VCs have invested millions in Social Networking companies like Friendster, LinkedIn and ZeroDegrees. Even more recently a new class of company that supports Social Network Analysis (SNA) like Spoke or Visible Path have been the beneficiaries of VC largess. So what is all the hoopla about Social Networks and why should you care? What does Social Networks or SNA have to do with collaboration?
Social Networks, or "trusted networks" are the new hot technology for 2003-2004. VC's are investing in them, and they are a natural way for a social animal, like humans to do some things. Like refer friends to a movie, a restaurant or each other. It is also a good way to find others with common interests. This can have a business twist to it in the procurement part of supply chain management. In collaboration trust is critical, and who are you going to trust more than your friends, or the friends of your friends, or the friends of your friends' friends.. you get the idea! Social networks seems like a reasonable outgrowth of collaboration. Lets hope it is not too much of a fad and is taken to far, or that the vendors promise too much.
It’s the Network, Stupid!
What are social networks? Well, chances are if you frequent the Internet you are part of one. Essentially Social Networking is the ability of Internet-based technologies to greatly enhance the efficiency of acquiring knowledge about your friends, colleagues or acquaintances.
Online social networks are webs of relationships that grow from computer-mediated discussions. The webs grow from conversations among people who share a common affinity (e.g., they work for the same company, department, or in the same discipline) and who differ in other ways (e.g., they are in different locations, keep different hours, specialize in different disciplines, work for different companies). When the people are distributed across time and space, then these conversations need to take place online, over an intranet or private internet forum.
For example, with Friendster if you find a friend in the system (which is highly likely because that is usually how you get asked to join one of these networks) you can look at their friends and imply that since you both like your first friend that you might have things in common or like each other. So rather than waiting for a cocktail party where you might get introduced to this person by your friend, you can ask for an online introduction and speed the process along. Friendster happens to be great for people in their 20s and 30s who may not like the bar scene and want some kind of filtering, to hook up.
It is interesting that social scientists that have studied these networks have found that:
• Most people do not know much about their own social network (the average person knows about 500 people)
• That the path chosen to a target (date, mate or job) is not necessarily the most efficient path, and traversing social networks is an en efficient process
• Granovetter, and others have shown that the more degrees of separation there are, the less value the path has for an action to happen.
Stories and Scenarios
Let's look at a scenario: Person A is a salesman at company XYZ, and he is looking for some help on a difficult technical proposal for a prospect. Being an outgoing guy, he normally would let his fingers start dialing and work through is network to find the expertise he needs to finish his proposal. But using social network technologies he is able to identify through these tools that his colleague B knows colleague C, who knows Expert D. Using the SN tool A persuades B for an introduction to C and C for an introduction to D. So far so good, but A has had to rely on the good graces of B&C and may in fact "owe them one" for this introduction. In addition, in some SN's there may be a burden placed on the "introducer" and doing an introduction (of any kind) might obligate B or C to some additional action (like getting feedback on the A-D interaction, or to put A's problem into a context that D would understand). But even without worrying about those issues, once A gets to D and makes his request, D might legitimately ask "what's in it for me?"
A real life example of this occurred a few months ago through LinkedIn, a business-oriented SN, I am a member of. I got a request from someone I knew that someone I did not know wanted to talk with me. In this case it was a junior member of a venture capital firm. Intrigued, I said OK, and was contacted by e-mail by this person, who quickly turned me over to a more senior person at the VC firm that was considering an investment in a company in an area that CS has expertise in (collaboration). Once the introduction was made, the VC started asking questions about the market, their firm, potential competitors, etc.
Having been introduced by a friend, we tried to answer the VC's questions, but since our knowledge and experience are what we charge for, we did not want to give too much away, and my colleagues and I agreed to bound the interaction to about an hour's worth of our time, since the VC was not paying. We thought that this would give the VC a good idea of our expertise and they might want to use us for something later (but we were not holding our breath). The VC followed up with additional e-mails and phone calls, and one of my colleagues and I ended up spending several hours of unpaid time looking at this start-up for the VC and giving them our recommendation. If this request had come by e-mail, or phone (more normal channels) we probably would have talked to them about fees within the first few minutes, bounding the interaction that way. My point here is that there is benefit in the SN for the "requestee", but not always for the "answerer." For SN's to create value, they have to create value for both sides of the equation.
Social Network Analysis (SNA)
SNA tools by contrast allow you to analyze social networks. They provide "sociaograms" or maps of the interactions of various individuals in a company, community, value network, or other type of organization. Up until a few years ago SNA, was a small, but interesting academic discipline, which has grown 10X because of sudden interest over the last few years. One of the values of this type of analysis is you can see who is talking, interacting, collaborating with who, and sometimes the pattern of interactions is indicative of a problem, lack of information flow (bottleneck), or other situation that needs to be addressed for the health of the organization.
The contention of many of the SNA vendors is that their tools, in analyzing a social network can provide you with information that allows you to take some new action. Since all relationships, interactions or collaborations are based on trust, and trust requires some type of interaction or information in context, then a logical inference would be that SNA tools allow you to identify and improve relationships. This is one way to create value. SNA tools and technologies are a bit more straight forward in that they can provide value to several areas of the business: HR, Sales, Support, etc. Some vendors like Entopia, Visible Path and Spoke, have tied these tools to SFA, CRM, BI/Competitive Intelligence or Help Desk and Support tools to add value. Stanley Wasserman, the chief scientist at Visible Path claims that through an API they are able to plug into salesforce.com and improve close rates by 22%, cut deal cycle times by 27% and increase the size of the deals sales people were working on.
Another way to add value is for consultants, with expertise in SNA to come in, and using a variety of tools (iFlow, Pajek, etc.) analyze various types of organizations and then based on the patterns of interactions, draw some conclusions. Figure 1 shows the interactions within a corporate R&D group.
Figure 1: SNA of a Corporate R&D function (From Rob Cross http://www.robcross.org/.)
The Ties That Bind
The interactions between individuals in social networks are often characterized as "ties" and there are: strong ties, weak ties, and bridging ties, to indicate the type of relationship there is between the two individuals in the network. In a famous paper by Mark Granovetter of Stanford University called "The Strength of Weak Ties" he showed that you can reach more people through distant friends and acquaintances than you can with close friends. With close friends you have "strong ties" you interact with each other a lot, may think alike, or have similar attitudes and opinions. Your friends of friends or acquaintances are much weaker ties in your social network, and allow you to come into contact with a greater diversity of people than your strong tie, friends would. In a variety of research studies, it has been shown that it is best to look for a date, mate, or work, through these networks with weak ties.
Ron Burt, another social network analyst, looks at the areas between networks, which he calls "structural Holes." In his classic paper called Structural Holes: The Social Structure of Competition Burt states that networks with "holes" -- that is, unbrokered connections -- present the most opportunity. A successful actor is one with ties to many points in the network who can uniquely fill one or more of those holes. To that end, Krebs -- who is writing a book on his experiences with social networks and business organizations -- plans to mine Amazon, map out the communities of interest relevant to his themes, and tune his presentation to optimally broker among them.
The Small World Problem
Many of you have played the Kevin Bacon game online or seen the play "Six Degrees of Separation." The play title alludes to some pioneering research by Stanley Milgram at Harvard in the 1960's that determined that there were about 6 people between you and anyone else in the world. Today, Columbia University is continuing this research but looking at how the Internet expedites social networks. You can participate in this research at: www.smallworld.columbia.edu.
Valdis Krebs, a well known social network analyst believes that Metcalfe's Law (network value is N2, for N users) and Reed's Law (network value is 2N, for N groups) are great in theory, but of limited practical benefit:
"The six-degrees small world is a fallacy. The small world is two or three steps. I, for example, am supposedly six steps from Madonna. But if I want a backstage pass, it's not going to happen. On the other hand, if I know you, and you know Madonna's manager, there's a chance it will. The practical limit is about three hops. After that, information, for the most part, doesn't travel. We can form 2 N groups, but I can belong to only so many".
Show Me The Money!
So what is the value of these Social Networks and SNA tools? Why have all of these venture capitalists pumped all this money into these start-up companies? Howard Reingold, a pioneer in the field on online communities (see his latest book called "Smart Mobs" http://www.smartmobs.com/index.html) believes that thoughtfully planned and knowledgeably implemented online social networks can enable an organization to:
1. Create an early warning system. 2. Make sure knowledge gets to people who can act on it in time. 3. Connect people and build relationships across boundaries of geography or discipline. 4. Provide an ongoing context for knowledge exchange that can be far more effective than memoranda. 5. Attune everyone in the organization to each other's needs – more people will know who knows who knows what, and will know it faster. 6. Multiply intellectual capital by the power of social capital, reducing social friction and encouraging social cohesion. 7. Create an ongoing, shared social space for people who are geographically dispersed. 8. Amplify innovation – when groups get turned on by what they can do online, they go beyond problem-solving and start inventing together. 9. Create a community memory for group deliberation and brainstorming that stimulates the capture of ideas and facilitates finding information when it is needed. 10. Improve the way individuals think collectively – moving from knowledge-sharing to collective knowing. 11. Turn training into a continuous process, not divorced from normal business processes. 12. Attract and retain the best employees by providing access to social capital that is only available within the organization. SNA can provide quantitative support for the kinds of management decisions now made solely on intuitive judgment. Here's the scenario:
"OK, Jon, you're working in marketing, and we've mapped out your personal network. You're fine within marketing, but you're not linked well enough to sales and engineering. We think that's important. Your professional development goal next year is to forge new connections with engineering and sales."
Social Networks and the tools that analyze them are very interesting. They give us a view of something that was previously unseen, and in many ways give us unique information about both formal and informal networks we participate in. Today, some of the SNA tools can be used to identify HR issue, or look at how well groups in a conglomerate are working together after a number of mergers. And just like collaboration, these tools support the fact that these networks are built on trust, and without that there would be nothing to analyze. Some early vendors in this space are (wisely) trying to apply SNA tools to more traditional networks in sales and support to derive additional value for the enterprise. But value for SN and SNAs is still somewhat murky...it is easy to see the great potential these tools and networks have, but not always easy to monetize them. We at CS will keep a close eye on this technology and developing market and will report to you again in the near future.
David Coleman is the Founder and Managing Director of Collaborative Strategies. This column is his ideas and comments and do not necessarily represent the views of all of the analysts at Collaborative Strategies.
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