than satisfaction, merits our relentless pursuit. When we reach the point where we can say “I want to be here doing this important work with you,” our citizenship often flourishes.

Fairness and supportive behavior on the part of our leaders also matters. When our leaders help us, they help themselves by encouraging a work environment where the “helping virus” can thrive.

With the exception of being conscientious and agreeable, our personality has little to do with being a good citizen at work. Even if it is not our personality, all of us can learn to be more organized, thorough, and deliberate in the performance of our job. And even if we don’t naturally go out of our way to help others, when our leaders treat us with courtesy, dignity, and respect, we feel positive at work, and good mood moves people of all personality types to be better citizens.

Our attitudes, personality, and how our leaders treat us matters, but can never be an excuse. Citizenship is a behavioral choice, and even if ours is never encouraged or rewarded, we can never escape our responsibility to do the right thing. Here is the paradox of citizenship for me: the hardest thing I have to do as a citizen is to be fair to people that aren’t fair to me, care about people that don’t care about me, and help people that have thrown me under the bus. But if we ever hope to be effective leaders, we have to first choose to be good citizens.

As we choose to help others at work, we should try to help in ways that makes them increasingly less dependent on our help. The goal is to help others become more autonomous and capable of being interdependent with others at work. Dependent people wear us out with repeated requests for our help. Independent people wear themselves by never asking for help and short us by never providing help to others in need. Interdependent people are comfortable working autonomously, but they also know when and how to ask for help from others when it is necessary. So if we want to encourage interdependence on our team, we too must learn to ask for help from others in ways that ultimately makes us better at performing autonomously.

In his brilliant new book, Adam Grant shows that when we give our time, effort, and knowledge to help others, we create the powerful belief that they are worthy of our help. And when we genuinely seek help or advice from others for the purpose of learning from them, it is a subtle way to invite them to make a commitment to us. Asking for advice can open doors to gaining influence, and the more influential we are, the more helpful we can be.

The evidence also shows that good citizenship requires the willingness to challenge. But challenge absent helping only goes so far. Helping enables challenging to have a more positive impact on the performance of our team. The most effective challengers have a reputation for first being helpful.

As we challenge, we have to be willing to risk disapproval in order to express our belief about what’s best for our team. We must not hesitate to challenge the opinions of others who we feel are directing the company in the wrong direction. And we must recommend changes to policies or procedures that we believe inhibit us from doing our best work. These recommendations for improvement should come from a posture of partnership where we assume as much responsibility as we can for being part of the solution. Real partners don’t dump. They don’t wag their finger and say “this sucks, and so do you.” The rhetoric of the purposeful, partner citizen sounds something like this: This procedure is not working as well as it could be, I think these changes would be an improvement, here is all I need from you to be able to implement this solution myself.

Its time we stop thinking about the success of our organization as someone else’s job. Our fundamental responsibility is to perform our assigned work with distinction. There is no substitute for performance. As we master our assigned work, we should look for ways to partner with others to fix the crappy systems that constrain our performance. We also have a responsibility to care about the work we do, the people we do it with, and the people we do it for. There is no substitute for caring. We need to manage our time in such a way that we can first do our work well, and then look for ways to help others on our team improve the work that they do. And if someone is behaving unethically, we need to care enough to muster the courage to confront them, even if we stand alone. When we perform, care, and operate with integrity, we become worthy of the trust of other citizens.

There is a lot of interest these days in employee engagement. I like engagement, but the hype far exceeds the peer-reviewed scientific evidence. The same is not true for organizational citizenship, where we have three decades of excellent peer-reviewed evidence. I’m not really sure how I need to behave at work to satisfy the engagement gurus, but I’m crystal clear about the importance of first doing my job well, then looking for opportunities to help my organization and colleagues. I wish our organizations would spend more time and effort encouraging good citizenship at work.

Yet for us who choose to ask what we can do to help, it really is true that in our hands will rest the final success or failure of our course. But we are masters of self-deception; highly skilled at telling ourselves stories that make us feel good but simply are not true, stories like “there is no way I can make a difference around here”. But our circle of influence at work is larger than we think. People are watching us, and it is our responsibility to craft the stories others tell about us. Those stories about our behavior have the power to change the culture of our organizations. My challenge to you is to go forward from here and choose to behave in ways that will provide stories of good citizenship because the evidence is unequivocal that if you do so, you can make a difference in your workplace.

Thank you

Think Like a Startup: Growth Hacking Introduces New Marketing Hacks to Businesses

di Brian Solis

Do more with less! Sound familiar? This is a statement I hear in almost every strategy and planning meeting I attend on behalf of enterprise and startup clients alike. The idea of course is to accomplish great feats, beyond the output or achievements of years gone by, without the previous resources exploited over time.

Several years ago, I adopted a way of thinking to help me realize that how things are done today isn’t indicative of how they could be. As such, I’ve adopted a mantra of “constraint forces creativity.” Constraint isn’t defined by cash flow or edicts, but instead the restriction of the boundaries that confine us to customary processes and views.

Yes, there are times when you can, when you should do more with less. But doing more with less isn’t a mantra in of itself. It’s a representative of a form of administration that attempts to boost productivity while operationalizing processes and optimizing efficiencies. Yes, that was corporate speak. It’s nonetheless true however.

This is how organizations compete today without necessarily thinking about how these activities position them in the future.

Innovation and risk taking often carry too much of a cost to bear for some companies. It’s more than finances however. Exploring new solutions also presents a significant opportunity cost that may in fact signify doing more with more rather than doing more with less. This presents a catch 22 of sorts. If you effectively “do more with less,” you may actually deliver less with less. If you discover ways to creatively excel, the pervasive culture of optimizing and operationalizing business practices may not truly appreciate the extent of your (and your team’s) sacrifices. New ideas often die on the vine.

The Hacker Way

“The Hacker Way” is the ideology that Mark Zuckerberg has long employed at Facebook. It’s also the name of the road that leads to the company’s sprawling campus in Menlo Park California.

To succeed in business today, there’s indeed a hack for that…

Everything begins with a shift in perspective and culture. What if the entire organization or at least those with driving impact where empowered? Sometimes it takes learning from the lean and mean world of startups to get larger organizations back on track.

Startups are the new darlings of their industry. Twitter, Foursquare, Instagram, Pinterest, Uber, AirBnB, these are the forces that are disrupting age-old business models while creating entirely new markets. In the world of startups, unlike larger organizations, employees not only wear multiple hats, they’re empowered to excel on each front to help the organization gain momentum and ultimately grow. This is classic intraprenuerialism. This approach takes the elements that represent the defining pillars of entrepreneurialism and attempts to celebrate them within a larger ecosystem.

Intrapreneurs are the New Entrepreneurs

Intrapreneurs rethink and promote innovation in processes, product development, marketing, collaboration and anywhere and everywhere it’s needed or possible.

In the startup community, one of the most talked about trends in intrapreneurialism is the role of growth hacking. To be a growth hacker is someone who is specifically tasked to do more with less. The difference here is that growth hackers take it upon themselves to do more with less as they hack the way things are done to find a potent way of obtaining goals.

What is a growth hacker?

Growth Hacking is the art and science of creating awareness, traction, adoption, and advocacy using unorthodox and surprising means. It’s quite literally a hack for traditional processes to accelerate business.

In 2010, Sean Ellis introduced us to the role of growth hacker in his post, “Find a Growth Hacker for Your Startup.”

In his post Ellis recognizes the difference between Growth Hacking and traditional marketing and business development, “…the problem is that most startups try to hire for skills and experience that are irrelevant, while failing to focus on the essential few skills. Typical job descriptions are often laden with generic but seemingly necessary requirements like an ability to establish a strategic marketing plan to achieve corporate objectives, build and manage the marketing team, manage outside vendors, etc.”

If you’re unaware of Quora, spend some time there. Quora is the defacto Q&A hub for all things disruptive and bleeding edge when it comes to technology, trends and the people behind them. On the topic of Growth Hacking and what it is and isn’t, the top ranked answer comes from Andy Johns, “It’s the idea that an entrepreneur can take a clever or non-traditional approach to increasing the growth rate/adoption of his or her product by ‘hacking’ something together specifically for growth purposes. What people call ‘hacking’ today will become common sense to most in the tech world in the future because people are waking up to the fact that growth doesn’t simply come from having a good product.”

Of course when you hear the word hacker, you probably think of breaking into networks or hijacking computers to illegally access files and information. Hacking is though a method of bypassing traditional tasks to obtain a goal.

To compete for the future and ultimately relevance, leading technologists believe that the future of marketing comes down to technologists. Growth Hacking sounds intriguing, but at its root, it represents homage to programming and respect for the culture of online, social and mobile communities in order to influence different behavior.

In 2012, Andrew Chen, an entrepreneur and blogger based in Silicon Valley described the skillset that serves as the undercurrent of growth hacking in his noteworthy article, “Growth Hacker is the New VP of Marketing.”

This is a defining piece as it outlines the importance, the responsibilities and the potential outcomes when growth hackers assume the role of marketing, “This isn’t just a single role – the entire marketing team is being disrupted. Rather than a VP of Marketing with a bunch of non-technical marketers reporting to them, instead growth hackers are engineers leading teams of engineers.

Growth Hacking is intrapreneurialism enacted.

Chen continues, “Before this era, the discipline of marketing relied on the only communication channels that could reach 10s of millions of people – newspaper, TV, conferences, and channels like retail stores. To talk to these communication channels, you used people – advertising agencies, PR, keynote speeches, and business development. Today, the traditional communication channels are fragmented and passé. The fastest way to spread your product is by distributing it on a platform using APIs, not MBAs. Business development is now API-centric, not people-centric.”

People are the 5th P of Marketing and the Source of Growth in Growth Hacking

While I take exception to the last line being “API-centric” and not “people centric,” Chen’s bigger argument is that it takes technologists to hack technology to reach desired audiences to drive desirable clicks, conversions and outcomes. He’s right. But, he’s wrong about people. People represent the 5tH P of Marketing and it’s through empathy in understanding real world challenges that opens the doors to new opportunities. Said another way, people and their aspirations and frustrations should inspire you.

The key is programming journeys that deliver coveted experiences. And that’s what this is really about. Growth Hacking finds new ways of creating awareness and constructively handholding people into a dynamic customer journey that is thoughtful, productive, and meaningful…on any platform.

To succeed in business and continually compete for the future takes a culture of intrapreneurialism to spark innovation within. Remember it’s less about doing more with less and absolutely about finding or creating solutions when resources or opportunities are either constrained or inhibited by convention. Growth hacking isn’t just about finding new means for the sake of hacking it, it’s about discovering a means to an end when the various forms of other means produce mediocre or lackluster results.

Why settle when new frontiers have yet to be discovered?

Capturing business value with social technologies

As these powerful technologies shake up productivity and growth across industries, they will create new organizational imperatives.

November 2012 • Jacques Bughin, Michael Chui, and James Manyika

Source: McKinsey Global Institute

Social technologies, in their relatively brief period of existence, have found favor with consumers faster than previous technologies did.¹ It took 13 years for commercial television to reach 50 million households and 3 years for Internet service providers to sign their 50 millionth subscriber. Facebook hit the 50 million–user mark in just a year and Twitter in nine months. Sweeping cultural, economic, and social changes have accompanied this accelerated pace of adoption by the world’s consumers.

Companies, too, have adopted these technologies but have generated only a small fraction of the potential value they can create. An in-depth analysis of four industry sectors that represent almost 20 percent of global industry sales suggests that social platforms can unlock $900 billion to $1.3 trillion in value² in those sectors alone. Two-thirds of this value creation opportunity lies in improving communication and collaboration within and across enterprises. Frequently, these improvements will go well beyond the areas many companies have focused on to date in their social-media efforts: connecting with consumers, deriving customer insights for marketing and product development, and providing customer service.

Since “social” features can be added to almost any digital application that involves interactions among people, the range of uses is immense and measurement correspondingly challenging. Thus, we cast a wide net. We studied several hundred cases of organizations using social technologies around the globe. In addition, we examined the patterns of knowledge work within organizations and drew insights from data covering several years of surveys involving thousands of global executives on the ways their companies use social technologies. Our analysis of successful uses served as a basis for modeling potential improvements across the value chain.

Of late, some bearish sentiments surround social technologies after disappointments for several companies in the capital markets. It’s worth noting, however, that today only 5 percent of communications occur on social networks. Moreover, almost all digital human interactions can ultimately become “social,” and jobs involving physical labor and the processing of transactions are giving way, across the globe, to work requiring complex interactions with other people, independent judgment, and the analysis of information.³ As a result, we believe social technologies are destined to play a much larger role not only in individual interactions but also in how companies are organized and managed.

Productivity possibilities

We estimate that using social technologies to improve collaboration and communication within and across companies could raise the productivity of interaction workers by 20 to 25 percent (Exhibit 1). These dramatic gains would occur thanks to shifts in the way these workers communicate—from using channels designed for one-to-one communication, such as e-mail and phone calls, to social channels, which allow “many-to-many” communication.

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Specifically, our research indicates that interaction workers typically spend 28 percent of each day (13 hours a week) reading, writing, and responding to e-mails. A huge amount of valuable company knowledge is locked up in them. As companies adopt social platforms, communication becomes a new form of content, and more enterprise information can become readily accessible and easily searchable rather than sequestered as inbox “dark matter.” Employees will be able to find knowledge in the organization more readily and to identify experts on various topics, given the expertise implied by their patterns of social communication. We estimate that 25 to 30 percent of total e-mail time could be repurposed if the default channel for communication were shifted to social platforms.

E-mail is just the beginning. Companies could also raise the efficiency of the large part of the day—roughly 20 percent—that knowledge workers spend searching for and gathering information. In fact, our analysis suggests that a searchable store of social messages could allow employees to repurpose 30 to 35 percent of their information search time.⁴ Unisys, for instance, has started along the path to capturing value in this way: 16,000 employees around the world have joined a company-wide social network, and ten social communities provide ready access to specialized expertise from around the company to resolve technical problems.

Capturing these technologies’ full potential to improve collaboration and communication, however, will require organizational change and new management approaches, which often take time to implement.

Adding up the business benefits

Besides these productivity opportunities from improved collaboration, social technologies offer a wide range of business benefits in additional areas—including consumer marketing (for instance, in industries such as consumer packaged goods and automotive), customer service, and even fraud detection (in sectors like insurance). To understand the full company-level potential of social media, we examined four major sectors: consumer packaged goods (CPG), advanced manufacturing, professional services, and consumer-facing financial services. Within each sector, we quantified the value potential in five functional areas—R&D, operations and distribution, marketing and sales, customer service, and business support⁵— as well as uses that cut across the enterprise and its functions (Exhibits 2 and 3).

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Consumer packaged goods

CPG companies have been among the early adopters of consumer social media, both to engage customers and to derive insights. However, substantial gains could arise from additional applications, particularly in marketing and sales, where these companies spend an average of 15 to 20 percent of their revenues. Some leading companies have gained the same level of consumer insight, at only 60 to 80 percent of the previous cost, by substituting insights from extensive online communities for more traditional marketing panels and focus groups. Interactive product campaigns that deploy social technologies, our research further shows, can increase the productivity of advertising expenditures by as much as 30 to 60 percent. New, collaborative forms of engagement with customers too can improve product development, both in speed and level of understanding. Kraft, for instance, discovered key consumer insights and significantly reduced times to market for 48 new South Beach Diet products by enlisting communities of nutrition experts and potential consumers.

Advanced manufacturing

We found significant opportunities for tighter collaboration in the three advanced-manufacturing industries we studied—semiconductors, aerospace, and automotive. Highly educated knowledge workers, though central to R&D operations in these industries, often remain “siloed” in their specific units within sprawling global operations. Collaboration among such employees across organizational boundaries could increase their effectiveness. Supply chain operations in semiconductors and aerospace frequently require a high degree of collaboration and knowledge sharing within and beyond company boundaries in the manufacture of specialized components and complex subsystems. Pre- and postsales customer support in these industries often involves ecosystems where information can be exchanged among knowledgeable customers and company personnel, and collaboration tools can facilitate this sharing. Texas Instruments, for example, uses social platforms to share design information with engineers at client companies, tailoring products to their needs while avoiding costly overdesign.

Automotive is a somewhat special case of advanced manufacturing, in that the end customers for finished products are consumers. Consequently, companies have a significant opportunity to use social technologies for marketing and for deriving consumer insights. Kia Motors, for example, designed more comfortable seats and increased the space of the cabin in one of its models after learning that consumers in social forums found the cabin cramped and uncomfortable.

Professional services

Interactions with colleagues and clients lie at the heart of how professional-service firms, such as advertising, accounting, engineering, and consulting businesses, create value. Productivity gains from the effective use of social technologies could be correspondingly significant, principally by reforming internal work flows and by providing meaningful real-time interactions with customers. Management resistance and legitimate fears of breaching client confidentiality are factors limiting the potential of social technologies, executives say. Of course, this resistance comes at a cost: service providers risk failing to satisfy the rising demands of clients, some of which could be further along the social-leaning curve than they are.

Innovations are emerging, however. Some entrepreneurial firms are experimenting with social networks to cocreate new services with their clients, speeding up knowledge access and implementation. One London engineering firm uses social platforms to manage project communications with road contractors. Disruptive new business models are appearing as well. At Choosa, a global design firm, clients post requests for proposals on a company social platform. The work is crowdsourced to contractors, who submit competing design proposals.

Consumer-facing financial services

In the retail-banking, life insurance, and property and casualty insurance industries, social technologies can help improve service delivery, reduce costs, and enhance the customer experience. Consumers are increasingly open to using these channels for easier, more transparent interactions with their financial institutions. New processes are surfacing across a sector often typified by organizational complexity, siloed personnel, and fragmented processes that stymie collaboration, innovation, and efficiency.

To improve collaboration and communication not only across an extensive branch network but also with headquarters, TD bank, for example, deployed a social platform for 85,000 employees. One result: a reduction in the number of phone calls, meetings, and unwanted e-mails. Insurance broker Friendsurance has launched a social platform that allows potential customers to form insurance groups (think Facebook friends) that lower costs. (The groups themselves insure lower-cost claims and crowdsource administrative tasks.) Movenbank has targeted 50,000 customers in a novel Facebook-based institution that will be branchless, as well as paper and plastic free. Clients will use the bank’s Web site and their own mobile devices for transactions, and an intelligent system called CRED will advise on financial matters and analyze customer information for credit decisions.

‘Next practices’

Because the landscape is evolving swiftly and remains largely uncharted, a universal set of prescriptions for business leaders to follow in exploiting these opportunities has yet to emerge. Furthermore, there are risks to be managed, including concerns about productivity-dampening distractions, privacy, the potential loss of proprietary information, and reputational issues.

Some companies have begun to develop a body of knowledge on how to use social technologies for applications such as marketing.⁶ However, for most applications of social technologies—particularly enhancing collaboration and communication—we recommend that instead of focusing on bestpractices in the early stages of the journey, executives should be open to discovering next practices, to which broader principles apply:

• Since these are social technologies, the decisions that will make the most difference often won’t be about the choice of the technologies themselves but about how to encourage interactions among people. Social technologies can bring the scope, scale, and economics of the Internet to human interactions, but a successful transformation will ultimately rest on practices and culture. The companies that have the greatest successes will be those with cultures conducive to broad collaboration and sharing.
• Activities appropriate to one organization may not succeed in another with a different workforce, competitive context, or customer base. Purposeful experimentation that tests an array of practices and technologies will therefore be crucial. Testing “minimal viable products” to determine what works should help companies learn and implement the right practices for them while they develop new “muscles” that allow the organization to pivot quickly and opportunistically to new models.⁷
• Creating a critical mass of participation is crucial, and companies will need to nurture self-reinforcing cycles of adoption. Bottom-up use of technologies is essential, but our research also has shown that role modeling and vocal support by leaders can be decisive. In addition, technologies should be baked into employees’ day-to-day work flows, or usage will probably decline after an initial burst of interest.⁸

While the adoption of social technologies is growing rapidly, a huge untapped potential for them to create value remains. Companies open to the principles and practices we have outlined here can begin to exploit these possibilities and may find that the resulting gains form the basis of a competitive edge over their rivals.

For the full McKinsey Global Institute report on which this article is based, see The social economy: Unlocking value and productivity through social technologies, on mckinsey.com.

About the Authors

Jacques Bughin is a director in McKinsey’s Brussels office; Michael Chui is a principal at the McKinsey Global Institute (MGI) and is based in the San Francisco office; James Manyika is a director of MGI and a director in the San Francisco office.

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Notes

¹ We define social technologies as products and services that enable social interactions in the digital realm and provide distributed rights to communicate and add, modify, or consume content. They include social media, Web 2.0, and enterprise collaboration technologies.

² In this article, value means economic surplus, not net present value.

³ See Scott Beardsley, Bradford C. Johnson, and James Manyika, “Competitive advantage from better interactions,” mckinseyquarterly.com, May 2006.

⁴ Estimates of the number of hours interaction workers spend on various tasks are based on McKinsey proprietary data and on International Data Corporation survey results. For methodological details and for more on the research underlying this article, see the full McKinsey Global Institute report, The social economy: Unlocking value and productivity through social technologies, on mckinsey.com.

⁵ Business support functions are corporate or administrative activities, such as human resources or finance and accounting.

⁶ See Roxane Divol, David Edelman, and Hugo Sarrazin, “Demystifying social media,” mckinseyquarterly.com, April 2012.

⁷ Eric Ries, The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses, Crown Business, 2011.

⁸ See Michael Chui, Andy Miller, and Roger P. Roberts, “Six ways to make Web 2.0 work,” mckinseyquarterly.com, February 2009.

Evolution of the networked enterprise: McKinsey Global Survey results

Executives report that the adoption of social-media tools at their companies is high—and that this usage could spur additional benefits.

March 2013

Source: McKinsey Global Institute

Over a surprisingly brief period, the use of social tools and technologies has grown from limited experimentation at the edge of corporate practice to what’s now the mainstream. But after this strong initial uptake, many companies find themselves at a crossroads: if they want to capture a new wave of benefits, they’ll need to change the ways they manage and organize themselves, according to the results from our sixth annual survey on the business use of these technologies.¹ A remarkable 83 percent of respondents say their companies are using at least one social technology, and 65 percent say employees at their companies access at least one tool on a mobile device. Ninety percent of executives whose companies use social technologies report measurable benefits from these tools, and what’s more, a small yet growing number of companies—the most skilled and intensive technology users—are racking up outsize benefits.²

In aggregate, though, the shares of respondents reporting certain benefits have hit a plateau, suggesting that these benefits are harder to come by after the first wave of adoption. Executives are optimistic but sober about the next leg of the social-technology pathway: they expect increases in employee productivity but also recognize the significant organizational barriers that prevent their companies from capturing the full potential of social tools. They also acknowledge the new open environment’s risks, including possible leaks of confidential information and intellectual property—yet 60 percent of respondents still say the potential benefits outweigh the risks. Three in ten executives believe that internal processes at their own companies will evolve from current use, with implications for project management and strategic planning. To accelerate these changes and make them stick, a growing number of leaders have begun to stress the importance of driving social-media skills throughout the organization (see “Six social-media skills every leader needs”). It’s these networked organizations that are the most likely to realize competitive gains.

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Notes

¹ The online survey was in the field from June 12 to June 22, 2012, and received responses from 3,542 executives representing the full range of regions, industries, company sizes, tenures, and func-tional specialties. To adjust for differences in response rates, the data are weighted by the contribution of each respondent’s nation to global GDP.

² We identified four types of organizations, defined by the degree and type of benefits reported (that is, whether outsize benefits were derived from connecting with employees, with consumers and suppliers, or with all stakeholders). We found strong correlations between high levels of benefits and the degree to which these technologies were embedded in employees’ day-to-day work.

Continuing adoption

The share of executives who say their companies use at least one social technology continues to climb, from 72 percent in 2011³ to 83 percent in 2012. More than half report the use of social networks—almost twice the level of 2009—while the two tools we asked about for the first time in the latest survey (videoconferencing and collaborative document editing) are among those that are used most frequently (Exhibit 1).

Most companies are continuing to leverage social technologies internally (73 percent, up from 64 percent in the previous year), as well as with customers (74 percent) and external partners (48 percent). Among individual customers, executives report that the use of these tools continues to grow. Respondents say their companies use social technologies to interact with an average of 38 percent of their customers, up from 31 percent the year before. On average, executives also say their companies interact with 43 percent of their external business partners through social technologies, though the percentage has declined—from 47 percent—since 2011.

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Notes

³ See Jacques Bughin, Angela Hung Byers, and Michael Chui, “How social technologies are extending the organization,” mckinseyquarterly.com, November 2011.

More organizations see outsize benefits

For the third year in a row, nine out of ten executives whose organizations use social tools report some measurable business benefit with employees, customers, and business partners. While the percentages reporting certain benefits (such as quicker access to external knowledge) plateaued or even decreased since 2011, increased shares cite cost-cutting benefits in 2012 (Exhibit 2). This is especially true for travel costs, perhaps in response to economic pressures and the prevalence of videoconferencing. Respondents also report a greater level of marketing-related benefits: on average, they say their companies’ use of social technologies with customers increases brand awareness by 36 percent and conversion of customers by 20 percent.⁴

As in 2010 and 2011, we identified a small group of “fully networked” enterprises, or those that report outsize benefits from using social technologies with all major groups of stakeholders.⁵ The latest results indicate that 10 percent of organizations using social technologies now fall into this category, compared with only 3 percent in the previous survey (Exhibit 3). The shares of both internally focused and externally focused organizations—or those where executives report significant benefits from using technologies with either employees or customers and partners—also have increased since 2011.

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Notes

⁴ In last year’s survey, respondents said their companies’ use of social technologies for customer-related purposes increased awareness by an average of 32 percent and conversion by an average of 17 percent.

⁵ Employees, customers, and other external stakeholders (business partners, suppliers, and external experts).

Moving toward mobile and the cloud

Most executives say their companies employ a variety of platforms to access social technologies. Remarkably, 65 percent say their companies have adopted at least one technology that’s used on a mobile device and that 48 percent of their companies’ employees have mobile access. This is nearly as large as the share of employees using technologies on other devices: across functions, executives say 52 percent of their organizations’ employees use social tools on nonmobile devices, up from 46 percent in 2011. The functions that used social technologies most often in previous surveys—marketing, sales, and IT—also use these tools on mobile more often than others (Exhibit 4). The cloud is a commonly used delivery platform as well: nearly half of executives say their companies deploy technologies through a third-party vendor, while 62 percent say their companies use their own servers and IT systems.

Respondents also report that their companies have begun using the big data that social technologies generate⁶ to capture value from interactions with different stakeholders. About one-third of executives say their companies use data from social-technology interactions to respond immediately to either consumer or employee concerns, and roughly one-fourth say the same about interactions with business partners. With respect to historical analytics, one-third of companies analyze customers’ social data, while just 19 percent report using customer data in predictive analytics. Overall, the results indicate that the use of social analytics is still in its early days: across employee, customer, and business-partner interactions, between 42 and 54 percent of respondents say either that they don’t know how their companies use the data or that these practices aren’t yet applicable to their companies.

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Notes

⁶ For more, see the full McKinsey Global Institute report, Big data: The next frontier for innovation, competition, and productivity (May 2011), on mckinsey.com.

Weighing the benefits and risks

While notable shares of executives acknowledge the risks associated with social technologies—a majority say their companies’ leaders see leaks of confidential information as a significant risk of this usage (Exhibit 5)—60 percent agree that the benefits far outweigh the threats. Even larger shares of respondents agree at the companies that use more technologies and that report at least one measurable benefit. Executives also note the potential for significant productivity benefits that remain to be captured. On average, they say employees at their companies could save 30 percent of the time spent reading and answering messages if they used accessible, searchable social technologies instead of one-to-one communications technologies such as e-mail.⁷

Financially, respondents say social tools contribute 20 percent and 18 percent, respectively, to the revenue increases and cost improvements their companies attribute to the use of all digital technologies. These percentages may appear small but are driven by the extent to which—and the ways in which—companies deploy the technologies. At companies using at least six tools (or half of the tools the survey asked about), executives say this usage amounts to a larger share of financial benefits. Even larger shares at the companies using six or more tools on mobile say so: these respondents report that social tools contribute 32 percent and 26 percent, respectively, to their companies’ revenue and cost-cutting benefits.

Achieving this high level of benefits will likely require substantial organizational changes. When asked about the changes that technologies might facilitate, executives are twice as likely to say these tools could enable entirely or mostly new processes for four of eight business activities at a hypothetical company without the technology-related constraints their own organizations face (Exhibit 6). Slightly larger shares than in 2011 do expect technologies to facilitate certain changes in their own companies, related to developing strategic plans, allocating resources, matching employees to tasks, managing projects, and determining compensation. But the large gaps between potential changes at respondents’ companies and at companies without constraints, which we observed in the previous survey, suggest that the hurdles could be considerable.

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Notes

⁷ These figures are consistent with the ranges of potential time that could be repurposed, as reported in a McKinsey Global Institute report, where the corresponding estimates of potential time were 25 to 30 percent for reading and answering e-mail, 30 to 35 percent for searching and gathering information, and 25 to 35 percent for communicating and collaborating internally. For the full McKinsey Global Institute report, see The social economy: Unlocking value and productivity through social technologies (July 2012), on mckinsey.com.

Looking ahead

To achieve the benefits and competitive advantages that social technologies promise, executives must consider where their companies stand in three key areas that were addressed above: quantifying benefits, investing in organizational changes, and using multiple platforms to enhance the overall adoption of these tools.

Regarding benefits, it’s admittedly difficult to assess the profit-and-loss impact of social-technology advantages. But the results suggest that companies continue to enjoy organizational improvements against intermediate metrics—such as the speed of access to experts and expertise, the quality of customer service and feedback, employee engagement, and cost reductions—that are easier to track. Further adoption of social technologies and a critical mass of participation within (and outside of) the organization should facilitate even greater benefits.

With respect to productivity benefits in particular, the results indicate that companies must invest time and effort to enable greater productivity (particularly among knowledge workers) and competitive advantage. The likely need for significant organizational change is a challenging problem—and one that must be met by doing far more than changing the tools in a company’s portfolio. Companies can realize potential advantages more quickly by getting started early on the organizational transformations that will facilitate better use of technologies.

One way to facilitate and encourage more employee use of social technologies—and thus enhance their related benefits—is equipping workers with mobile access to these tools. Companies can also deploy cloud-based solutions when appropriate to make these solutions more scalable and decrease time to value.

About the Authors

The contributors to the development and analysis of this survey include Jacques Bughin, a director in McKinsey’s Brussels office, and Michael Chui, a principal of the McKinsey Global Institute who is based in the San Francisco office.

© Copyright 1992-2013 McKinsey & Company

A Smaller Slice of the Pie: Why Technology Is No Longer Creating Jobs

A Smaller Slice of the Pie: Why Technology Is No Longer Creating Jobs

Published: March 13, 2013 in Knowledge@Wharton

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Can technology set off a new boom in job creation? The question is a fundamental one for the American economy given that policy makers in Washington often look to the technology sector to pick up the slack in the employment market. Meanwhile, the fortunes of Silicon Valley start-ups continue to be closely followed, in part because of the spectacular wealth they can generate for their founders, but also because of the assumption that these new companies are a significant source of new employment.

So it will likely disappoint many people that four prominent economists assembled for a recent panel discussion to explore the link between technology and job creation were, in large part, bearish in their outlook. Some went so far as to suggest that technology actually increases unemployment and adds to other problems in the U.S. economy, notably the growing wage disparities between an extremely elite group of earners and everyone else.

The discussion, titled "Can Tech Power the Next Jobs Boom?" took place at Wharton's San Francisco campus and was co-sponsored by the Churchill Club, a Silicon Valley business and technology forum.

Several troubling data points emerged during the evening, including one offered by Erik Brynjolfsson, a professor at MIT's Sloan School of Management and director of the MIT Center for Digital Business.

Working with fellow MIT professor Andrew McAfee, Brynjolfsson compared the market capitalization and payrolls of four of the biggest tech companies. His conclusion: While the companies had astronomical values on Wall Street, their job production was minimal.

The four -- Apple, Amazon, Facebook and Google -- at the time had a market cap in the neighborhood of $1 trillion, which is roughly 6.25% of the combined market cap of all U.S. companies. But the four employ about 190,000 people, fewer than the number of jobs the U.S. economy needs to add approximately every six weeks to just keep pace with population growth. The implication, said Brynjolfsson, is that even hugely successful tech companies cannot be counted on to create the kinds of jobs the economy needs.

Brynjolfsson also described what he called a "superstar" effect in technology-related wealth distribution, a trend that has become pronounced in the last decade. In recent years, he said, the majority of GDP growth has benefited a very small part of the population, less than 1%. In many cases, even college-educated workers are not sharing in the growing pie. "It's becoming a winner-take-all situation," he said.

"Technology doesn't automatically lift the fortunes of all people," Brynjolfsson noted. "It's something of a paradox. Profits have never been higher, innovation is roaring along, GDP is high, but job creation is lagging terribly, and the share of profits going to labor is at a 60-year low. This is one of the most important issues facing our society."

Citing the work of economist Joseph Schumpeter, Brynjolfsson noted that technology has historically provided "creative destruction" for an economy, causing some jobs to disappear while bringing others into existence. "But the last 10 years have been different. Technology simply hasn't been creating jobs as it did before."

It's a double-barreled effect, Brynjolfsson added. Not only are today's technology companies creating fewer jobs, but the products they make, notably computerized automation equipment, often lead to further job losses in other parts of the economy. These second-effect job losses are further encouraged by off-shoring and by the declining power of labor unions.

"Improvements in technology can improve productivity," he said. "For most of the 20th century, those productivity increases were associated with job growth and growing wages. But there is no economic law saying that always has to be the case. It's quite possible to make the pie bigger, but with most people having a smaller slice. That is what has been happening recently."

Flint, Michigan, vs. Austin, Texas

Somewhat similar themes were echoed in the remarks of Enrico Moretti, an economics professor at the University of California, Berkeley, whose recent book, The New Geography of Jobs, was widely praised for its insights into the changing nature of the American workforce.

According to Moretti, there was not one single labor market in the United States, but hundreds, corresponding to metropolitan areas. Overall, he said, these markets fell into three different groups: those doing well in the new technology economy, those doing poorly and those hanging in the balance.

The differences between the emerging job market "winners" and "losers" are striking. In 1980, Moretti noted, both high school and college graduates in Austin, Tex., made half as much as their counterparts in Flint, Mich. Now, however, those ratios are reversed, and the gap between wages in Flint's rust belt and the booming tech sector in Austin continues to grow. "So when people ask, 'Can technology create the next job boom?' my answer is, 'It depends,'" said Moretti.

While technology may not be making as many jobs as it once did, the jobs it does create are among the most economically valuable. Moretti noted that the average tech position creates five additional jobs in various support industries, from doctors to hairdressers to dog walkers. However, the "multiplier effect" for manufacturing jobs is much lower: 1.6 instead of 5. Much of that, he added, was simply the result of the higher wages generally paid by tech jobs.

Because of that high multiplier, the majority of people will never be employed directly by technology, even in thriving tech hubs like Silicon Valley. "Technology jobs will be the minority, [about] 30%," Moretti said. "What's important is to build that foundation of 30%...."

Moretti and several other panelists suggested that the jobs being lost in the traditional manufacturing sector are never coming back. Or, if they do, there will be far fewer of them, as is the case with the heavily automated manufacturing facilities that Apple has discussed opening in the United States.

Michael Chui, who studies job creation for the McKinsey Global Institute, said that "employment transparency" has become a crucial issue for college students attempting to pick a field of study. They need to know where the jobs of tomorrow are likely to be, but the data is not available to them during the period of their lives when they are making decisions that will weigh most heavily on their career options.

He also said the United States needs to increase the number of college graduates studying science, technology, engineering and mathematics, the so-called "STEM" curriculum. More than 40% of China's college population are in a STEM field, and the figure in Germany is 28%. But in the United States, said Chui, it is only 15%.

Even within STEM, he noted, priorities may need to be readjusted. For example, a traditional elite technical education typically includes a healthy dose of calculus. But perhaps statistics should receive more attention, Chui said, because of the need for future managers to be able to more intelligently use the huge mountains of data now being routinely collected by businesses.

Education Is Key

The fourth member of the panel, Hal Varian, chief economist at Google and an emeritus professor at the University of California, Berkeley, told the audience that the "secret" of guaranteeing oneself employment in an increasingly technology-oriented society is "to make yourself an expensive complement to something that is becoming cheaper and more ubiquitous." As an example, he echoed Chui's reference to the growing demand for "data scientists" who can work with businesses' ever-larger databases.

Varian also urged greater appreciation for the "supporting" jobs created by technology, saying many of them, like doctors and lawyers, require sophisticated educations and usually provide excellent salaries.

On a more positive note, Varian offered a global, long-term perspective on the U.S. employment problem. In the last 30 years, he noted, more than a billion people have been lifted out of poverty. Economists of a generation ago might have assumed that the global process would be a zero-sum game; that for there to be a billion big "winners" in the developing world, there would need to be an equal number of losers elsewhere, notably in parts of the world, like the U.S., that are already prosperous. While Varian noted that those better-off regions are indeed experiencing a number of employment-related challenges, "in some senses, it's amazing that we've done as well as we have in this country, considering these massive global changes."

In terms of specific policy recommendations, Moretti said he favored a substantial and permanent investment tax credit, pointing to the importance of federal support for technology research. He described the many technology successes of the Pentagon's DARPA (Defense Advanced Research Projects Agency), the agency whose early research money made possible everything from the Internet itself to the self-driving car that Google has recently popularized.

Proper education was also frequently stressed by the panel. "There is no better time than right now to be an entrepreneur who can make use of all these new technologies," said Brynjolfsson. "But there is no worse time to be a worker with no special skills, because all of those jobs are being automated."

Additional Reading

For the Global Economy in 2013, Happy Days Are Not Quite Here Again: Knowledge@Wharton

Davos 2012: 'Joblessness and Its Discontents': Knowledge@Wharton