Firms using social media for collaboration more likely to win market share

Brands that use social media to interact more effectively with customers, business partners and staff are twice as likely to win market share and generate higher profit margins than those that do not.

According to a survey among 3,249 executives across a range of regions, industries and functional areas undertaken by management consultancy McKinsey, two-thirds currently use social networking technologies within their organisations, with nine out of 10 obtaining some measurable business benefit such as more effective marketing or faster access to knowledge. Just under four out of five saw a mean improvement of 5% in at least one area of their business.

About 13% actively embedded social media tools into business processes in order to boost employee collaboration and enable them to share information more easily, particularly across organisational silos and projects.

Such activity enabled decision-making to take place lower down the corporate hierarchy and led a greater willingness to create teams comprising both in-house staff and external individuals. This situation, in turn, led to increases in market share.

A further 5% of organisations also achieved substantial benefits from employing social networking technology to interact more effectively with customers and business partners, although such activity did not appear to correlate with higher operating margins.

The report explained: "Market leaders use Web 2.0 to strengthen internal collaboration, seeking to enhance the organisational resiliency required to maintain their leadership positions. Market challengers, by contrast, may be more focused on external uses of Web 2.0 to win customers from industry leaders."

The most successful category of all, however, was so-called ‘fully networked enterprises’, which comprised a mere 3% of the total survey sample. They used social media for both internal and external interactions and were 50% more likely than other respondents to generate both market share gains against rivals and higher profit margins.

"The benefits from the use of collaborative technologies at fully networked organisations appear to be multiplicative in nature: these enterprises seem to be ‘learning organisations’ in which lessons from interacting with one set of stakeholders in turn improve the ability to realise value in interactions with others," the report said.

The rest of the sample were described as ‘developing’ in that they were still learning the social media ropes and business benefits were less clear cut.