Social Networks Improve Business Performance
McKinsey says that social networks are “extending the organization;” that’s a key take-away from their fifth annual study of the use of technology in organizations.
They continue to identify the key benefits of effective use of technology as increasing speed to access both internal and external knowledge, reducing communication costs and both increasing customer satisfaction and decreasing marketing costs. In terms of technology usage, they identify 4 types of firms: developing, internally networked, externally networked and fully networked. It should come as 
no surprise that few enterprises identify themselves as fully-networked while the largest number identify themselves as externally networked.
In this chart they collapse the benefits into internal, customer and partner/supplier benefits. Fully networked organizations have seen the greatest increase in payback from social technology (interactive presentation here). McKinsey warns, though, that it can be difficult to scale the benefits in a large enterprise. It is clearly worth the effort. They found improvements in market share, operating margin and market leadership from the use of specific technologies. See that detail in Exhibit 5 of their report.
The report also features a chart showing what kinds of technologies are being used for what purposes. It reinforces the point that you need to select technologies carefully, based on use and audience, before you invest time and effort in them.
The McKinsey report has some data on adoption of technology by industry. Dion Hinchcliffe has an excellent post that includes data from a similar study by IBM and examples of success in healthcare, manufacturing, finance and insurance. He makes the point that across industries have examples of increased worker productivity and efficiency through the use of social networks.
Why is that? Business Intelligence expert Ken Chow has a provocative answer. Writing in the Information Management newsletter he says:
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