I'm often asked about the tangible business benefits of "real time communications" and specifically "Persistent Group Chat" (PGC). In our experience, results vary both by organization and by the particular collaborative technology selected. Most people, however, look for some sort of time savings. For instance, "can I save 15 minutes a day by reducing email traffic?" While an interesting question, email reduction due to the deployment of persistent group chat is not really where the ROI lies. The answer is actually embedded in the question, "what will you and everyone else do with the extra time and better structured communication?" "How do you create and sustain a competitive advantage relative to your peers?"
Competitive advantage from PGC is a common theme that we have seen with our clients (as we have as a company). That advantage generally comes from broadening information awareness, collapsing information silos, and accelerating interaction. Intuitively, this all makes sense, but the correlation to quantifiable value still eludes us.
I have looked far and wide for studies that show how enterprises benefit from better group collaboration. Being a student of financial economics, I have specifically searched for a study that correlates competitive advantage with one's corporate goal: creating shareholder value. That is, "does better communication and collaboration among your colleagues, partners and customers correlate directly to company value?"
Well, I have finally found a study that makes this case almost as perfectly as if I’d commissioned it. The study appeared in McKinsey Consulting’s “The McKinsey Quarterly,” published in January 2007 and titled, "Competitive advantage from better interactions." The article is a must-read for anyone who has labored to understand:
(1) Why there is a growing need for collaboration (what market forces are making collaboration tools a 'need to have') and,
(2) the impact of effective collaboration on a firm’s value.
You can find the article here:(http://www.mckinseyquarterly.com/article_abstract_visitor.aspx?ar=1767) , a free subscription/sign-up is required.
The first question is answered in the study by showing an increasing percentage of corporate roles that are primarily "Tacit Interaction" based roles. Tacit Interaction is defined as "the searching, coordinating, and monitoring of activities to exchange goods, services, and information." These are roles, the article suggests, where "traditional" efficiency improvements (i.e., typical production line improvements) won't make a difference; instead, organizations need to make tacit interactive professionals more "effective" in what they do…coordinating, collaborating, deciding, and acting. Think salespeople, management, marketing professionals, consultants, etc., where the transaction and type of work is described by the article as "complex." Coordinating resources, sharing information, and generally getting things done. There's no production line for this and certainly no six-sigma improvement. The key is that the study shows a growing dependency on these roles across all industries, and a growing need to make these interactions more effective.
So, how is that done? It's suggested in the article that this is accomplished by a series of both organizational (culture, management style, structure and compensation) and technological (collaborative tools that allow groups to better communicate) improvements. Industries where the dominant interaction is tacit have been leaders in the adoption of these managerial and organizational practices, as well as early adopters of new forms of technology that help accomplish the ultimate goal of more productive team interactions. Inherently, organizations in these industries know that the more productive teams are, the more productive the organization as a whole (in terms of revenue, competition, and value).
Part of the competitive advantage we at Parlano have always espoused, and the article confirms, comes in the form of a workforce that has specific knowledge and understanding that can organically and uniquely grow over time through improved team (tacit)interactions. Unlike improvements in a production line that can be copied from firm to firm, these knowledge-specific advantages are hard to replicate, if not impossible, and are the basis for sustainable competitive advantages relative to one’s peers.
The second question is answered in a brilliant way. A diagram in the article (Exhibit 2) shows what I like to call the "Horn of EBITDA." The diagram has (a) Industries on the horizontal (X) axis measured by "Intensity of tacit interaction" from low (left) to high (right) and (b) the average Earnings Before Interest, Taxes, Depreciation, & Amortization (EBITDA) per employee (as measured and normalized by a comparison of the standard deviation of EBITDA per employee to the mean) on the vertical (Y) axis. EBITDA is used here as an indication of value and value creation, the ultimate goal of every organization. In theory, the higher the EBITDA, the higher relative value to one's peer group.
The chart compares industries on the scale of intensity of tacit interaction and variation in company-level performance. No surprise that those industries with a lower variability of EBITDA to employee were firms with lower intensities of tacit interaction. The conclusion is that those firms are more "transformational" or "transactional" driven, for example steel, freight companies, etc..., and there is less to gain or lose because much of the improvements in those processes have been made.
However, the chart suggests that even those in traditional industries can improve their tacit interactions, that those interactions are a growing part of their business, and that this will likely be the basis by which they outperform their peer group and thus become valued higher. This is the exact argument that we make anecdotally when asked how collaboration, or persistent group chat, helps or applies to "traditional" industries. This article supplies the evidence to those claims. Thus, every firm has a growing number of tacit interactions and should easily justify the investment in collaborative technologies.
As you move to the right of the chart and look at the industry highlighted (Investment Banking and, by extension, Capital Markets), it's not difficult to understand why Parlano has focused so much attention and effort to this sector. There's more tacit interaction, arguably the highest, and more to gain by improving it. So, Financial Services will invest more heavily and help to innovate solutions that improve tacit interactions. Those innovations and best practices are then replicated back to industries on the left, and the early adopters will quickly move to the top of their industry and competitively outperform their peer group(s).
I believe Persistent Group Chat is at the center of these investments and improvements in tacit interactions. Tacit interactions are not defined by one-to-one exchanges, rather intercompany team communication and knowledge sharing that transcend organizational hierarchy. They flatten the communication lines and become, as the article suggests, critical…"multi-directional."
Email, IM, wikis, blogs, etc…are all part of the answer, but when the requirement is real-time exchange in a multi-directional sense, persistent group chat is the natural fit. Tacit interactions need to be both synchronous and asynchronous, widely disseminated in some instances and narrow in others. But, importantly, the velocity and volume of more productive tacit interactions will define the competitive advantages. That's why it’s not about 15 minutes saved or 40 percent less email. That's why PGC is the dominant form of communication and collaboration across the largest sell side institutions around the globe. It's also why we have consistently seen dramatic improvements in communications and results for each of our clients, and why other forms of communication (like email) wane over time…but that's not the primary purpose.
I strongly encourage anyone interested in understanding the real underlying benefits of collaboration in an organization to read the McKinsey article in full. The path is drawn between the investment in technology and organizational change, to shareholder value. Persistent Group Chat will be an important enabler and a must-have for any organization serious about improving team collaboration.
