In a few short years, social technologies have given social interactions the speed and scale of the Internet. Whether discussing consumer products or organizing political movements, people around the world constantly use social-media platforms to seek and share information. Companies use them to reach consumers in new ways too; by tapping into these conversations, organizations can generate richer insights and create precisely targeted messages and offers. While 72 percent of companies use social technologies in some way, very few are anywhere near to achieving the full potential benefit. In fact, the most powerful applications of social technologies in the global economy are largely untapped. Companies will go on developing ways to reach consumers through social technologies and gathering insights for product development, marketing, and customer service. Yet the McKinsey Global Institute (MGI) finds that twice as much potential value lies in using social tools to enhance communications, knowledge sharing, and collaboration within and across enterprises. MGI’s estimates suggest that by fully implementing social technologies, companies have an opportunity to raise the productivity of interaction workers—high-skill knowledge workers, including managers and professionals—by 20 to 25 percent.

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The social economy:
Unlocking value and productivity
through social technologies
Discussion document for Alumni Webcast
August 9, 2012

2. McKinsey & Company | 1
Social technologies share three key characteristics
SOURCE: McKinsey Global Institute
We define social technologies as digital technologies used by people to
interact socially and together to create, enhance, and exchange
content. Social technologies distinguish themselves through the
following three characteristics:
1. They are enabled by information technology.
2. They provide distributed rights to create, add, and/or modify
content and communications.
3. They enable distributed access to consume content and
communications.

3. McKinsey & Company | 2
Social technologies include a broad range of applications
that can be used both by consumers and enterprises
NOT EXHAUSTIVE
1 Social analytics is the practice of measuring and analyzing interactions across social technology platforms to inform decisions.
SOURCE: McKinsey Global Institute analysis
Ratings
and
reviews
Evaluate and rate
products, services,
and experiences;
share opinions
Social
commerce
Purchasing in
groups, on social
platforms, and sharing
opinions
Wikis
Search, create and adapt
articles; rapidly access
stored knowledge
Discussion
forums
Discuss topics in open
communities; rapidly
access expertise
Shared
work-
spaces
Co-create content;
coordinate joint
projects and tasks
Crowd-
sourcing
Harness collective
knowledge and
generate collectively
derived answers
Social
gaming
Connect with friends
and strangers to
play games
Media
and file
sharing
Upload, share, and
comment on photos,
videos, and audio
Social
networks
Keep connected
through personal and
business profiles
Blogs/
microblogs
Publish and
discuss opinions
and experiences
Social
analytics1

4. McKinsey & Company | 3
Social technologies have been adopted at record speed
SOURCE: Various press reports
Time to reach 50 million users
50 million users
Radio
TV
iPod
Internet
Facebook
Twitter
38 years
13 years
4 years
3 years
1 year
9 months
ILLUSTRATIVE

5. McKinsey & Company | 4SOURCE: eMarketer, February 2011
% of total US users
Use of social networks is spreading across age groups
Age
NOTE: Numbers may not sum due to rounding.
16 14 13
20
18 17
22
21 21
201120102009
65+
55-64
45-54
3
8
14
4
9
15
4
10
15
35-44
25-34
18-24
12--17
0-11
16
2
17
2
18
2

6. McKinsey & Company | 5
Communications are shifting from e-mail and
instant messaging to social media
SOURCE: comScore Media Metrix, October 2011
31
36
-5 p.p.
2011
69
64
2007 53
69
-16 p.p.
31
47 44
18
100% =
1,430
+26 p.p.
56
82
760
E-mail Instant messaging Social networking
Users of service
Non-users
Unique monthly visitors
% of global online population

7. McKinsey & Company | 6
Social networking accounts for just 5 percent of the time spent
communicating and consuming media
0
1
2
3
4
5
6
7
8
9
10
11
1900
In person
20102000199019801970196019501940193019201910
Social networks
Instant messenger
SMS
Mobile phone
Other Internet3
E-mail2
Recorded music1
TV1
Landline telephone
Radio1
Print
Mail
1 Radio, TV, and recorded music are slightly discounted to account for the time spent using these concurrently with other media.
2 Does not include e-mail sent internally within companies, which is not counted as Internet traffic.
3 Includes all social technologies that cannot be explicitly separated in available data.
SOURCE: Bureau of Labour Statistics; WAN-IFRA; Statistical Abstracts; National Bureau of Economic Research; US Census
Bureau; Radicati Group; Yankee Group; Nielsen; ITU; eMarketer; and others; McKinsey Global Institute analysis
Time spent consuming messages by technology type
in the United States
Hours per day
Non-digital
Potential to be socially enabled
Currently socially enabled

8. McKinsey & Company | 7
Use social
technology as an
intra- or inter-
organizational
collaboration and
communication tool
Use social
technology to
match talent to
tasks
Enterprises can apply social technologies across the entire value
chain, as well as across and between enterprises
Marketing
and sales
Operations
and
distribution
Product
development
Co-create products1
Leverage social to forecast and monitor2
Use social to distribute business processes3
Use social technologies for marketing
communication/interaction
5
Generate and foster sales leads6
Derive customer insights4
Social commerce7
Provide customer care via social technologies8
9
Enterprise-
wide levers
1 Deriving customer insights for product development is included in customer insights ( lever 4) under marketing and sales.
2 Business support functions are corporate or administrative activities such as human resources or finance and accounting.
SOURCE: McKinsey Global Institute analysis
10
Customer
service
Business
support2
4 Derive customer insights1
Organizational functions Across entire enterprise
Improve collaboration and communication
Match talent to tasks

9. McKinsey & Company | 8
Potential of social technologies to improve productivity at different
points in the value chain in major sectors of the economy
% of cost base in each value chain step
1–5
5–10
10–20
>20
SOURCE: McKinsey Global Institute analysis
Potential benefit from productivity increase along the value chain
Total value
at stake
% of total costIndustry/segment
Product
development
Operations
and
distribution
Sales and
marketing
Customer
service
Business
support
functions
Financial
services
Insurance—
P&C
~2–3
Insurance—
life
~3–4
Retail
banking
~6–12
Consumer packaged goods ~6–9
Professional services n/a ~8–11
Advanced
manufacturing
Semi-
conductors
~5–6
Automotive ~4–6
Aerospace
and defense
~2–3
Social sector

10. McKinsey & Company | 9
Potential of social technologies to improve margins across
the value chain in major sectors of the economy
Percentage points margin potential1
1 Margin for the social sector is expressed as a percentage of costs.
<0.5
0.5–1.0
1.0–2.0
>2.0
SOURCE: McKinsey Global Institute analysis
Potential benefit from productivity increase along the value chain
Total value
at stake
% of revenueIndustry/segment
Product
development
Operations
and
distribution
Sales and
marketing
Customer
service
Business
support
functions
Financial
services
Insurance—
P&C
~3–6
Insurance—
life
~3–4
Retail
banking
~4–7
Consumer packaged goods ~5–6
Professional services n/a ~8–11
Advanced
manufacturing
Semi-
conductors
~5–7
Automotive ~4–6
Aerospace
and defense
~2–3
Social sector

11. McKinsey & Company
LastModified5/8/20135:24PMEasternStandardTimePrinted3/9/20124:10:42PM
| 10
Potential value and ease of capture vary across sectors
Utilities
Energy
Health care
providers
Pharmaceuticals
Education
Telecommunications
Retail and
wholesale
Transportation
Electronics
Consumer
products
Food and
beverage
processing
Chemicals
Construction
Industrial
manufacturing
Professional
services
National
government
Local
government
Media and
entertainment
Insurance
Banking
Software
and Internet
SOURCE: McKinsey Global Institute analysis
Value
potential
Ease of capturing value potential
Lower
Higher
Relative size of
GDP contribution
HigherLower
DIRECTIONAL

12. McKinsey & Company | 11
Value available through collaboration and other benefits of
social technologies varies across industries
%
SOURCE: McKinsey Global Institute analysis
63
49 48
30
24
57
38 34
Average
66
Aero-
space
62
Auto
43
Semi-
conductors
76
Profes-
sional
services
98
Retail
banking
70
2
Life
insurance
52
P&C
insurance
51
CPG
37
Collaboration
Other benefits

13. McKinsey & Company | 12
Companies with higher volumes of interactions outperform industry peers
Variation in firm-level performance1
SOURCE: Compustat; McKinsey Global Institute analysis
1 Defined as the ratio of standard deviation to mean for EBITDA per employee within each industry.
2 Low is less than 14 percent interaction workers on payroll, medium is 14 to 62 percent, high is more than 62 percent.
Strategic
advantage
over industry
peers
Range of
firm-level
performance
Top
performers
Bottom
performers
Average
Level of interactions2
Low Medium High
0.9x 5.5x 9.4x

14. McKinsey & Company | 13
20.0–25.0
4.0–6.0
3.5–5.0
5.5–6.5
7.0–8.5
Improved communication and collaboration through social technologies
could raise productivity of interaction workers by 20 to 25 percent
SOURCE: International Data Corporation (IDC); McKinsey Global Institute analysis
19
14
39
28
100Total
Role-specific tasks
Communicating and
collaborating internally
Searching and
gathering information
Reading and
answering e-mail
Tasks of
interaction worker
% of average week
Productivity
improvement
%
Increased
value-add time
% of workweek
25–30
30–35
25–35
10–15
20–25

15. McKinsey & Company
LastModified5/8/20135:24PMEasternStandardTimePrinted3/9/20124:10:42PM
| 14
Many companies need a cultural transformation to prepare for successful
internal implementation of social technologies
SOURCE: McKinsey Global Institute
Transformation Transaction Tacit
Interactions
Strategy and
innovation
Centralized and
top-down
Decentralized,
bottom-up, evolutionary
Organization
Hierarchies,
command and control
Flat, flexible,
contingent, porous
Knowledge
and learning
Rote and instruction-
oriented, top-down
Apprenticeship,
decentralized,
knowledge marketplace
Technology
leverage
Substitute, automate Substitute, automate,
accelerate, scale
Complement, extend,
adapt
Role of
management
Set targets, assign
tasks, optimize
Set direction, enable,
learn
Performance
management
Physical and activity
outputs, efficiency
Outcomes,
effectiveness
Physical outputs,
efficiency