Economic Downturn: Putting a Dollar Figure on the Value of Enterprise 2.0 for Companies

The times they are a-changin'. In a space of weeks, the global economy has slowed. Employees are concerned about their jobs, companies are preparing for negative growth. Everyone's in a tough period right now.

For the Enterprise 2.0 industry, this is indeed the time to demonstrate the business case of social software. On the FASTForward Blog, Jevon MacDonald penned a great piece: In uncertain times, Enterprise 2.0 takes the stage. Included in the post is a quote by Enterprise 2.0 consultant Thomas Vander Wal:

The interconnections and interactions between people spark great value, but the more costly traditional tools have missed out on this great reservoir of value, but the newer lower cost solutions offer these gems up wonderfully with a little coaxing.

Enterprise 2.0 improves three critical components of companies' success: innovation, productivity and responsiveness. During times of economic stress, productivity rises to the top in terms of priorities...

Do more with less.

In that spirit, we want to discuss a fantastic academic paper that studies the effects of IT, multitasking and social networks on companies. Specifically, the researchers studied a multi-office, geographically dispersed executive recruiting firm.

The results are eye-opening, and provide empirical evidence for the power of social software to improve productivity.

How to Do More with Less

The study Information, Technology and Information Worker Productivity was produced by researchers at MIT, NYU and Boston University. The team evaluated over 125,000 emails, detailed accounting data, completion rates and team membership for over 1,300 placement projects, and surveys with most employees. What were they looking for? "The fine-grained relationships among information flows, IT use, and individual information-worker productivity."

The researchers found statistically significant relationships among social networks, technology use, completed projects and revenues for project-based information workers. Here are the four findings of the research team:

1. The structure and size of workers' communication networks are highly correlated with their performance
2. IT use is strongly correlated with productivity
3. Productivity is greatest for small amounts of multitasking, but too much multitasking reduces productivity
4. Asynchronous information-seeking promotes multitasking

The full report includes many, many nuggets of valuable information. We want to focus on two outcomes of their research that put a dollar figure on the value of social software.

Putting a Dollar Figure on the Value of Social Software

A key finding of the researchers was this:

A one standard deviation increase in betweenness centrality in the email network is associated with approximately $76,000 greater revenue output per year controlling for human capital, demographic variables and use of the ESS system.

A one standard deviation increase in network diversity is associated with approximately $83,000 greater annual revenue output.

What this report gives us is a dollar figure for the value of social software inside companies! The research computed significant productivity gains for workers with superior positions on two attributes:

• Betweenness centrality
• Network diversity

Both of these attributes are core to the value of social software. But let's define them first, because the terms sound daunting.

Betweenness centrality: What's the probability that an individual will fall on the shortest path between any two other individuals? This attribute measures the strength of an individual's connections to other employees. Sort of a probability-based LinkedIn.

Network diversity: Measures the degree to which an individual's contacts are connected to each other. If your social network consists of people who all know each other well, your network diversity is low. If your social network has a lot of connections that don't know one another, your diversity is high.

Let's examine one of the attributes, network diversity. The $83,000 improvement in revenue production referenced above was for a one standard deviation improvement relative to the mean. Graphically, here's what that means:

Employees who connect to a wider range of their colleagues generate higher revenue for their companies. In this case, an employee in the 84th percentile of network diversity delivers $83,000 more in revenue annually than average. Why?

If all you ever see is the same perspective from your cohorts, it can be hard to figure out solutions to  problems that are new to you. As the researchers note in their study:

Information in local network neighborhoods tends to be redundant

Soliciting input from a greater array of co-workers brings new ideas, information and perspectives to an employee. This becomes a competitive differentiator, and a basis for better collaboration across the enterprise. The question, as always, is how to find and build relationships with others who can help beyond your normal internal contacts?

Now here's where this becomes an interesting opportunity for companies. The results calculated for these high-performing employees were based on their email social networks. In other words, these employees' email contact lists present an after-the-fact look at how they're connected.

For an employee looking to improve her social network, it's hard to use email in this way. A random email over-the-transom will do little to foster a new, vital connection internally. It lacks context.  Unfortunately, most systems inside organizations are ill-suited to provide the context for what co-workers are working on, as Thomas Vander Wal notes above.

As a result, diversifying an internal social network is slow, and likely stagnant, for all but the most proficient workers.

So how does one break out of the small, insular social network?

At Connectbeam, our application lets workers identify their expertise, interests and projects. It aggregates the workstreams of employees, providing a way to find the information that colleagues generate. Colleagues that an employee already knows well, as well as those beyond her normal social network. Suddenly, there's a better awareness of others' work and context for reaching out to them.

If you're a statistical type of person, the objective is to move the average of the normal distribution to the right (increase average production per employee) in the above graphic, and to tighten up the curve (everyone enjoying the fruits of network diversity in a similar way).

Check out our product page for more information on how we improve both network diversity and betweenness centrality.

And for companies looking to get more done with less in these tough economic times, recognize that social software provides a solid, statistically based way to improve productivity.

Comments

[Daniel J. Pritchett]

I perked up when I got to the part about network diversity and local maxima. The first things that came to mind were my burgeoning networks of outside contacts on social media platforms.

Do you have data on the effect of increased connectivity with workers outside of the enterprise? I'd like to think that when I hit the social networks I'm cross-pollinating ideas and bringing in new best practices but in reality most of the people I'm talking with aren't really doing the same work I do.

I guess it's good that I don't spend all of my time talking to other business intelligence engineers. I already hear from plenty of those at the office.

[Hutch Carpenter]

No data specifically Daniel. It seems the same lessons apply regarding the diversity of the network though, internally or externally. Both are sources of new info, opinions and perspectives.

[Weedogroup]

Thanks for a very informative read

[john]

Do you have data on the effect of increased connectivity with workers outside of the enterprise? I'd like to think that when I hit the social networks I'm cross-pollinating ideas and bringing in new best practices but in reality most of the people I'm talking with aren't really doing the same work I do.

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[Hutch Carpenter]

Hi John - I don't have any data on external social connections right now. If I come across anything, I'll email you. As for people not doing the same work as you, I'll bet they're out there. One recommendation for finding them - use key word searches (e.g. on Twitter and Del.icio.us tags). You may not know the people you find yet, but you can follow them and engage them in conversations as opportunities allow.

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