Social media can herald new economic renaissance

Social media can herald new economic renaissance

Together with scores of other PR and marketing professionals I have been advocating social media as an opportunity for economic development and for new impetus in an otherwise stagnating economy for years.

Debates have since raged about the usage of social media and the specifics of individual media channels, with much hyped material having come from self-serving commercial interests.  At long last, the distinguished McKinsey Global Institute has come up with an authoritative piece of research on social media, stating that its potential for transforming our economies is so huge that we will look back at our current woes in disbelief that we did not act sooner.

Undeniably, the rise of social technology has probably been the most staggering achievement of the 21st century.  As the report states, it took TV 13 years to achieve 50 million users, but only nine months for Twitter to do the same.  There is, of course, natural affinity between social media interactions and our genetic make up.  Social media is all about being human, warts and all.  By creating networks of like-minded individuals who are sharing information and values, a more positive and creative environment can be engendered through social technology; little wonder, therefore, that its global adoption has literally boomed.

The key finding of the report is that social media can have a huge transformative impact on the economy, generating up to an estimated $1 trillion additional sales annually.  Considering that this figure is only in the markets McKinsey analysed, and which represent just 20% of global industry sales, and you can appreciate the extent of the potential of social media to achieve global economic regeneration.  Another staggering figure is that today’s free social technologies have already provided $40 billion in consumer surplus in 2010, potentially rising to $76 billion in 2015.

The second key piece of information is that well planned, well managed social media technologies have the potential to increase productivity between 20 and 25%.  This is astonishing, particularly as organisations have been struggling to increase productivity by points of a percent.  The caveat is that companies need to become fully networked enterprises and therefore have to reinvent themselves.  Some of the productivity gains are logical; for example, a 7 or 8 % increase could be achieved by simply reducing e-mail interactions up to 25%.  Who might have thought ten years ago that email, heralded as the mainstay of modern business, would have turned into the tyrannical process we are all familiar with, chaining us to our mailboxes?  By freeing email time we could all be engaged in more productive activities, according to McKinsey, as well as reducing through social media platforms the search for information by 35%, too (this alone would increase productivity by another 6%, apparently).

The report stresses time and time again that in order to reap such gains companies need to undergo fundamental changes to their management and delivery approaches.  Organisations need to move into collaborative and open structures on the inside, as well as on the outside (staff, customers and suppliers).  This new paradigm requires vision, determination and enlightened management.  The rewards can be great, highlighted by findings stating that 90% of those companies already engaged in social technologies reported tangible benefits to their operations.  Unsurprisingly, companies that stand to benefit most from social technology are those with a high percentage of knowledge workers, high brand recognition and awareness, and which are trustworthy and experiential (i.e. those organisations like hotels) or inspirational; prospective margins of increases can be up to 60% if the correct approaches are used.

As with all opportunities, there are, of course, risks.  Social media networks are very porous.  Security risks, patent infringements, copyright issues and other hazards of this kind can therefore occur.  Averting major problems requires the creation of new mechanisms to ensure that most of the social media advantages are retained with fewer of its hazards.  Social media may also endanger other parts of the traditional supply chain by creating a process of “disintermediation”, that is, the reduction of intermediaries.  However, as in most cases intermediaries were either placed to facilitate the transfer of goods or services or for economic reasons (like in Japan) it’s a fair assumption that their decline can be accepted as a natural part of the economic cycle.

McKinsey’s findings have primarily focussed on social media accessible through fixed means.  But what about the advent of smartphones and greater mobile internet access?  Facebook alone estimates that more than 40% of its users access this service by mobile devices already.  Other studies indicated that mobile internet access will literally explode in the next few years.  Mobile access has the potential of generating even higher levels of social interaction and therefore even higher economic growth.

There are, of course, many challenges ahead.  Some have been highlighted in the McKinsey report.  Others, like creating a sound communication infrastructure (e.g. broadband access in remote areas) have not.  History is littered with missed opportunities, but the inherently human side of social technology will prevent it from becoming a mere asset in the hands of the few.  Its transformative powers are here to stay, unleashing the new dynamics of the 21st century for a new world economy that may even be more socially inclusive, as well as more creative and, ultimately, even more fun.

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