How real is Web 2.0 to business?

Michael Alan Hamlin

Posted on August 26, 2009

A recent McKinsey & Company survey of 1,700 global executives conclusively demonstrated that most companies gain measurable business benefits from implementing Web 2.0 technologies. Those benefits include more innovative products and services, more effective marketing, better access to knowledge, lower cost of doing business, and higher revenues, a report on the survey results concluded, adding, “Companies that made greater use of the technologies report even greater benefits.

Of all the respondents globally, 69% indicated that their companies have benefited from Web 2.0. Web 2.0 refers to a new generation of web technologies ranging from blogs to search marketing to social network marketing. They are interactive, and intended to provide a rich user experience, but at their core they are visibility tools seeking attention for content that increases interest in and credibility for product and service, individual, and organizational brands.

Because they work so well as visibility tools, Web 2.0 technologies prioritize issues, helping to focus resources on those that are the most impactful. These tools are online, so they also enable communication and collaboration at lower cost. According to the McKinsey report, “When used effectively they encourage participation in projects and idea sharing, deepening a company’s pool of knowledge,” with the result that products are brought to market faster. An additional benefit is “strengthening bonds with customers and improving communications with suppliers and outside partners.”

These benefits are realized when companies that successfully leverage Web 2.0 tools tightly integrate these technologies with “the work flows of their employees and create a ‘networked company,’ linking themselves actively with customers and suppliers” alike, the report’s authors note. Web 2.0 tools have become so integral to most respondents’ companies that they “overwhelmingly say that they will continue to invest in Web 2.0” despite the tough economic times that prevail when cutting all unnecessary expenses is a critical survival tactic.

The survey examined benefits of internal communication and external communication both with customers and suppliers and other stakeholders. It requested that respondents specify in percentage terms the level of improvement experienced in their companies in each of these instances. The results showed, for example, that the “median level of gains derived from internal Web 2.0 use ranged from a 10 percent improvement in operational costs to a 30 percent increase in the speed at which employees are table to tap outside experts.” Both the low and high ranges were significant.

According to respondents, their companies use a variety of Web 2.0 technologies. However, the “more heavily used technologies are blogs, wikis, and podcasts-the same tools that are popular among consumers.” Often, benefits accrue as a result of the use of automatic information feeds, including RSS (a method of syndication where URLs of popular sites are automatically checked by RSS readers-most browsers incorporate this service). Information captured from outside sites help companies understand “affinity groups” with similar interests.

Increasingly, companies are also using video to disseminate information internally and externally than in the past because “technology improvements have made videos easier to produce and disseminate within organizations.” Respondents said blogs and social networking are important because they “invite customer feedback and even participation in the creation of products.”

Not surprisingly, high-technology companies rank at the top of organizations reporting measurable benefits from Web 2.0, and they are followed by companies offering business, legal, and professional services. The survey also showed that large companies-with revenues over $1 billion-report benefits more often than smaller companies, perhaps because they have the resources to experiment with the tools.

Functionally, technology, business development, and sales and marketing executives find greater use of Web 2.0 tools than finance or purchasing executives. “IT executives, in general, are more focused on using Web tools to achieve internal improvements,” the report’s authors write, “while business development and sales functions often rely on the technologies to deliver better insights into markets or to interact with customers.”

In Asia-Pacific, 57% of respondents said they have achieved measurable benefits from Web 2.0 technologies when used for internal purposes, compared to 62% of executives in North America. Forty-five percent of Asia-Pacific executives said they realized measurable benefits when they used these technologies for customer-related purposes, compared to 54% of North American executives. Finally, 36% of Asia-Pacific respondents indicated measurable benefits applying these tools to work with external partners and suppliers, the same as executives in North America.

The results showed that Web 2.0 tools are increasingly integral to the strategic success of organizations. That’s because by increasing visibility, providing focus on priorities, and fostering collaboration, companies become more competitive.

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