McKinsey Quarterly

Digital hives: Creating a surge around change

| Article

New lessons are emerging for executives striving to harness the power of social media in the cause of wider employee participation. Clearly, there’s more to success than just investing heavily in the latest Enterprise 2.0 technology platforms. Large-scale engagement of the workforce requires, first and foremost, a firm grasp of organizational culture and its social dynamics, a psychological understanding of what triggers new behavior, a determination by management to loosen if not relinquish its traditional top-down approach, and an ability to demonstrate how digital activities complement offline or other real-world events.

Those attributes are often absent, so we find that many companies struggle to maintain the momentum of initiatives to encourage broad- and digitally based employee involvement. Indeed, that’s true whether these efforts focus on the formulation of strategy, transformational change, customer service, or other business contexts where fresh ideas or new ways of working are needed for competitiveness. Some initiatives fail to “mobilize the masses” to any significant degree, dissipating energy and effort as the message gets stuck in middle management. Others get going but never reach the organization’s perimeter, thereby missing an opportunity to collect valuable feedback and ideas from the front line.

Four ways to drive change

Here we present four specific approaches to the creation of what we call digital “hives”—electronic hubs bristling with collective activity and designed to solve a particular problem or set of problems, to drive new habits, and to encourage organizational change (exhibit). Digital tools to facilitate networking and collaboration propel these “horizontal” cascades, which at their best can weave new patterns of engagement across geographic and other organizational boundaries. In this way, they make it possible to have new conversations around problem solving, unlock previously tacit knowledge, and speed up execution.

Digital hives facilitate a collective approach to problem solving.
Designing the digital hive

1. Engaging the workforce in better strategy

Best practice in the formulation of strategy and in organizational change has long been to craft a “story” at the top and then to cascade it through lower echelons of the organization. Some companies refine the message in the light of feedback from middle managers, but however well communicated the refined story may be, it is still management’s second attempt. Employees on the shop or office floor often feel like passive recipients.

That’s beginning to change, though, thanks to social technologies. In a 2012 Quarterly article, we described the emergence of an approach that provides for extensive employee input and modifications. Telling thus equates with sharing, so the narrative grows as it diffuses throughout the organization.1 There are still relatively few social strategy-development processes, but the tools are getting more powerful, and the scale and scope of such efforts are more impressive.

Using the “management hackathon” concept—an integrated multistage platform that allows participants to discuss ideas, express opinions, and contribute expertise collectively2 —a successful consumer-goods company recently involved its entire organization in an open-source strategy process. This effort started with an organization-wide online discussion about risks to the company’s growth engine from higher input costs, stagnant industry growth, and a growing competitive threat from imitators to certain products and the business model. These risks then formed the basis for a bottom-up process that spawned over a thousand new strategic insights using a combination of in-person meetings and workshops as well as online channels.

These insights were aggregated into roughly ten strategic themes—from reengineering the retail experience and digital technology to creating service ecosystems around the company’s strongest brands. All employees were asked, via an online platform, to provide a rank order for these insights and to suggest specific business ideas embodying them. The input from the hive helped management to narrow the strategic themes down to three and to identify several high-priority opportunities. The company is currently developing them, leveraging both online and offline channels to harvest more insights from across the organization and to identify volunteers who want to be involved.

Early experience suggests that better results follow when a problem is presented in stages to avoid overwhelming the participants, when a company uses volunteers rather than conscripts, when it offers training on how to think about innovation, when energy- and community-building offline events (such as workshops or weekly cafeteria sessions) supplement the online discussions, and when executives strike an authentic tone.

2. Connecting silos with a social chain

One of the biggest organizational challenges is to break siloed behavior and get employees talking to one another and cooperating across intracompany boundaries. It’s one thing to diagnose a problem and aspire to collaboration. It’s quite another, once the initial excitement wears off, to maintain momentum through mechanisms that underpin the new behavior and prevent managers and employees from slipping back into old habits.

One promising social-technology experiment we’ve observed is what we call the “social chain”: a digital platform that links everyone working in a particular value chain inside a company. (Value chains often comprise people in different silos or departments working, say, to fulfill a customer order.) The social chain allows employees to work “out loud” online by sharing how they do things. It also encourages people who were previously isolated in part of the chain to identify areas where they depend on others and to tackle problems or bottlenecks collaboratively. Chain leaders can monitor these conversations and inject their own insights when appropriate. The chain can help them to expose old behavior and to highlight the sort of tacit understanding that drives more efficient operations.

The Dutch bank ABN AMRO has been a pioneer in using social chains. The banking crisis, a merger with Fortis, and the ensuing nationalization saw the company embark on a sweeping change program to cut costs, increase the efficiency of the value chain, and make employees more responsive. In the group’s wholesale arm, for example, senior managers discovered that there was no uniform approach to tracking and reporting problems: employees could detect defects at the customer end more quickly through the Internet than through the company’s internal systems. Needing a way to stimulate proactive, real-time problem solving, ABN AMRO introduced a social chain dedicated to employees working in its Acquiring and Issuing Cards unit, who spanned different silos, including IT, customer service, and operations. To push people into the hive, managers discouraged communication through meetings and e-mail.

Eighteen months later, the results were clear. ABN AMRO’s social chain had enabled its employees to share their expertise, in real time, beyond a narrow circle of peers. They could therefore become true ambassadors for, and identify with, the chain as a whole.

3. Enlisting key customers to improve the proposition

A company’s most regular and trusted customers—a group we call the “client rim”—can be a powerful force for change when they provide feedback on service standards or product quality. The opinion of these customers counts; they have extensive experience with the company and its ways of working, are generally committed to its success, know the people, and are typically both its most enthusiastic ambassadors and its strongest critics. Thanks to the power of social technologies, a company that mobilizes such people can solicit specific ideas for improving its customer proposition and demonstrate its client-centricity more broadly.

KLM, the Dutch airline, has successfully used this approach to foster a stronger client-centric mind-set among its employees. Operating in a highly competitive market with tight margins, the airline decided to target the lucrative segment of small and midsize enterprises directly. This approach required a significant shift in perceptions, not least because KLM traditionally focused on larger corporate clients and was often seen as distant, even arrogant, by smaller businesses.

Rather than taking the traditional focus-group route to find new ways to improve the offering, the company’s executives opted for a large-scale digital dialogue between KLM and its emerging customers in this segment. The resulting Bluelab idea-management platform involved 1,500 participants from small and midsize businesses, who generated more than 1,000 concrete ideas and 4,000 other contributions. Both management and customer-facing staff from KLM Netherlands actively participated in these discussions. According to one senior executive, the initiative has “opened our eyes to the possibilities of social media to build a far stronger customer focus among our staff.” KLM has since become one of the airline industry’s foremost social-media exponents.

Companies can embrace key customers in a variety of ways. Mobile apps can transmit a continually updated stream of client quotes on the product and service experience. A buddy system can allow individual customers and employees to have online conversations—preceded, perhaps, by a customer-experience event at which clients and employees explore new paths to common goals. Idea-management platforms can solicit customers’ help in solving vexing problems. Or a company might create social “mystery shoppers” who follow internal conversations anonymously and comment on them.

4. Uniting a dispersed sales force to drive higher sales

We’re all creatures of habit, often reluctant to ditch comfortable routines and to apply new ways of doing things. The desire to address exactly this problem recently prompted a leading beverage company in Africa to employ social media to engage with its far-flung sales force (1,000 reps servicing around 100,000 individual outlets) and win back market share. These reps traditionally had spent several weeks at a time on the road, rarely checking in with the head office and therefore operating in a feedback and knowledge vacuum. Inevitably, they had become disconnected from the organization, and performance suffered.

The turnaround started after the company implemented a simple, low-budget system that uses the hive’s collective wisdom to give each sales rep and call-center agent regular, real-time, and personalized information. Given time pressures, cash constraints, and concerns over the rate of thefts in African townships, the company opted to issue simple mobiles rather than the latest smartphones with a specialized app.

Staff at the center collected ideas based on intelligence gleaned from the calls and e-mails of the sales reps themselves and from district managers familiar with current issues in the beverage trade. The company also analyzed customer data highlighting pockets of fiercer-than-normal competition or SKUs that were selling particularly well. Such insights were then shared with reps and agents, who each received two or three personalized SMS messages a day. Managers could further use this rudimentary social platform to communicate with the sales force by, for example, congratulating teams when they hit milestones and generally celebrating success. The company also created a call-center “leaderboard” allowing executives to track the agents most responsive to the new information at their disposal. The executives then freed up time for these “early adopters” to coach their peers, provide feedback, and strengthen the system with additional insights.

The new network, implemented at minimal cost, puts collective expertise in the hands of each of the frontline reps, binds them more closely to the organization, and generates faster performance feedback. Within a year of the start, the company has increased cross- and upselling rates to more than 50 percent, from 4 percent, realizing an increase in gross margins of $25 million.

A new mind-set for senior managers

The examples in this article illustrate the range of business contexts in which executives are increasingly making use of social media’s growing influence in their employees’ private lives and their increased familiarity with new digital-communication tools. As managers contemplate how to drive broader and deeper employee engagement in their companies, they should bear in mind the following considerations:

Leading while letting go

Digital hives involve large numbers of previously “disenfranchised” employees in setting strategy, company-wide transformations, and customer-outreach initiatives. Creating these hives requires a delicate balancing act—not least a willingness by top managers to let go. Managers should not be afraid to commit themselves explicitly to acting on the results of these initiatives and should encourage unrestrained participation, however unpredictable the consequences.

But that doesn’t mean playing a passive role. Our research consistently shows that without substantial involvement by the CEO or other top leaders, the vast majority of such initiatives fail to achieve their objectives. What’s more, change programs that involve large numbers of people are up to two times more successful than those that do not.3 When we ask change leaders what they would do differently next time, the top three responses always include spending more effort on engaging people and on developing and communicating change stories.

Looking inward

The growing use of social tools to drive employee engagement provides particular opportunities for senior executives to improve role modeling. When people reflect on their behavior, they tend to rely on their own often sketchy perceptions and faulty memories. With many digital technologies, however, people can now track their behavioral footprint—for example, by analyzing conversational threads in microblogs and comparing their actual behavior with the leadership style to which they aspire. Managers at an international insurance company we know did so and found a clear gap between the effect they thought they were creating as leaders and the actual results.

Becoming more responsive

Mobilizing a crowd requires companies to anticipate the crowd’s expectations. Executives can maintain pace and encourage deeper engagement only through transparent feedback and rapid follow-up. We often see companies respond too slowly and erratically, so that employees can only guess what comes next. Radio silence or a prolonged hiatus strongly diminishes any sense of urgency and disrupts the rhythm, or pulse, of participation. Worse, it may spark lingering skepticism. Unleashing collective intelligence through a hive will be more successful if managers think ahead and develop an agile, scrum-like response capability outpacing that of smaller offline programs.

Given the speed of technology’s development, we recognize that digital hives are still an area of fertile experimentation and that new models will evolve over time. What we know already is that the hive’s transparent, inclusive, and egalitarian nature amplifies well-established psychological mechanisms, such as peer pressure and social recognition. Out in the limelight, with clear rules of engagement and a level playing field, people tend to stimulate and encourage others, perform well, and seek recognition. Collective adoption and participation can grow in hives as each one of them becomes a catalyst for change and causes a wider ripple effect throughout the organization.

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