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Saturday, October 31, 2009

Importance of Enterprise 2.0 Connections to Innovation ROI

by Hutch Carpenter

In a recent post on the Spigit blog, Study - Collaborative Networks Produce Better Ideas, I described the research of Professor Ronald Burt. He found that employees who are better connected across the organization generate higher quality ideas than those with limited connections. Wider access to the ideas, knowledge, experiences and judgment of colleagues makes employees stronger in innovation.

I posted this write-up in the Continuous Innovation group on LinkedIn. One person made this observation:


"Need to keep in mind that collaborative networks have little to do with technology. There are certain personality types that keep the organization connected. The proportions of those people in an organization is related to the specific corporate culture."


There's a good alternative perspective. That really, the same people that connect via collaborative networks are those that would be doing it in an offline world as well. The rest of the employee population likely continues to work in a more insular world.

I see it differently though. First, I agree that there are people with natural connector personalities. They would span the different parts of the organization no matter what. Anyone think David Armano wouldn't be one of those types?

But not everyone need be an uber connector to see benefits from plugging into a more connected network. My personal experience on sites like Twitter and FriendFeed tells me that everyone benefits from these online social networks. We may not all be uber connectors, but we do increase our degree of connectedness.

The graph below is my concept for how this effect manifests:

Offline vs Online Degree of Connectedness

Assume a population of employees: 25 in this hypothetical example. The blue line is the level of connectedness for employees working the way they have for decades. Your connections tend to be local and departmental, with some tenure you gain a larger informal network. In Professor Burt's terms, most workers are relatively insular in terms of who they access for information and ideas. But some broker connections across different corporate 'tribes'.

The red line represents the level of corporate connectedness for employees including the ability to find others online. To me, this is a no-brainer. Of course people are going to connect with others they wouldn't have otherwise. The number, diversity and depth of connections increase.

The gray zone between the red and blue lines represent that improvement. Some people won't get too much increase. They really are in-person types of connectors. But others thrive in the online environment. They have more specific interests, and didn't know who else in the organization held them. Through the social software, they find more people with interests similar to theirs. Or at least with experience relevant to their interests.

Don't need to be an uber connector there. Just need to be able to make connections.

Next..the ROI math.


The Natural Logarithm Method

Take a look at the graph below. It shows the scatter plot of how ideas were rated for different employees (Y axis). The X axis represents the degree of connectedness for employees, based on actual social network analysis conducted by Professor Burt in his study:

Measuring Innovation ROI from Enterprise 2.0 Connections

The scatter plots show that employees who have a high diversity of connections across the organization provided higher quality ideas. The converse holds true as well.

Regression shows the equation that represents the observations:


Value of Idea = 5.51 - 0.91 * ln(Level of Network Constraint)


The equation shows that, on average, every increase in a person's level of connectedness with different parts of the organization produces higher quality ideas. Note the natural log curve. The effect increases as connectedness improves. What I like about that is that the benefits increase, even if the work of increasing employees' network diversity gets more difficult as you try to connect those last holdout groups.

Extrapolate the effect out to the organization at large. Raising the overall level of workforce connectedness will have a salutary effect on the average quality of ideas generated. In an era of ever higher levels of market volatility, improving the organizational 'innovation IQ' is a critical aspect of surviving and thriving.

One thought on the accelerating benefit - increased idea quality - as connectedness improves. In a large population, would this have any correlation to network effects?

It's not perfect, but Professor Burt's analysis demonstrates a strong ROI basis for leveraging social software to increase the diversity of connections.



Hutch CarpenterHutch Carpenter is the Director of Marketing at Spigit. Spigit integrates social collaboration tools into a SaaS enterprise idea management platform used by global Fortune 2000 firms to drive innovation.

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2 Comments:

Blogger Venessa said...

Nice post. I'd like to build on that a bit by offering my thoughts about how the power and scope of social networks, combined with human capital metrics, might be used to facilitated shared creation and innovation: http://bit.ly/22Ptxo

10:32 AM  
Blogger Jak said...

So being judged increases innovation? I can definitely see that. It might also perhaps reduce some of those crazy, out there ideas that can be molded into genius.

5:53 PM  

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