McKinsey's building the argument for corporate investment in social networks

Should companies stop concentrating on outsourcing and downsizing, and instead invest more heavily in social networking software to increase the productivity of their most innovative and valuable workers? That's what some McKinsey consultants seem to be arguing in "The next revolution in interactions," from the new edition of the McKinsey Quarterly.

The article differentiates between work that is largely transactional - tasks that can be clearly identified and whose work load can be mapped out, like air transportation, retailing, utilities, and recreation workers - and work that is tacit - tasks that depend upon information sharing, communication and negotiation skills.

The authors argue that companies should concentrate upon increasing the productivity of their "tacit workers" if they want to establish a new competitive advantage in their industry - and this will require new priorities in IT investment.

    "... new and emerging technologies will let companies extend the breadth and impact of tacit interactions. Loosely coupled systems are more likely than hard-coded systems and connections to be adapted successfully to the highly dynamic work of tacit employees. This point will be particularly critical, since tacit interactions will occur as much within companies as across them.

    Broadband connectivity and novel applications (including collaborative software, multiple-source videoconferencing, and IP telephony) can facilitate, speed up, and progressively cut the cost of such interactions as collaboration among communities of interest and build consensus across great distances. Companies might then involve greater numbers of workers in these activities, reach rural consumers and suppliers more effectively, and connect with networks of people and specialized talent around the world ...

    Companies will also have to think differently about the way they prioritize their investments in technology. On the whole, such investments are now intended largely to boost the performance of transformational activities - manufacturing, construction, and so on - or of transactional ones. Companies invest far less to support tacit tasks ...

    So they must shift more of their IT dollars to tacit tools, even while they still try to get whatever additional (though declining) improvements can be had, in particular, from streamlining transactions. The performance spread between the most and least productive manufacturing companies is relatively narrow. The spread widens in transaction-based sectors - meaning that investments to improve performance in this area still make sense. But the variability of company-level performance is more than 50 percent greater in tacit-based sectors than in manufacturing-based ones ... Tacit activities are now a green pasture for improvement."

Could Technorati, SixApart - even Wikimedia - end up with multinational sales forces and channel partners - like SAP, SAS or Oracle?

Analysis like this, from recognized management and business authorities, is essential if social media is to evolve - to move beyond circular debates among early adopters and online enthusiasts and become an essential component of the business strategies considered by the decision-makers in your C-suite.

Technorati: social media management McKinsey