Enterprise2.0 – McKinsey reports it is starting to work

You know something is approaching the mainstream when it gets a write up in a McKinsey quarterly report, and so it is with Enterprise2.0, or as they would have it web2.0 in the enterprise.  They have been studying 50+ early adopter enterprises in this space for two years now and the write up shows that there is an even mix of success and failure, but growing consensus that there are real productivity gains to be had from increased employee collaboration using lightweight web tools.  Clay Shirky refers to this as an immense ‘cognitive surplus’ that can be tapped with participatory web services.

The article is well worth a read if you are into this space.  It covers many topics that we have discussed here before including the bottom up (edge-in) nature of these tools, the challenges for management in implementing them, the appropriate balance between central direction/encouragement and putting the user in control, the importance of building these tools into workflow, and how ego and public recognition are important incentives to drive adoption – and it does so with the structure and rigour you would expect from McKinsey.

I’m going to pull out just three things in this post.

Firstly – Adoption cycles – as regular readers will know I think time is everything in venture so it is interesting to note from the chart below that McKinsey believes that adoption is still limited and yet to reach the rapid growth phase.  That tells me the real excitement is yet to come for startups in this space, but that the likely big winners are probably already up and running and doing business.

Secondly – The technologies – in the table below McKinsey provides a helpful list of the technologies that we are talking about here.  The standout conclusion for me when reading this list is that they are not technically challenging to develop.  Thus for startups to have value in this space they will need to demonstrate massive growth and customer traction.  I think it is unlikely that we will see big ticket acquisitions for the sake of technology alone.  This is different to traditional enterprise software.

Thirdly – Market size – McKinsey has it at $1bn globally, which is, as they point out, paltry.  Further it isn’t clear if services are included in that figure.

  • Nic, the market size estimate really jumped out at me. While spending may be only USD $1 billion, the value of the time invested by employees in using these web tools (for personal, official corporate and informal corporate use) must be far, far larger. Adoption (and moreso, attention) have far outstripped spending.

    And that shift may have a far larger impact on companies than the levels of spending might suggest.

    Thus I wonder if instead of “15% annual growth” in revenues we'll some other, much more drastic shift in either 1) spending on web apps or 2) significant decrease in spending on the services they empower or replace.

  • Hi Taylor – I agree that the $1bn implies a lower impact than thse tecnologies are having, but it remains the market opportunity for vendors in this space.

    As with consumer social media the attention far outsrips the money.

  • Nic, the market size estimate really jumped out at me. While spending may be only USD $1 billion, the value of the time invested by employees in using these web tools (for personal, official corporate and informal corporate use) must be far, far larger. Adoption (and moreso, attention) have far outstripped spending.

    And that shift may have a far larger impact on companies than the levels of spending might suggest.

    Thus I wonder if instead of “15% annual growth” in revenues we'll some other, much more drastic shift in either 1) spending on web apps or 2) significant decrease in spending on the services they empower or replace.

  • Hi Taylor – I agree that the $1bn implies a lower impact than thse tecnologies are having, but it remains the market opportunity for vendors in this space.

    As with consumer social media the attention far outsrips the money.

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  • I strongly stand by point 4:
    Appeal to the participants’ egos and needs—not just their wallets; this is analogous to The Pain and Pleasure Principle. People are largely motivated by avoiding pain or seeking pleasure. Hence, if your site offers services that help your users achieve either of those, you should have substantial success.

    However, there’s always a gap between your assumption and the reality. Many startups don’t understand why their “engaging” site did not pick up. Well, they just have to accept the fact that their definition of “engagement” is just not relevant to their users.

  • I strongly stand by point 4:
    Appeal to the participants’ egos and needs—not just their wallets; this is analogous to The Pain and Pleasure Principle. People are largely motivated by avoiding pain or seeking pleasure. Hence, if your site offers services that help your users achieve either of those, you should have substantial success.

    However, there’s always a gap between your assumption and the reality. Many startups don’t understand why their “engaging” site did not pick up. Well, they just have to accept the fact that their definition of “engagement” is just not relevant to their users.

  • For me, as Twitter is almost the bellweather of Social Media Retail (man on the street), GetSatisfaction is for me the Bellweather of E2.0 (surprise). And they still "have to crack it", IMHO. But is the business model innovation there that is compelling, not the technology, as you point out.

  • For me, as Twitter is almost the bellweather of Social Media Retail (man on the street), GetSatisfaction is for me the Bellweather of E2.0 (surprise). And they still "have to crack it", IMHO. But is the business model innovation there that is compelling, not the technology, as you point out.

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