How businesses are using Web . : A McKinsey Global SurveyMore than three-fourths of executives who responded to a McKinsey survey say they plan to maintain or increase their investments in technology trends that encourage user collaboration, such as peer-to-peer networking, social networks, and Web services. More than half say they are pleased with their past Internet investments, though some regret not boosting their own capabilities to exploit technology. More executives said they should have acted faster than , who consider their companies cautious investors in the past, are stepping up their pace today. Similarly, many executives in emerging markets such as India and Latin America intend to move more quickly to capture the perceived benefits of these a follow-up discussion, respondents describe how these innovations are creating a new way of bringing technology into businesses, one that is easier to implement and more flexible than traditional top-down approaches. They also offered insights into how and why their companies are using Web and where these technologies may offer a sustained competitive -François Martin
2How businesses are using Web . : A McKinsey Global SurveyBy and large, executives are satisfied with their previous investments in Internet technology, and most are investing in trends that promote automation and networking rising popularity of user-driven online During an online discussion convened to dig services, including MySpace, Wikipedia, and more deeply into these results, it became clear YouTube, has drawn attention to a group that companies using Web . technologies have of technological developments known as Web developed a new way of bringing technology . . These technologies, which rely on user into businesses. And, according to many collaboration, include Web services, peer-to-peer participants, this new approach is easier to networking, blogs, podcasts, and online implement and more exible than traditional social -down approaches. Discussion participants are seeing some business impact from these Respondents to a recent McKinsey survey technologies and seem generally optimistic show widespread but careful interest in this about their bene ts, particularly in how they trend. Expressing satisfaction with their help a company re ne its investments so far, they say that Web . technologies are strategic and that they plan to increase these investments. But companies aren’t necessarily relying on the best-known Web . trends, such as blogs; instead, they place the greatest importance on technologies that enable automation and networking. The McKinsey Quarterly conducted this survey in January and received responses from , executives worldwide, percent of whom hold C-level positions; all data are weighted by GDP of constituent countries to adjust for differences in response : McKinsey survey on Internet technologies
3Successful investments so farMore than half of the executives surveyed say Companies that acted quickly in the previous they are pleased with the results of their wave of investment are more satis ed than late investments in Internet technologies over the movers. Less than a fth of all those surveyed past ve years, and nearly three-quarters say say they are very satis ed with their returns. that their companies plan to maintain or Of those who rate themselves as very satis ed, increase investments in Web . technologies in percent are “early adopters” and per- coming years. (A mere percent say they cent “fast followers” (Exhibit ).are disappointed with previous investments.) Survey 2007Internet surveyExhibit 1 of 7Glance:Exhibit title: Different outlooksExhibit 11% of respondents who cited given level of satisfaction, by categoryDifferent outlooksHow satis ed are you with your company’s nancial return on investment in Web . technologies over the past years?Early adopterFast follower100%n =2Very satisfied46444642Somewhat satisfied22561,0092Neutral9417442Dissatisfied931182 Respondents whose companies were late followers or did not invest are not shown. Very satis ed = paid off beyond expectations and/or faster than expected; somewhat satis ed = paid off as expected and in reasonable amount of time; neutral = paid off as expected but took longer than had been hoped; dissatis ed = didn’t pay off as expected or the payoff has taken too long. Source: McKinsey Survey on Internet technologiesSource: McKinsey survey on Internet technologies
4Asked what might have been done differently to (Exhibit ). Among the percent who say they make the previous investments in Internet would have moved faster, many describe their technologies more effective, only percent say companies as fast followers or early adopters— they would not have acted differently. Forty- a strategy consistent with the view that speed two percent say they would have strengthened is of the essence in technology companies’ internal capabilities to make the most of the market opportunity at hand Survey 2007Internet surveyExhibit 2 of 7Glance:Exhibit title: Rethinking investmentsExhibit 21Rethinking % of respondents (n = 2,623)investmentsGiven hindsight, what might your company have done differently during the past 5 years to make more effective investments in Web . technologies?Invested at the right time but should have invested more in our company’s 42internal capabilitiesShould have invested sooner in technology that in the meantime had a significant 24impact on our industryWouldn’t do anything differently18Invested at the right time but overestimated 10the market potentialShould have waited for technology to be developed further (that is, be less expensive 7and/or better able to meet our needs)Other3 Respondents who answered “don’t know” are excluded; gures do not sum to %, because respondents could select multiple answers. Source: McKinsey Survey on Internet technologiesSource: McKinsey survey on Internet technologies
5What’s next?Among the execuFew executives say that their companies are tives familiar with the nine Web using more than two of these technologies. But . trends cited in the survey (see the nearly two-thirds of those whose companies sidebar, “What’s in Web . ”), more than three-are investing in them think they are important fourths say that their companies are already for maintaining the company’s market posi- investing in one or more of these trends. The mostion, either to provide a competitive edge or t frequently cited investment is Web services, beto match the competition and address customer ing used or considered by percent of the demand. More than one-third labeled them respondents familiar with the tools. Peer-to-peer ne“experimental.”tworking also is popular; percent say they are using or considering it (Exhibit ). Survey 2007Internet surveyExhibit 3 of 7Glance:Exhibit title: Popular betsExhibit 31Popular bets% of respondentsUsing or planning to useNot under considerationIs your company investing in any of the following Web technologies or tools?Web services806(n = 2,615)Collective intelligence4826(n = 1,987)Peer-to-peer networking 4728(n = 2,345)Social networking 3739(n = 2,173)2RSS3542(n =1,755)Podcasts3540(n = 2,325)Wikis3339(n =1,705)Blogs3243(n = 2,431)Mash-ups2154(n =1,046) Respondents whose investment plans are uncertain are not shown; respondents who answered “not familiar enough to say” or “don’t know” are excluded. Really Simple Syndication. Source: McKinsey Survey on Internet technologiesSource: McKinsey survey on Internet technologies
6Executives from some industries and regions were more likely than the average company to that were slow to invest during the past ve invest cautiously in the past, now overwhelm- Survey 2007years are poised to move more aggressively now. ingly say they will increase investment in Web Internet surveyFor example, retail executives, whose companies . technologies in the coming years (Exhibit ).Exhibit 4 of 7Glance:Exhibit title: Interest is high in IndiaExhibit 4% of respondentsInterest is high What are your company’s plans for investing in Web technologies over the in Indianext3 years?Investment in these types of technologies will increaseBy industryBy regionRetail77India80High tech74Asia-Pacific69Telecommunications70Europe65Financial services63China64Pharmaceuticals53North America64Latin America62 Source: McKinsey Survey on Internet technologiesWhat’s in Web Blogs (short for Web logs) are online journals or diaries hosted on a Web RSS (Really Simple Syndication) allows people to subscribe to online site and often distributed to other sites or readers using RSS (see below).distributions of news, blogs, podcasts, or other information. Collective intelligence refers to any system that attempts to tap the Social networking refers to systems that allow members of a specific expertise of a group rather than an individual to make decisions. site to learn about other members’ skills, talents, knowledge, or Technologies that contribute to collective intelligence include collabora- preferences. Commercial examples include Facebook and MySpace. Some tive publishing and common databases for sharing use these systems internally to help identify -ups are aggregations of content from different online sources Web services are software systems that make it easier for different to create a new service. An example would be a program that pulls systems to communicate with one another automatically in order apartment listings from one site and displays them on a Google map to to pass information or conduct transactions. For example, a retailer and show where the apartments are might use Web services to communicate over the Internet and automatically update each other’s inventory -to-peer networking (sometimes called P2P) is a technique for efficiently sharing files (music, videos, or text) either over the Internet Wikis, such as Wikipedia, are systems for collaborative publishing. They or within a closed set of users. Unlike the traditional method of allow many authors to contribute to an online document or a file on one machine—which can become a bottleneck if many people try to access it at once—P2P distributes files across many machines, often those of the users themselves. Some systems retrieve files by gathering and assembling pieces of them from many machines. Podcasts are audio or video recordings—a multimedia form of a blog or other content. They are often distributed through an aggregator, such as : McKinsey survey on Internet technologies
7survey varies across regions, with China being a Similarly, while executives from China and fast adopter. The use of and plans for Web . Latin America typically say that their technologies in general are well balanced companies are late followers or had invested globally (Exhibit ), although some locations cautiously, they now plan to invest at the same (such as India) stand out for their enthusiasm. rate or even faster than companies in Europe and North America. The level of investment in each of the Web . technologies cited in this Survey 2007Internet surveyExhibit 5 of 7Glance:Exhibit title: A choice of technologiesExhibit 5A choice % of respondents using or planning to use Web technologiesLowMediumHighof technologiesOtherLatinNorthdevelopingAsia-PacificChinaEuropeIndiaAmericaAmericamarketsBlogs25202629233219Collective32373533313035intelligenceMash-ups76810586Peer-to-peer 43503839433739networks1RSS19202018172520Social22363029282729networksWikis19102326172012 Really Simple Syndication. Source: McKinsey Survey on Internet technologiesSource: McKinsey survey on Internet technologies
8Why Web say they are using Web . Respondents report that to communicate with technologies to communicate with customers business partners and, secondarily, to achieve and business partners and to encourage tighter integration with suppliers, companies collaboration inside the company (Exhibit ). are using Web services, peer-to-peer networking, Seventy percent say they are using some collective intelligence, RSS (Really Simple combination of these technologies for Syndication), and peer-to-peer networking. communicating with their customers. For example, about one- fth of them say they are Companies are using the same technologies to using blogs to improve customer service or help manage knowledge internally. Just over solicit customer of respondents say they used one or more Web . technologies for that purpose. Just under half use these tools for designing and developing new products—for example, setting up systems to gather and share 2007Internet surveyExhibit 6 of 7Glance:Exhibit title: How they use themExhibit 6% of respondents who report using Web technologiesHow they use themRespondents report using some combination of technologies to . . .New customers, Customer-to-business 1new markets4719feedbackInterface with 70customers34Customer servicesPurchasing17Better interface Interface with 51integration, better suppliers, partnerscommunication83Knowledge51managementManage collaboration 75internallyProduct design, 49development Sum of responses for entering new markets and acquiring new customers in existing markets. Source: McKinsey Survey on Internet technologiesSource: McKinsey survey on Internet technologies
9Finally, among the executives surveyed, podcasts, and mash-ups trail technology trends technologies for automation and collaboration that allow people to contribute knowledge to a appear to be gaining more traction than some common effort or allow machines to exchange of the technologies that have received more information more in the press (Exhibit ). Blogs, Survey 2007Internet surveyExhibit 7 of 7Glance:Exhibit title: Business relevance drives usageExhibit 7Business relevance % of respondentsdrives usageIs your company investing Identify the 3 technologies or in any of the following Web that are most important to technologies or tools?your business.(n = 2,847)(n = 2,433)Web services6378Peer-to-peer networks2834Collective intelligence2130Social networks1919Podcasts1717Blogs16171RSS1412Wikis1310Mash-ups43 Really Simple Syndication. Source: McKinsey Survey on Internet technologiesSource: McKinsey survey on Internet technologies
10However, looking at companies that have in Asia. And some percent are much likelier invested in speci c technologies, two distinct to have invested in RSS, blogs, and podcasts groups emerge. Some percent of companies than others; these companies are also likelier to are even more focused on networking and be in industries such as media and telecom- collective intelligence technologies than the munications and located in North average (Exhibit ); these companies are likelier than others to be large, in high tech, and < > 2007Web bbExhibit 1 of 1Glance:Exhibit title: Who, what whereExhibit 81Deviation from average, %Who, what, whereInvestmentKnowledge-focusedCommunicationsGlobal averageRSS (Really Simple Syndication)97134Blogs–110531Podcasts17933Collective intelligence361047Peer-to-peer networking65–5347Social networking60–27370Mash-ups7020Web services8–580Wikis272533 This exhibit is a result of cluster analysis. The percentages in the two left-hand columns refer to the percentage difference from the global : McKinsey survey on Internet technologies
11Respondents’ discussionDuring an online discussion convened to dig In addition, some note that as collaboration more deeply into the preceding results, it tools spread through the organization, they became clear that companies using Web . help break down hierarchical and functional technologies have developed an easier and boundaries, since they facilitate passing more exible way of bringing technology into information up, down, and around: “We use businesses, compared to traditional top-down a CRM package where I can easily nd out my customers like and dislike and have suggestions from the help desk guy on how A key theme that emerges from the discussions to improve our service. The message does is that many of these technologies start at a not need to ow through layers within our company’s grassroots level. Because many organization to reach me.”of these tools are easy to implement, small groups of interested individuals can launch Discussion participants seem generally optimis- informal pilots to test their viability. “We tic about the bene ts of these technologies, have been very customer driven and quite ad particularly as they help companies re ne their hoc,” one executive explains. “As we grow business direction: “The most valuable aspects we are formalizing the process, but it is still today are providing a means for customers to driven by inspiration [and] passion from key have a dialogue with us. This provides bene ts stakeholders.”to both parties. If we get something wrong, our customers let us know very quickly and they Another central point is that although many expect to know when we are going to address of these technologies came into prominence it. This rich dialogue also brings us ideas and as consumer services, discussion participants suggestions on future product developments, are using them throughout their businesses which is extremely valuable.”as tools and can already see some impact on the business. “Wikis are adding the greatest value,” one executive says. “Blogs and podcasts are more focused outside the organization, supporting sales and marketing efforts. . . . Technology is just the way of doing business.” The discussion brought together senior executives, including CEOs and company owners, from Europe and North America. Participants were grouped into two categories: those who told us they are using relatively few of the technologies we asked about and those who said they are using three or more. Customer relationship : McKinsey survey on Internet technologies
12Promising startsIn this follow-up discussion, wikis, blogs, and are opportunities to use the collaboration RSS technologies were the most commonly techniques more actively in the software life mentioned ones. Although these were not the cycle. We would be interested in harness- technologies that executives cited in the ing collaboration tools built on Web . for original survey as the most used by companies developers.” across industries, discussion participants see them as having immediate value for their Blogs are also frequently mentioned as a organizations. As one executive says, “Col- channel to communicate with customers laborative and communications technologies and, in some cases, critics: “We use blogs as are clear winners.” a means of communication and engagement with our customers, but also to help engage Several executives, for example, say they are our prospects and detractors in a positive and using wikis (software that allows a group of productive discussion. We nd that it helps to people to contribute to an online document or manage our reputation.”collection) as a way to encourage collaboration within their companies, especially for Mash-ups—combining two technologies to knowledge development. “A typical example is create a new and distinct application, such as the use of a wiki to get to a commonly agreed displaying locations on a map—were the trends terminology set. . . . Users are able to respond least referenced in the original survey, but to language and messages that emanate from several participants say they are using them to the center and translate that into a set of terms address customer needs. “We are using mash-that is meaningful in their own context.” This ups based on customer demand to display participant adds that wikis “capture a good physical locations consumers can interact at. deal of unstructured and anecdotal information Google has set the bar with consumers.”that would otherwise have been lost.” Another notes that wikis are necessary because his organization has outgrown its ability to gather and share knowledge participants are hoping to take these technologies further, by using them to develop knowledge or software. “As a soft- ware integration provider, I think there These three technologies are more likely to be used by media and telecommunications companies, which have been quick to adopt Web . technologies for distributing : McKinsey survey on Internet technologies
13Adoption and barriersMost Web . tools are simple-to-use Some participants cite a difference between applications that are hosted offsite (for example, the way their companies implement more tech- wikis, blogs, and social networking), which nical and integrated technologies (for example, makes them easy to implement. Given that Web services) and the more user-friendly ease, it’s not surprising that many discussion technologies. “We committed to Web services participants say grassroots efforts are often as a long-term technology decision. . . . Our use as effective as formal pilot programs. One of blogs has been driven more by teams tied executive says, “These projects started at to the customer relationships.” Others suggest the grassroots level; however, the value was that the grassroots adoption style re ects rapidly demonstrated. This led to projects the novelty and availability of the new technolo- being taken up by their ‘natural’ owners within gies. “We have been very customer driven the organization [who] continue to invest and and quite ad hoc in the past. As we grow we develop the projects.” Another panelist goes are formalizing the process, but it is still further, asserting that top-down management driven by inspiration [and] passion from key would have been a hindrance: “The most stakeholders.” Inspiration often comes effective efforts started as grassroots efforts. from outside the company, sometimes even The role of senior management was to provide outside the industry. “An idea was seen the support for this to continue and then get that people thought, ‘Wow, that’s cool.’ That out of the way. Executives cannot mandate was the starting point for the discussion successful adoption of Web . technologies. [about] how we could use something like that Their role is to supply permission and to help us.”resources—and set the boundaries—and [then] let intelligent and motivated teams run with The discussion also highlights some difference this.”in adoption styles between executives who are using many Web . technologies and those The ease of exploring these technologies is cited who are exploring few. The more proli c users as a factor in helping advocates avoid typical show a tendency to leap into grassroots efforts, barriers to implementation (or perhaps just while the light users appear to take a more inertia) by quickly pulling together prototypes. cautious and traditional approach: “Decisions “The ease of implementation can be used to on new technology have tended to be driven overcome the usual resistance to trying things by one or two specialists in the technology and taking risks. A simple [working] prototype team, generally led by the CTO. Other board and some data from the sandbox with real members will be involved where signi cant users is very compelling when compared to the nancial investment is required.” Indeed, some traditional business approvals process.”executives report the same adoption barriers Chief technology of : McKinsey survey on Internet technologies
14as those they face with more traditional or However, in other environments, one executive expensive technologies, including caution on says, “No encouragement is necessary. the part of senior management and apathy The tools are simple and sometimes fun. The among customers. “The old shareholders do ability to click-and-drag graphics, videos, not understand the use of IT and they think [and] sound bites into a forum provides of it as a cost, not an opportunity.” A news- different dimensions to information. What’s paper executive adds, “We are struggling to do gone are the old BBS text boards.”the right thing to transform our business while trying to inform and engage the public who, frankly, don’t seem very interested.” Bulletin Board : McKinsey survey on Internet technologies
15Measuring impactWhile many panelists assert that Web . several Web . technologies, say they are technologies are subject to the same scrutiny as willing to give the tools more time: “These are other investments (speci cally, do they return still early days. The tools and technologies enough value to justify their costs?), a general that we have today will evolve into what will sense emerges that it is, in many cases, too become the next step. We are not necessarily soon to tell. However, participants also assess at that point today.” And some warn against these technologies by their impact on business rushing to judgment: “You need to give people performance, which they de ne in many ways—room to make mistakes and to shape it to including better customer engagement, more their needs. You also need time. Without a ef cient collaboration within the company, and commitment to those things, the command-an improved ability to manage its reputation and-control freaks will strangle it off with , mechanistic models. . . . Many of the old models for calculating return are either Some executives say the tools are already having of limited value or simply destructive.”visible effects, such as better communication with customers. “The most valuable aspects Another participant notes that nothing today are providing a means for customers resembling best practice has yet emerged for to have a dialogue with us.” One panelist implementing these tools or measuring cites blogs and RSS as factors that are helping their success: “There is perhaps, at best, sound to reduce the customer churn rate. Perhaps practice. Approaches are so dependent even more important, several participants are on context for success that slavishly following tapping customers’ opinions and expertise models used elsewhere will almost certainly to improve product design. “We now see restrict creativity and innovation.”customers, particularly the professionals and customer experts, as having a much greater role in the development of new products,” says one. Another adds, “Our success is based on allowing [clients] to participate in the process.”There is a wide variance in how long panelists are willing to wait for the tools to demonstrate their value. This period is sometimes tied to whether a company is using more or fewer of these technologies. One executive from a company using fewer notes, “The key for us is to identify value . . . at an early stage.” Others, such as this participant from a company using Source: McKinsey survey on Internet technologies
16Competitive advantage?Executives tend to invest in new technologies Some participants, especially those whose and processes because they hold out the promise investments have focused on changes in their of either increasing competitive advantage IT systems and who have invested less in (for example, by enabling new services or Web . , tend to view advantages as eeting. improvements to existing ones) or reducing “While we have been in the forefront of most costs. While opinions differ among discussion technology upheavals over the past two participants as to whether Web . technologies decades, none of our investments have have yet demonstrated any economic impact, provided us with any signi cant competitive some consensus emerges that the technologies advantage for a signi cant duration. The are valuable internally (mostly by improving technologies tend to get adopted by competing collaboration) and externally (by strengthening nancial institutions with no meaningful connections among suppliers, partners, and time gap [and] tend to get commoditized very customers). “It’s too early to claim competitive rapidly.”advantage . . . but we have used blogs to strengthen our stakeholder communication Others see these technologies as enabling a and we are currently implementing wiki different way of doing business, both internally technology in our intranet and extranet sites. (for example, by aggregating knowledge from The main bene t seems to be the stronger sense throughout the company) and externally (by of community that we can nurture through tapping customers for product-development technologies that are more interactive, less ideas). These respondents, such as this executive push.”from a company using several technologies, tend to expect a more sustainable advantage. The views of discussion participants on whether “Web . tools are helping to encourage interest these tools can offer enduring competitive in collaboration across the organization and advantage differ signi cantly. The variance not helping us to explore new and different ways of only highlights differences between executives collaborating. In time this may bring us some at companies where more of these tools are in form of competitive advantage, but it would be use and other executives, they also parallel an hard to quantify anything at this stage.”ongoing debate among technology executives and other experts as to whether technology can offer enduring competitive advantage. Web . tools, participants who are using them the most suggest, may lead to a long-term The contributors to the development and analysis of this survey include Jacques Bughin, a director in McKinsey’s Brussels of ce, and James Manyika, a director in the San Francisco of ce. Copyright McKinsey & Company. All rights : McKinsey survey on Internet technologies
