Tag Archives: investment

The next decade – the “most innovative time” ?

A recent PwC survey found that that innovation is high on the executive agenda in virtually every industry. In all, 78% of CEOs surveyed believe innovation will generate “significant” new revenue and cost reduction opportunities over the next three years. But it is highest for those where technology is changing customer expectations. In both the pharmaceutical and entertainment and media sectors, for example, more than 40% of CEOs believe their greatest opportunities for growth come from spawning new products and services.

Additionally, the survey found that CEOs are re-thinking their approach to innovation and increasingly seeking to collaborate with outside partners and in markets other than where they are based. For example, a majority of entertainment and media CEOs said they expect to co-develop new products and services.

The innovation process generally has four phases: 

  • Discovery: Identifying and sourcing ideas and problems that are the basis for future innovation. Sources may include employees as well as customers, suppliers, partners and other external organisations.
  • Incubation: Refining, developing and testing good ideas to see if they are technically feasible and make business sense.
  • Acceleration: Establishing pilot programs to test commercial feasibility.
  • Scale:  Integrating the innovation into the company; commercialisation and mass marketing.

However, the drive for innovation must arise from the CEO and other executive leadership by creating a culture that is open to new ideas and systematic in its approach to their development.

Therefore, the study also identifies 7 misconceptions about the innovation process:

  • Innovation can be delegated.  Not so. The drive to innovate begins at the top. If the CEO doesn’t protect and reward the process, it will fail.
  • Middle Management is the ally of innovation. Managers are not natural champions of innovation. They to reject new ideas in favor of efficiency.
  • Innovative people work for the money. Establishing a culture that embeds innovation in the organisation will attract and retain creative talent.
  • Innovation is a lucky accident. Successful innovation most often results from a disciplined process that sorts through many ideas.
  • The more open the innovation process, the less disciplined. Advances in collaborative tools, like social networking, are accelerating open innovation.
  • Businesses know how much innovation they need. Leaders must calculate their potential for inorganic growth to determine their need to innovate.
  • Innovation can’t be measured. Leadership needs to identify its ROII (Return on Innovation Investment).

Details about the study here.

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Challenges of today’s knowledge management: providing the tools is just not enough

knowledge share fair 2009 - fishbowl demonstration
Image by Petr Kosina via Flickr

Genuine business value comes on one hand from managing knowledge acquired from external sources and, on the other hand, from creating and exchanging it internally. Keeping knowledge in the heads of your most experienced talent lowers your return on investment to its minimum. How can other colleagues from the same unit or even other territories replicate and improve it? Well, there are two stages of this point:

Stage 1: Your experienced talent has to invest time and energy to transform their knowledge into a form in which it can be exchanged. I should also say that the value of knowledge should be high enough to cover the cost of sharing.

Stage 2: Team members from similar projects invest time in searching for knowledge, replicating and improving it. They might as well become “Stage 1” experts as the improved knowledge may be shared if there is significant added value. I should mention again that at this stage, in order to be cost-effective, knowledge should worth the price of seeking it.

You can call it a market and in some companies it literally is. Maybe at a later time I’ll come back with a story of a company that pays employees with its own currency for sharing knowledge and charges knowledge consumption – a way to determine talent to share at least as much knowledge as they benefit of.

You may observe that there is a strong technological background for knowledge sharing but I’m not going to refer to this side for the time being. I’d rather have a look at one of the most common management mistakes we face on the process today. The trap is to assume that with some big investments in technology solutions such as document management systems, shared repositories, and intranets, employees will become eager to put their knowledge in the internal marketplace.

Investments in technology alone are useless because of two basic reasons:

Firstly, your talent may not be so eager to share what they know. In many cases that is merely because they know their knowledge is their strongest asset in the corporate hierarchy. You have to motivate them to share. They have to realize that the value of sharing is worth their own investment.

Secondly, most of shared knowledge may not be some of the best quality it can be. Volume of irrelevant documents may become overwhelming, and you may find many of them of poor quality and hard to replicate. Controlling both the quality of shared knowledge and the usefulness of the search systems is an imperative to ensure that shared knowledge is worth the price of seeking it.

Both centralised and decentralised approached to knowledge management can bring value to your business; it really depends on what your business is about and how knowledge is created or where it is most relevant. Distributing top-down messages about previously filtered knowledge has its limitations but can work in a process-focused risk averse company.  At the opposite, letting local units solve their own knowledge problems may bring enthusiasm and motivation to highly creative businesses with a focus on local markets rather than on the global one. Approaches have pluses and minuses and, most likely, a company may be in the position of having a mix of both.

52% of executives said their company will increase security spending over the next year

Lokcpick 101
Image by SerialK via Flickr

According to the 2011 Global State of Information Security Survey (conducted by PricewaterhouseCoopers in conjunction with CIO and CSO magazines), out of 12,800 executives from 135 countries, 52% said their company will increase security spending over the next year. Yet many executives said their company’s business partners (52%) and suppliers (50%) have been weakened by economic conditions, a substantial increase from 43% and 42%, respectively, in 2009.

Security executives said their companies also have been impacted by spending restraints, often resulting in the stalling or degradation of some fundamental security capabilities such as conducting personnel background checks and the use of vulnerability scanning tools. Additionally, 47% of respondents said their organization had reduced security-related funding for capital expenditures and 46% said their company had reduced security-related operating expenditures.

The top factors driving information security spending this year are economic conditions (reported by 49% of respondents), business continuity and disaster recovery (40%), company reputation (35%), internal policy compliance (34%) and regulatory compliance (33%).

The only spending driver to show substantial increases this year is “client requirement,” the study found. Client requirement moved up from the bottom of the list in 2007 to near parity with the top-ranking legal/regulatory environment. The rise of client requirement demonstrates the continuing strategic importance and integration of the security department to the business.

Not surprisingly, due to the cost-cutting initiatives taken by most global actors, the 2011 Global State of Information Security Survey also found a significant shift in the ongoing evolution of the CISO’s reporting channel, which has moved away from the CIO in favor of the company’s senior business decision-makers such as the CFO and the CEO.

Risks of social networking and a new role for insurance

The 2011 Global State of Information Security Survey revealed that many companies are unprepared to deal with the potential risks of social networking and other Web 2.0 applications: 60% of respondents said their organization has yet to implement security technologies supporting Web 2.0 exchanges such as social networks, blogs or wikis, according to the survey.

Additionally, 77% of respondents said their organization has not established security policies that address the use of social networks or Web 2.0 technologies. This lack of action on social networking and Web 2.0 technologies can expose organizations to a variety of risks, including loss or leakage of information, damage to the company’s reputation, illegal downloading of pirated material, and identity theft.

The survey also found that many companies are using an additional tool (insurance) to protect the organization from theft or misuse of assets such as sensitive data or customer records: 46% of respondents said their organization has an insurance policy. Additionally, 17% of respondents said their company has made a claim and 13% said their company has collected on a claim.

In Europe, the focus on information security is far more muted, the survey found. Europe now trails other regions in maturity across many security capabilities. Like North America, Europe continues to suffer poor visibility into security events and, as a result, may be unaware of the true impact of events on the business. While 68% of European respondents say their organizations place a high level of importance on protecting sensitive customer information, the responses from other global regions are higher, including Asia (80%), North America (80%), and South America (76%).

Industry specific highlights and further regional information are available here

Entertainment and media forecasted to grow by 5% annually until 2014

Advertising in Stratford, England
Image via Wikipedia

Following a year of decline in 2009, the global E&M market, as a whole, is forecasted to grow by 5% compounded annually for the entire period to 2014 reaching US$1.7 trillion, up from US$1.3 trillion in 2009. Fastest growing region throughout the forecast period is Latin America growing at 8.8% compound annual rate (CAR) during the next 5 years to US$77 billion in 2014. Asia Pacific is next at 6.4% CAR through to 2014 to US$475 billion. Europe, Middle East and Africa (EMEA) follows at 4.6% to US$581 billion in 2014. The largest, but slowest growing market is North America growing at 3.9% CAR taking it from US$460 billion in 2009 to US$558 billion in 2014.

Consumers seam to embrace new media experiences with staggering speed. The advancing digital transformation is driving audience fragmentation to a level not previously seen. However, the current wave of change is of a different magnitude from previous ones both in its speed and its simultaneous impact across all segments.

Although there is consistency in the inevitable migration to digital, the ways in which this presents itself and the pace of change continues to vary by market. Regional and country variations in current market size and future growth reflect local factors around infrastructure, access availability and consumer behaviour. For example the mobile internet explosion has already happened in Japan, accounting for some 53% of global spending on mobile Internet access in 2009 while other markets are still at the bottom of their growth curve.

Advertising on the rebound

Advertising revenues have been particularly hit by the turbulent markets and while there are signs of a rebound, this is still fragile in nature. Spend is unlikely to return to former levels. By 2014, the US advertising spend is expected to still be 9% below its level in 2006. Overall, global advertising will increase at a 4.2% CAR from US$406 billion in 2009 to US$498 billion in 2014. Internet advertising will join television in 2014 as the only media with spending in excess of US$100 billion.

The projections reflect the fragmentation of the market and behavioural changes of consumers. The advertising industry is responding to consumers’ shifting attention and has embarked upon a long-term journey towards total marketing or total brand communication. Brands are changing their focus from advertising on a medium, to marketing through, and with, content.

Conversing with consumers

Consumer feedback and usage provides the only reliable guide to the commercial viability of products and services, and the global consumer base is being used as a test-bed for new offerings and consumption modes. However, as responses are still evolving it is up to the industry to anticipate and identify where they are heading and pre-empt the needs and wants of consumers. PwC believes that three themes will emerge from changing consumer behaviour:

The rising power of mobility and devices: Advances in technology and products will see increasingly converged, multi-functional and interoperable mobile devices come of age as a consumption platform by the end of 2011. Consumers are increasingly demanding “ubiquity”, with content flowing across different devices to support ever-greater interactivity and convenience. They are using mobile in new ways, and downloading ever-increasing numbers of mobile applications (“apps”) to support their lifestyles. The ability to consume and interact with content anywhere, anytime—and to share and discuss that content experience with other people via social networks—will become an increasingly integral part of people’s lives.

The growing dominance of the Internet experience over all content consumption: Using the Internet is now one of the great unifying experiences of the current era for consumers everywhere—and their expectation of Internet-style interactivity and access to content will continue to expand across media consumption in every segment. This trend is initially at its clearest in television. Equally, people are already consuming magazines and newspapers on Internet-enabled tablets, and streaming personalised music services such as Pandora in preference to buying physical CDs or even digital downloads.

Increasing engagement and readiness to pay for content—driven by improved consumption experiences and convenience: Ongoing fragmentation means that media offerings will need greater consumer engagement and quality to get themselves heard – and paid. Consumers are more willing to pay for content when accompanied by convenience and flexibility in usage, personalisation , and/or a differentiated experience that cannot be created elsewhere. Local relevance will also become important once again as an aspect of convenience and relevance.

Revolutionising the business

Digital migration and the changes in consumer behaviour have put extreme pressure on existing business models. It has caused the industry to radically rethink its approach to monetising content as it strives to capture new sources of revenue, be it from transactions or from participation with others operating in the evolving digital value chain.

Inevitably this results in individual companies searching for where to position themselves in the new digital world. Partnering with other organisations is becoming imperative in order to create viable commercial content offerings while sharing the costs and risks. Increasingly potential partners are being found from a diverse set of industries.

Whatever the partnership or collaboration PwC identifies seven critical factors for operating succesfully in the new value chain:
• Strategic flexibility
• Delivery of engagement and reationship with the customer through the consumption experience
• Economics of scale and scope
• Speed of decision-making and execution, with the appetite to experiment and fail
• Agility in talent management
• Ability to monetise brand/rights across platforms
• Strong capabilities in partnership structuring and M&A targeting and integration

2010 – 2014 Media Outlook in numbers

• There were 12 countries in 2009 with E&M spending above US$20 billion, led by the United States at US$428 billion and Japan at US$164 billion. Of the leading countries, the People’s Republic of China (PRC) will be by far the fastest growing with a projected 12% compound annual increase, fuelled by a vibrant economy and large increases in broadband penetration that in turn propel other segments. Japan will be the slowest growing of the leading countries at 2.8% compounded annually.
• Internet access is a key driver of spending in most segments. Increased broadband penetration will boost wired access while growing smartphone penetration and wireless network upgrades will drive mobile access. Spending on wired and mobile Internet access will rise from US$228 billion in 2009 to US$351 billion in 2014.
• PwC expects a relatively flat market in aggregate global advertising and consumer/end-user spending in 2010, improved growth in 2011 and a return to mid-single-digit gains during 2014. Overall global advertising will increase at a 4.2% CAR from US$406 billion in 2009 to US$498 billion in 2014. Overall consumer/end-user spending will rise from US$688 billion in 2009 to US$842 billion in 2014, a 4.1% compound annual increase.
• Globally, the video game market will grow from US$52.5 billion in 2009 to US$86.8 billion in 2014, growing at a compound growth rate of 10.6%. This will make it the second fastest-growing segment of E&M behind internet advertising wired and mobile, but will be the fastest-growing consumer/end user segment ahead of TV subscriptions and license fees.
• The global television subscription and license fee market will increase from $185.9 billion in 2009 to US$258.1 billion in 2014, a CAGR of 6.8%. This will outpace TV advertising, which will grow at a CAGR of 5.7%. The biggest component of this market is subscription spending and this will increase at 7.5% CAR to US$210.8 billion in 2014. Asia Pacific will be the fastest-growing region with a 10% compund annual increase rising to US$47.1 billion in 2014 from US$29.2 billion in 2009.
• Total global spending on consumer magazines fell by 10.6 percent in 2009. PwC projects an additional 2.7% decrease in 2010, a flat market in 2011, and modest growth during 2012–14. As a result, spending will total $74 billion in 2014, up 0.7 percent compounded annually from $71.5 billion in 2009.
• Electronic educational books will grow at a CAGR of 36.5% globally throughout the forecast period yet will still only account for less than 6% of global spend on educational books in 2014.

Details on PwC’s study: www.pwc.com

How can we make cost cuts stick

54% of the executives surveyed by McKinsey in April indicated that they would take steps to reduce operating costs in the next 12 months, compared with 47% in February. In April, 2/3 of the respondents rated economic conditions in their countries as better than they had been six months previously, and another 2/3 expected further improvement by the end of the first half of 2010 (“Economic Conditions Snapshot, April 2010: McKinsey Global Survey results,” mckinseyquarterly.com, April 2010). Yet any successes companies have at cutting costs during the downturn will erode with time. Many executives expect some proportion of the costs cut during the recent recession to return within 12 to 18 months (“What worked in cost cutting -and what’s next: McKinsey Global Survey results,” mckinseyquarterly.com, January 2010) – and prior research found that only 10% of cost reduction programs show sustained results three years later (Suzanne P. Nimocks, Robert L. Rosiello, and Oliver Wright, “Managing overhead costs,” mckinseyquarterly.com, May 2005).

Why is it then so difficult to make cost cuts stick?

In most cases, it’s because reduction programs don’t address the true drivers of costs or are simply too difficult to maintain over time. Sometimes, managers lack deep enough insight into their own operations to set useful cost reduction targets. In the midst of a crisis, they look for easily available benchmarks, such as what similar companies have accomplished, rather than taking the time to conduct a bottom-up examination of which costs should be cut. In other cases, individual business unit heads try to meet targets with draconian measures that are unrealistic over the long term, such as across-the-board cuts that don’t differentiate between those that add value or destroy it. In still others, managers use inaccurate or incomplete data to track costs, thus missing important opportunities and confounding efforts to ensure accountability.

Some possible solutions:

Focus on how to cut, not just how much

Benchmarks matter. External ones on some measures may be difficult to get, but where they are available – for example, on travel expenses – they can enable managers to compare performance across different units and identify real differences, as well as trade-offs that may not be in line with the organization’s overall strategy. Internal benchmarks are easier to access and provide great insights, especially because managers are more likely to understand and adjust for differences among their company’s organizational units than among different companies represented by external benchmarks.

P&L accounting data is not enough to make lasting decisions

Unfortunately, few companies have the kinds of systems they need to track costs at a fine-grained level – and they face a number of challenges in establishing them. Multiple data systems may make it difficult to aggregate and compare data from different geographies. Inconsistent accounting practices between businesses or time periods may lead to significant distortions. Changes in organizational structure (as a result of acquisitions, divestitures, or even changes in the allocation of overhead costs) may similarly distort tracking.

Clearly link cost management and strategy

Strategy must lead cost-cutting efforts, not vice versa. The goal cannot be merely to meet a bottom-line target. Indeed, among participants in a November 2009 survey, those who worked for companies that took an across-the-board approach to cost cutting in the recent downturn doubt that the cuts are sustainable. Those who predicted that the cuts could be sustained over the next 18 months were more likely to say that their companies chose a targeted approach. (“What worked in cost cutting – and what’s next: McKinsey Global Survey results,” mckinseyquarterly.com, January 2010).

Yet, many companies do not explicitly link cost reduction initiatives to broader strategic plans. As a result, reduction targets are set so that each business unit does “its share” – which starves high-performing units of the resources needed for valuable growth investments while generating only meager improvements at poorly performing units. Moreover, initiatives in one area of a business often have unintended negative consequences for the company as a whole.

Aim at results for 2-3 years not just 12 months

Most companies treat cost management as a one-off exercise driven by the need to manage short-term profit targets. Yet such hasty cost-cutting activity typically goes into reverse once the pressure is removed and rarely results in sustainable changes in cost structure. A better approach is to use the initial cost reduction program as an opportunity to build a competency in cost management rather than in cost reduction.

60% of executives say R&D will be top priority this year

Scientist Nestlé R&D Centre Tours, France
Image by Nestlé via Flickr

Research and development has risen sharply on the corporate agenda in the wake of the global economic crisis, a McKinsey survey finds. Four in ten respondents report that both R&D budgets and activity levels are up this year relative to 2009. What’s more, executives are remarkably optimistic that the R&D moves their companies made during the downturn will serve them well in the coming three to five years.

Moreover, nearly 60% of executives say R&D will be either the top priority or among the top three priorities this year – significantly higher than the 47% of executives who said the same last year. Despite the increased levels of spending and activity, companies are taking a wait-and-see approach to R&D hiring. Relatively few respondents say their companies are hiring or firing; the most common approach is a focus on retention.

Executives recognize that delaying, reducing, and eliminating R&D projects can limit long term competitiveness. Still, 42% of respondents say their organizations cut R&D costs in 2009, perhaps reflecting the lengths to which some companies needed to go in order to survive the recent economic turmoil. Further, when compared to the moves companies had made in spring 2009 (when McKinsey’s first R&D survey was conducted) with the moves they made by year’s end, it becomes clear that for many R&D organizations, conditions worsened steadily. Far more companies eliminated projects, delayed spending, and instituted hiring freezes as the year progressed.

These actions may well haunt some companies for years to come. A significant share of executives whose companies cut costs expect that these moves will have adverse effects in the coming three to five years. The problems respondents are most likely to expect include reduced market share, a loss of technological ground to competitors, a weaker R&D talent pool, a loss of institutional knowledge, and damage to morale.

Meanwhile, a significant number of companies appear to have used the downturn as an opportunity to add a measure of discipline to their R&D organizations, infrastructure, or processes. Among the most frequent changes in 2009 were increased accountability for performance and spending, increased collaboration with outside R&D groups, increased use of global R&D resources, and the streamlining of core R&D processes. All these moves should help companies innovate more effectively over the long term.

Moreover, high performers in the survey appear more attuned to the “softer” aspects of R&D than other companies are. Executives at high-performing companies, for instance, are significantly more likely to say their organizations are focusing on retention of key employees (40% versus 29%). And while the majority of high-performing companies didn’t cut R&D costs in 2009 — 63% of high performers didn’t, versus 56% of the others — those that did are far more likely than other companies to fear weaker R&D talent pools, a loss of institutional knowledge, and damage to company morale. Finally, high-performing companies appear to be markedly more proactive than the others in two operational areas that represent significant long-term investments: the streamlining of core R&D processes and the expansion of R&D infrastructure.

You may find more details at:
https://www.mckinseyquarterly.com

Transform: business trends in 25 markets across the Central & Eastern Europe

Tallinn, Rotermanni new neighbourhood
Image by Bookish type via Flickr

Transform is the bi-annual magazine of PwC in Central and Eastern Europe (CEE). It covers the latest business trends in 25 markets across the region, from the Czech Republic to Kazakhstan. Each issue of the magazine goes out to 10,000 business leaders, financiers, politicians and opinion formers in CEE.

Within the last issue, PwC brings the regional CEOs of three leading companies – Siemens, Orange and the ROLF Group – together to debate this issue and asks Romanian business veteran Dinu Patriciu for his insight. Staying in Romania, PwC features an exclusive interview with Bogdan Dragoi, Secretary of State at Romania’s Ministry of Public Finance, on how the government is trying to get the economy there back on track.

Also, in the wake of the World Eonomic Forum’s annual leaders summit in Davos, Switzerland, in the New Year, PwC turned to four commentators with expertise in the region for their thoughts on what CEE’s business and political leaders should be tackling this year.

You may download a free copy from here

PwC Global CEOs Survey results released at the World Economic Forum: 60% of CEOs said they expect recovery in their national economies only in second half of 2010 or later

Overall, the survey found that 81% of CEOs worldwide are confident of their prospects for the next 12 months, while only 18% said they remained pessimistic. The results compare with 64% who said they were confident a year ago and 35% who were pessimistic; 31% of CEOs said they were now “very confident” of their short term prospects, up 10% from last year, a low point in CEO confidence since PwC began its tracking.

The survey revealed striking differences in confidence levels – and by extension the impact of the global recession – among CEOs in emerging economies and those in developed nations. In North America and Western Europe, for example, about 80% of CEOs said they were confident of growth in the next year. That compared with 91% in Latin America and in China/Hong Kong, and 97% in India.
Looking at the longer term, the results were more even. Overall, more than 90% of CEOs expressed confidence in growth over the next three years. Those results, coming at the start of a new decade, were about on par with confidence levels of CEOs in PwC’s 2000 survey. But 10 years ago the economic split was very different, with 42% of North American CEOs extremely optimistic – twice as many as in Asia.
For the future, a total of 60% of CEOs said they expect recovery in their national economies only in second half of 2010 or later, while 13% said recovery was already underway, and 21% said it would set in during the first half of this year. Return to growth was fastest in China, where 67% of CEOs said recovery had begun in 2009. However, nearly 65% of CEOs in the US and more than 70% in Western Europe said the turnaround would not begin until the half of 2010.

Other key findings of the 13th Annual PwC Global CEO Survey:

Fears for the future
Protracted global recession remains the biggest overall concern of CEOs around the world (65%), followed closely by fear of over-regulation (60%). More CEOs are “extremely concerned” about over-regulation (27%) than any other threat to business growth. Other high-ranking potential business threats included instability in capital markets, and exchange rate volatility. At the other end of the spectrum, concerns over terrorism and infrastructure were cited by less than a third of CEOs globally as threats to growth.

Love-hate relationship with regulators
CEOs were very clear about the threat of over-regulation. Over 65% of CEOs disagreed with the notion that governments have reduced the overall regulatory burden. They also opposed government ownership in the private sector even in the worst of times – nearly half agreed that government ownership helps to stabilise an industry during a crisis. CEOs from two sectors that received considerable government support during the crisis – automakers and banks – were amongst the most appreciative of government ownership in troubled times.

At the same time, CEOs were optimistic about governments’ efforts to address systemic risks such as another economic crisis – 65% of CEOs agreed that regulatory cooperation will help successfully mitigate systemic risks.

Combating the effects of recession
To combat recession, nearly 90% of all CEOs said their companies had initiated cost-cutting measures in the past 12 months, led by those in the US, Western Europe and the UK. And nearly 80% overall said they would seek cost cuts over the next three years.

Public trust and consumer behaviour
Over one in four CEOs believe their industry’s reputation has been tarnished by the downturn. However, 61% of CEOs in the banking and capital markets sector said there has been a fall in trust in their industry.

Nearly half of CEOs are concerned that the recession caused a permanent shift in consumer behaviour. Most say that consumers will place greater importance on a company’s social reputation (64%), spend less and save more (63%), or be more active in product development (60%).

Risk management
Risk management took on greater importance among CEOs as a result of the recession; 41% of CEOs plan to make major changes to their company’s approach to managing risk, and another 43% report plans to make some change to their processes.

Boards of Directors are becoming more engaged in key aspects of management; such as assessing strategic risk, monitoring financial health, and overseeing company strategy.

Climate change
More than 60% of CEOs said their companies are preparing for the impact of climate change initiatives and believe those efforts will improve their company’s reputation. The recession had little impact on the green momentum; 61% of companies with climate change initiatives saw no effect of the recession on their strategies and 17% raised such investments last year.

The full survey report plus supporting graphics which can be downloaded are available at: www.pwc.com/ceosurvey

The value companies have realized from their Web 2.0 deployments

McKinsey Quarterly conducted a survey in June 2009 and received nearly 1,700 executives from around the world, across a range of industries and functional areas. The survey focused on the value they have realized from their Web 2.0 deployments in three main areas: within their organizations; externally, in their relations with customers; and in their dealings with suppliers, partners, and outside experts.

Their responses suggest why Web 2.0 remains of high interest: 69% of respondents report that their companies have gained measurable business benefits, including more innovative products and services, more effective marketing, better access to knowledge, lower cost of doing business, and higher revenues. Companies that made greater use of the technologies, the results show, report even greater benefits. The survey also looked closely at the factors driving these improvements—for example, the types of technologies companies are using, management practices that produce benefits, and any organizational and cultural characteristics that may contribute to the gains. The results show that successful companies not only tightly integrate Web 2.0 technologies with the work flows of their employees but also create a “networked company,” linking themselves with customers and suppliers through the use of Web 2.0 tools. Despite the current recession, respondents overwhelmingly say that they will continue to invest in Web 2.0.

What benefits do Web 2.0 deployments bring to a company?

This year’s survey turned up strong evidence that these advantages are translating into measurable business gains: greater ability to share ideas; improved access to knowledge experts; and reduced costs of communications, travel, and operations. Many respondents also say Web 2.0 tools have decreased the time to market for products and have had the effect of improving employee satisfaction.

Looking beyond company borders, significant benefits have stemmed from better interactions with organizations and customers. The ability to forge closer ties has increased customers’ awareness and consideration of companies’ products and has improved customer satisfaction. Some respondents report that these customer interactions have resulted in measurable increases in revenues.

Respondents cite similar gains resulting from better ties to suppliers and partners: the ability to gain access to expertise outside company walls more quickly, lower costs of communication with business partners and lower travel costs.

How do companies use Web 2.0?

Among respondents who report seeing benefits within their companies, many cite blogs, RSS, and social networks as important means of exchanging knowledge. These networks often help companies coalesce affinity groups internally. Finally, respondents report using Web videos more frequently since the previous survey; technology improvements have made videos easier to produce and disseminate within organizations.

Respondents who report that Web technologies have strengthened their companies’ links to customers also cite blogs and social networks as important. Both allow companies to distribute product information more readily and, perhaps more critically, they invite customer feedback and even participation in the creation of products.

What’s next?

• Over half of the companies in this year’s survey plan to increase their investments in Web 2.0 technologies, while another quarter expect to maintain investments at current levels.
• The current downturn has increased interest in the technologies, presumably because companies count on extending their gains.
• About 1/3 of respondents have not yet achieved business benefits, either because they aren’t using Web 2.0 for one of the three major usage categories (internal, customer, and partner/supplier) or because they have yet to learn how to achieve measurable benefits with the tools they are using.

For a closer look at how companies are using Web 2.0 and their benefits, see the articles “Business and Web 2.0: An interactive feature,” and “How companies are benefiting from Web 2.0” on www.mckinseyquarterly.com

IT investments management: solutions in a downturn

“Ziarul Financiar” published today one of my articles in which I stated that the indiscriminate slashing of IT investments could be harmful to the current economic context.

I believe this to be one of the most common traps companies fall into these days as medium and long term perspectives are overshadowed by short term cash flow requirements. Within the article, I also offered some suggestions for a short, medium and long term approach to IT investments.

You may read the full article (Romanian only) in PDF:
“Managementul investitiilor IT: solutii in timp de criza”, Ziarul Financiar, 3 iulie 2009

and online:
http://www.zf.ro/opinii/managementul-investitiilor-it-solutii-in-timp-de-criza-4613097/