Thursday, July 31, 2008

Innovation means Increasing Diversity of Women on Boards

New Catalyst study reveals still no women in many Canadian boardrooms

The familiar image of men sitting around a boardroom table is no longer representative of the winning business model, according to the latest 2007 Catalyst Census of Women Board Directors of the FP 500: Voices from the Boardroom.

In fact, the study suggests that the persistent under-representation of women on corporate boards and the extremely slow pace of change might have disturbing implications for company performance and governance in Canada.

The 2007 Catalyst Census found that women represent 13 percent of corporate board seats in the FP500, an increase of only one percentage point since 2005. Over 40 percent of FP 500 companies in Canada have no women directors on their boards.

“The tendency for boards to recruit from the same narrow pool of candidates acts as a barrier to women seeking board seats,” said Catalyst Vice President North America, Deborah Gillis. “Board chairs, CEOs and corporate governance chairs are in unique positions to jump-start the process and drive change. By championing gender diversity and looking beyond the C-suite and FP 500 boards to find qualified women directors, they can provide a better, more transparent environment in which Canadian businesses can succeed.”

Additional key findings from the study support casting a wider net in order to increase women’s representation in Canadian boardrooms.

* Over 20% of vacant board seats and 30.5% of board seats in public companies were filled by individuals already serving on a corporate board.

* Women were “recycled” in public companies at greater rates than their male colleagues – 40% of female directors as compared to 28.9% of male directors sit on multiple FP500 boards.

Previous research from Catalyst shows that, on average, companies with more women on corporate boards financially outperform those with the fewest. The women directors we interviewed told us that enhancing gender diversity at the board level raises the quality of discussion around the table. This has the potential to yield real improvements in the overall quality of governance which, in turn, will be reflected in company performance. Yet, despite this compelling business case for more women on boards, the pace of change is frustratingly slow.

To understand why, Catalyst interviewed close to 60 FP500 women board directors to understand their perspectives on the slow pace of change. They responded that the positions, opportunities and networks which have been so vital to their own success are still not available or accessible to many women in corporate Canada. They also noted that while talented potential directors exist outside the C-suite, recruiters seeking new directors usually return to this group of “usual suspects” where women’s representation continues to be low.

Although progress is slow, the Census study did reveal small signs of progress:

* The number of companies with multiple women directors increased by 2.5 percentage points since 2005 to 28.5%.
* Women’s representation as board chairs increased 1.3 percentage points since 2005 to 3.4%.
* The percentage of key public company board committee chairs held by women rose one percentage point to 6.8%.

The study outlines a few ways that companies can broaden their search for potential candidates:

* Demand a diverse slate of candidates.
* Update and create skills matrices to determine what competencies are currently represented on the board, and what other skills are needed.
*Search out candidates who will fulfill a company’s competency needs in various industries.

Look beyond the C-Suite (i.e. COO, CEO, CFO) for qualified candidates with track records in other senior level positions.

CIBC is the study’s lead sponsor. McKinsey & Company Canada and Pricewaterhouse Coopers LLP are the supporting sponsors.

Wednesday, July 30, 2008

Is Canada Simply a Mirror of the USA in Innovation Decline

I read today a very thought provocative article published in the NY Times by David Brooks. I have provided the content below for my blog today, with additional commentary on the parallels in Canada's innovation status and educational excellence - back to the basics that is critical to economic sustainability and innovation competency development.

Why did the United States or Canada become leading economic powers of the 20th century? The best short answer is that both nations strove to make the world and their country's a better place. Both nations had a strong commitment to core values to transform lives, and create a stronger future. Unequivocably, the focus was on: a an unparalleled commitment to education, hard work and economic freedom.

Between 1870 and 1950, the average American’s level of education rose by 0.8 years per decade. In 1890, the average adult had completed about 8 years of schooling. By 1900, the average American had 8.8 years. By 1910, it was 9.6 years, and by 1960, it was nearly 14 years.

As Claudia Goldin and Lawrence Katz describe in their book, “The Race Between Education and Technology,” America’s educational progress was amazingly steady over those decades, and the U.S. opened up a gigantic global lead. Educational levels were rising across the industrialized world, but the U.S. had at least a 35-year advantage on most of Europe. In 1950, no European country enrolled 30 percent of its older teens in full-time secondary school. In the U.S., 70 percent of older teens were in school.

America’s edge boosted productivity and growth. But the happy era ended around 1970 when America’s educational progress slowed to a crawl. Between 1975 and 1990, educational attainments stagnated completely. Since then, progress has been modest. America’s lead over its economic rivals has been entirely forfeited, with many nations surging ahead in school attainment.

This threatens the country’s long-term prospects. It also widens the gap between rich and poor. Goldin and Katz describe a race between technology and education. The pace of technological change has been surprisingly steady. In periods when educational progress outpaces this change, inequality narrows. The market is flooded with skilled workers, so their wages rise modestly. In periods, like the current one, when educational progress lags behind technological change, inequality widens. The relatively few skilled workers command higher prices, while the many unskilled ones have little bargaining power.

The meticulous research of Goldin and Katz is complemented by a report from James Heckman of the University of Chicago. Using his own research, Heckman also concludes that high school graduation rates peaked in the U.S. in the late 1960s, at about 80 percent. Since then they have declined.

In “Schools, Skills and Synapses,” Heckman probes the sources of that decline. It’s not falling school quality, he argues. Nor is it primarily a shortage of funding or rising college tuition costs. Instead, Heckman directs attention at family environments, which have deteriorated over the past 40 years.

Heckman points out that big gaps in educational attainment are present at age 5. Some children are bathed in an atmosphere that promotes human capital development and, increasingly, more are not. By 5, it is possible to predict, with depressing accuracy, who will complete high school and college and who won’t.

I.Q. matters, but Heckman points to equally important traits that start and then build from those early years: motivation levels, emotional stability, self-control and sociability. He uses common sense to intuit what these traits are, but on this subject economists have a lot to learn from developmental psychologists.

I point to these two research projects because the skills slowdown is the biggest issue facing the country. Rising gas prices are bound to dominate the election because voters are slapped in the face with them every time they visit the pump. But this slow-moving problem, more than any other, will shape the destiny of the nation.

Second, there is a big debate under way over the sources of middle-class economic anxiety. Some populists emphasize the destructive forces of globalization, outsourcing and predatory capitalism. These people say we need radical labor market reforms to give the working class a chance. But the populists are going to have to grapple with the Goldin, Katz and Heckman research, which powerfully buttresses the arguments of those who emphasize human capital policies. It’s not globalization or immigration or computers per se that widen inequality. It’s the skills gap. Boosting educational attainment at the bottom is more promising than trying to reorganize the global economy.

Third, it’s worth noting that both sides of this debate exist within the Democratic Party. The G.O.P. is largely irrelevant. If you look at Barack Obama’s education proposals — especially his emphasis on early childhood — you see that they flow naturally and persuasively from this research. (It probably helps that Obama and Heckman are nearly neighbors in Chicago). McCain’s policies seem largely oblivious to these findings. There’s some vague talk about school choice, but Republicans are inept when talking about human capital policies.

America rose because it got more out of its own people than other nations. That stopped in 1970. Now, other issues grab headlines and campaign attention. But this tectonic plate is still relentlessly and menacingly shifting beneath our feet.

Tuesday, July 29, 2008

SaaS Innovations Heating Up: The End of Software as we know it!

Bill Gates, Founder of Microsoft, stated in 2005:

"This coming 'services wave' will be very disruptive…Services designed to scale to tens or hundreds of millions will dramatically change the nature and cost of solutions deliverable to enterprises or small businesses.”

SaaS Market Growth Trends

A November 2007 survey conducted by THINK strategies and Cutter Consortium found that the majority (53.8%) of SaaS survey respondents are utilizing horizontal SaaS applications, over a fifth (21.5%) are employing industry-specific SaaS solutions and another quarter of the respondents are using both. They also found nearly three-quarters (72.3%) of the people who responded are using SaaS solutions to fill unmet needs and the remainder are swapping out their legacy applications for new SaaS solutions.

As customers become more receptive to SaaS alternatives, the number of SaaS players is exploding. This ‘gold-rush’ effect is creating greater competition and confusion in the market as customers try to weed through a proliferation of SaaS solutions.

And, as customers become more knowledgeable about SaaS alternatives, their expectations are also rising as they attempt to make more strategic sourcing decisions to control the number of vendors they must manage and ensure that their SaaS solutions can easily integrate together.

In response, the SaaS market is also undergoing a maturation process that resembles the shift which occurred in the traditional software industry.

SaaS Platform Strategies

Today’s SaaS platforms are built on a combination of multi-tenant architectures, third-party integration technologies and cooperative business partnerships, or ‘ecosystems’. Just as the legacy application leaders of the past—such as Microsoft, Oracle and SAP— used software suites to address a greater share of their customers’ application requirements, so are SaaS companies today seeking to win a greater share of the rapidly growing market via their platform strategies.

These platforms are aimed at aspiring SaaS vendors and user organizations. The aspiring SaaS vendors can leverage a SaaS platform to accelerate their development processes, and reduce their costs and time to market. By aligning themselves with an established platform provider, SaaS companies can also overcome customer concerns regarding integration issues.

User organizations can utilize these platforms to develop their inhouse applications so they can interoperate with pre-existing applications. A quarter (24.6%) of the respondents to Cutter’s SaaS survey reported that they are selecting SaaS providers that offer platform capabilities. Nearly a third of the respondents (35.4%) said they are selecting SaaS companies that offer platform and point solutions.

Promising Early Stage SaaS Market Leader - Corent Technologies

One of the early stage market leaders to watch is Corent Technology which is an innovative developer of enterprise-scale software solutions with a focus on the Software as a Service (SaaS) model. Corent recently won the award for Best Funding Opportunity, and the People's Choice award at the Harvard Entrepreneurs Conference’s Tech Coast Angels Fast Pitch event. It is the first time that an early stage company has been recognized by two award recognitions in the prestigious Harvard and Tech Coast Angels Pitch Event.

Unlike some early stage companies, Corent has a very strong leadership team with experience from market leaders like HP, IBM, Sun Microsystems, AT&T, Open Text, Northrop Grumman, Actel, and Jamcracker.They have taken a very focused approach to developing their go-to-market offerings and have positioned in the market three key offerings:

SaaS-Engine™ - Corent’s SaaS enabling software at the heart of every application. SaaS-Engine™ provides a wide range of functions and rich capabilities that form the core of every Corent SaaS solution developed. This allows for the rapid, efficient development, deployment and maintenance of applications that meet the need for robust, reliable, scalable, flexible, service oriented offerings.

SaaS-Factory™ - People, methodology and tools to build custom SaaS offerings powered by SaaS-Engine™.

SaaS-Powerplant™ - The ability to deliver the application as a service to end users; encompassing the servers, storage, bandwidth, operational management and support necessary to provide the services. Corent’s SaaS-Powerplants are operated as a collaborative service with our datacenter infrastructure provider partners.

Corent Technologies will be a much sought after platform as companies continue to recognize the cost efficiencies of having a robust SaaS platform and software toolkits to reduce time to market for new applications. Early clients include Boeing, and Micron Technology.

In a recent interview with the CEO, Feyzi Fatehi in San Francisco, I asked him what were his current go-to-market challenges. Here are his comments: The first operating growth hurdle like most early stage Software companies is attracting Smart Money from Smart Investors. There is always money in the valley but is it the right money. This is what we need to be careful with. The second hurdle is securing rapid growth in the sales pipeline with strong customers and channel partners. The third hurdle is remaining focused on the growth strategy due to the constant demands on the most precious resource which is time. We will all see this as a worthwhile journey as long as we are surrounded by positive and energy giving talent - these plays are hard enough - being surrounded by the right talent and partners - we have the opportunity to transform the software industry further with our SaaS know-how.

Feyzi and his leadership team recognized the growth in the SaaS market early and have spent the last four years developing a robust SaaS platform and SaaS toolkits for the SaaS Prime Time Tango. Check them out - based on my venture capital experience and early stage growth acceleration and deep knowledge of the SaaS and on demand market place, Corent Technologies is a company that HP, SAP, Oracle, IBM, SunGuard, Unisys, should all have on their radar screens for acquisition.

Additional SaaS Best Practice Sources

For more information on SaaS, check out the SaaS Showcase Best Practices Portal and also pick up a copy of the book that the Founder of WebEx, Subrah Iyar and I recently wrote called: Why Buy The Cow? which provides case studies and lessons learned from leading SaaS CEOs from Lulu, NetSuite, Right Now Technologies, WebEx, and others.

Monday, July 28, 2008

Innovation can benefit from Chaordic Organizational Design Principles.

Creating the future organization based our the knowledge intensive economy that we are living in requires a deeper understanding of human connections and human networks. Charodic Organizations provide some good insights of ways to create new meanings and a stronger sense of purpose in our businesses.

What is a Chaordic organization?

* Are based on clarity of shared purpose and principles.
* Are self-organizing and self-governing in whole and in part.
* Exist primarily to enable their constituent parts.
* Are powered from the periphery, unified from the core.
* Are durable in purpose and principle, malleable in form and function.
* Equitably distribute power, rights, responsibility and rewards.
* Harmoniously combine cooperation and competition.
* Learn, adapt and innovate in ever expanding cycles.
* Are compatible with the human spirit and the biosphere.
* Liberate and amplify ingenuity, initiative and judgment.
* Are compatible with and foster diversity, complexity and change.
* Constructively utilize and harmonize conflict and paradox.
* Restrain and appropriately embed command and control methods.

Learn more about chaordic organizations?...

If you do not have a copy of Dee Hock's book, One From Many (or The Birth of the Chaordic Age), please consider reading an outline of One From Many to glean some of the major ideas and wisdom discussed therein.

In summary, the writer of a book review of The Birth of the Chaordic Age states Hocks claim that "We live in such a complex world, that our relationships, too, will be too complex to allow agreement much beyond intent."

Consequently, Hock recommends we need to begin to explore things

1. as they were;
2. as they are;
3. as they might become; and
4. as they ought to be.

And we need to carefully discern old assumptions and beliefs that are now false or no longer serve us.

Chaordic Leadership

Leaders of chaordic organizations can encourage grassroots innovation by knowing how to wisely view relationships, communication, motivations, results, diversity, letting go, etc. Learn more about chaordic leadership ...

Chaordic Design

The design of a chaordic organization begins with deep questioning. "If anything imaginable were possible, if there were no constraints whatever, what would be the nature of an ideal institution to accomplish our purpose?" Learn more about the chaordic design process ...

Visa's purpose was to "create the world's premier system for the exchange of value." How can we state our shared purpose in a similarly powerful way?

The first step: Develop a Statement of Purpose

"The first step is to define, with absolute clarity and deep conviction, the purpose of the community. An effective statement of purpose will be a clear, commonly understood statement of that which identifies and binds the community together as worthy of pursuit. When properly done, it can usually be expressed in a single sentence. Participants will say about the purpose, 'If we could achieve that, my life would have meaning.'"

Thursday, July 24, 2008

Social Lending: A New Form of Disruptive Innovation in Financial Services

What is Peer To Peer Lending All About?

‘Peer-to-peer lending is a means by which borrowers and lenders may transact business without traditional intermediaries, such as banks. The process may include other intermediaries who package and resell the loans – examples include Prosper and Zopa – but the loans are ultimately sold to individuals or pools of individuals. An enabling technology for peer-to-peer lending has been the Internet, which connects borrowers with lenders, for example through an auction-like process in which the lender willing to provide the lowest interest rate “wins” the borrowers’ loan’. Other leading models striving for foothold in Canada is Community Lend.

Social Capital and Lending is not New

Whereas it has been an Ancient Custom in this Kingdom for Artists to Meet together and unite themselves into Society (But more especially for those who follow any Art or Mystery) to promote Amity and true Christian Charity…’ (Rules of the Second Mechanics Society, Plymouth, 1794 as cited in Gorsky, 1998).

Friendly societies originated in Britain in the 1630s and 1640s. They were an evolution of the centuries old communal organizations of gilds and although they were similar to free masonry societies, members of friendly societies were more likely to be wage earners or artisans rather than merchants or professionals.

By the early 1700s friendly societies became better established and there were increasing trends towards institutionalisation at a local level through rules and charters and at a national level through the Friendly Societies Act of 1793, which aimed to grant various privileges in return for registration (Gorsky, 1998).

During the nineteenth century, friendly societies experienced exponential growth in membership and an increasing trend towards affiliated societies with multiple lodges. Membership in 1793 surged from 600,000 to 4 million in 1874 becoming the most well attended voluntary associations after churches (Beito, 2000).

Friendly societies membership was overwhelmingly working-class and although friendly societies did have various functions, the vast majority aimed to insure against sickness and death (Eden, 1994).

Similarly, one of the three rules of a friendly society holding meetings in a Derbyshire village pub recorded in 1736 the purpose of the society as follows:

And to every one that shall belong unto it after they have been in it one whole year, if sickness should come on them they shall have given unto them three shillings a week so long as it shall continue on them, and if their sickness be judged to be incurable they shall have two shillings a week while they live, and at their death shall have twenty shillings for to bury them if so required, and every member or at least those that are bidden shall convey their brother's corpse to the grave, & upon neglect of not coming, notice being given them, they shall forfeit sixpence to the box without good & just reasons be given to the Master and Wardens and they approve thereof’ (as cited in James, 2001).

Consequently, friendly societies had two main purposes – that of mutual support and financial assistance. The inseparability of these criteria is summarized by the mission statement of the Fraternal Aid Society to provide; ‘for mutual moral and material assistance’ (as cited in James, 2001).

Growth of Social Lending in Modern Times

Social Lending and a more general interest in philanthropy have in recent years seen a remarkable growth in interest. Social Lending schemes are in the process of constructing new ways of using and interacting with financial services.

According to Gartner Group, "Social banking platforms will capture 10% of the market for retail lending and financial planning. 10% of bank's revenues from retail payments will be supported by Competitors such as PayPal. Banks will shart shutting down their full-service mobile banking channels, and centralized retail core banking applications will cease to exist in at least 20 percent of banks worldwide."

Importantly, the re-emergence of Social Lending is a direct response to social trends and a demand for new forms of relationship. Because Social Lending schemes embrace the social trends that are definitional of our age, they are likely to become increasingly important in the future. Such newly emerging types of financial relationships may seriously rival more traditional mainstream financial services and prompt a need to re-examine the model of traditional banking. At the same time, these new business models provide more cost-effective options for them to reduce their risk exposure and focus on more profitable lines of business. In essence, notions of the individual within community, transparency and broader ethicality are fundamental to Social Lending schemes.

Where these are present all the “actors” in the relationship are able to act in “good faith”, where not, as is generally perceived to be the case by respondents in this research to more traditional financial services, a merely transactional relationship is developed that a significant number of people will ultimately find unsatisfying.

What is driving the need for these types of P2P lending systems are:

* Home equity used to be the cash management tool for the credit-worthy borrower, and that has really, really dried up. In many ways, Prosper's three-year, 25,000 US$ loan is a pretty good proxy for what people were using home equity for — improving their home, starting a sole proprietorship, college costs and certainly for replacing credit card debt.

* Javelin Strategy & Research is quoted that credit card debt is the main reason people want to use p2p lending. For example, research is forecasting that forecasting P2P lending specifically for credit card balances will grow from 38 billion US$ in 2007 to 159 billion US$ by 2012.

The Social Futures Observatory and Zopa released a study entitled, "Social lending the next Web 2.0 phenomenon."

This study looked at a number of Social Lending players, and used Zopa, the online marketplace where people meet to lend and borrow money, as a case study. Zopa currently has over 200,000 members in the UK. Zopa is based in the UK, while Prosper is currently the social lending leader in the U.S.

The basic idea with social lending is that when you need money, others will pool their funds together and lend them to you at x% interest rate. Prosper uses your credit score to determine your risk rate and then based on that risk rate you bid for the loan with your terms.

People who register as Prosper lenders set the minimum interest rate they are willing to earn and bid in increments of $50 to $25,000 on loan listings they select. In addition to criteria commonly used by institutional lenders, such as credit scores and histories, Prosper lenders can consider borrowers' personal stories, endorsements from friends, and group affiliations.

Borrowers create loan listings for up to $25,000 and set the maximum rate they are willing to pay a lender. Then the auction begins as Prosper lenders can bid down the interest rate. Once the auction ends, Prosper takes the bids with the lowest rates and combines them into one simple loan to the borrower. Prosper handles all on-going loan administration tasks including loan repayment and collections on behalf of the matched borrower and lenders.

What makes Zopa & Prosper popular is the "social" aspect; that is you can post your story about why you need the money. The opportunity to innovate social networking approaches into these types of lending models creates unique stickiness and there is no end of possibilities - the only limit is one's imagination.

Few of these organizations have tapped into the power of MySpace, Facebook and other major social network communities to create community ecosystem experiences... at our firm we expect more creativity to unfold in this sector in the next 12 months.

Report Highlights

On fairness and finances

* More than a third of respondents strongly agreed that the big banks aimed to put customers in debt
* 61 per cent said that the main aim of their bank was ‘to make money for themselves’
*Only 15 per cent thought that the main aim was to provide a good financial service to its customers
* 14 per cent felt their bank’s main aim was to help people manage their finances and a meagre 5 per cent thought their bank’s main aim was to provide a valuable service for society
*Between 43 and 69 per cent of people (depending on which bank they banked with – from a list of high street banks) felt that the interest rate charged on monies borrowed from high street banks was not fair in comparison to the interest rate received on savings and investments.
*Nearly 8 out of 10 people of people who have borrowed on Zopa said that Zopa secures a lower rate of interest than offered by high street banks
* On average, 64 per cent of general bankers said that they had received charges from their principle bank which they felt were unfair or unreasonable

On community, transparency and ethics

* Only 12 per cent of general bankers thought their bank was sufficiently involved in community projects, and more than 3 out of 5 claimed they were unaware their bank had community projects
* Less than 1 in 10 general bankers surveyed were aware of their mainstream bank’s endevours to enable the disadvantaged to gain access to credit, the development of community projects, environmental and entrepreneurial projects.
*The largest proportion of people, 29 per cent, claimed that they were unaware of any ethical policies

Summary Comments

Clearly we are experiencing a resurgence in these types of community driven social lending financing business models - except now we are leveraging web 2.0 or 3.0 technology and the power of social networks. This combination is very powerful and can free-form based on the wisdom of the social network crowd dynamics. The competition in this area will become fierce as companies determine what works and what does not work. Here is a brief summary of some of the players in the competitive landscape that for investors or organizations trying to understand this market need to be aware of.

1.) 1983 Grameen Bank
2.) 2005 Zopa
3.) 2005 Kiva
4.) 2005 Circle Lending - acquired by Virgin (morphed into Virgin Money)
5.) 2006 Prosper
6.) 2007 Lending Club (Face Book)
7.) 2007 Globe Funder
8.) 2008 Quizzle
9.) 2008 Nexx
10.)2008 CommunityLend
11.)2008 GreenNote
12.)2009 iGrin

Any major Retail Banking executive responsible for business strategy and innovation should be doing two key things in this area:

1.) Investing in these business models to offset market share losses; and
2.) Enabling go to market channel models to provide a way of reduced overhead costs, yet also participating in these new business models growth paths

Even smarter executives will focus on (1) and (2)as a combined business model. In terms of the Canadian landscape, if we had to bet on who will get this right first, we would put RBC and TD Capital at the top of the food chain due to their stronger Web 2.0 and Innovation cultural heritage(s).

Organizations like BNS and CIBC have not evolved their leadership talents and expertise yet sufficiently enought in Web 2.0 areas and have been either hit hard by sub debt realities or are known for not being first market movers in their respective local markets. However, what is also clear there is no winner yet in this space in the Canadian market either in the banks having access to P2P social lending Web 2.0 business models to bring to market to their customers, hence, there is tremendous opportunity in 2009-2010 for the Canadian market to pick up its innovation activities in this market.

This is a market that we will continue to watch as new forms of retail banking models like P2P social lending are new forms of disruptive innovation and the future of banking is an exciting industry to be part of.

If you have any questions, please do not hesitate to contact us at

Thursday, July 10, 2008

Social Networks are the Root of Innovation Diffusion: Pioneering Thought Leaders Theory Contributions

When I did my doctoral thesis, I specialized in knowledge and innovation diffusion theories very much based on the roots of social capital theory. Although there is tremendous media coverage on social communities and social networks - the reality is these underpinnings go back literally centuries.

Below are a few highlights down memory lane of major social network contributions that help put in context the importance of community interaction stimulation to foster knowledge innovation and support its diffusion needs for global learning.

What is different now is that the wide adoption and access to the internet has accelerated the speed of knowledge diffusion. The concepts of community, culture, rituals, social networks, or often I like to call them knowledge tribes are rooted fundamentally in the DNA of the human species. The human society is developing a broader sense of inter-connectedness and increasing reliance on networks, peers, friends, and families for decision making. The power of institutions continues to decline, as value cluster networks evolve in reach, depth, and meaning.

There have been dozens of notable contributions from a variety of researchers, academics and practitioners across multiple disciplines (e.g., sociology, anthropology, phsyics, and mathematics.) Outlined below is a summary of meaningful contributions.

Social Network - Thought Leader Theory Contributions

1853, Auguste Comte (1798-1857):
Comte applied structural terms to argue that people within a social system are interconnected, a concept core to much of the research that emerged in the 1930’s concerning social networks.

1908, Georg Simmel (1858-1918):
Simmel offered a structural perspective on the association between individuals that include concepts related to “social circles”. These concepts were refined later by Charles Kadushin (1966) and by Douglas White (i.e., social circle network models).

1923, Jacob Levi Moreno, M.D. (1889-1974):
Moreno is considered the father of sociometry, a term he coined in 1934. His study of social structures likely took shape in 1923. From 1932-1938, Moreno’s work crystallized, due largely to the influence of his research associates Helen Hall Jennings and Paul Lazersfeld. In a book published in 1934 (Who Shall Survive), Moreno described or alluded to many concepts that eventually defined social networks and their analysis.

1932: W. Loyd Warner (1898–1970):
Warner’s involvement in two key research studies highlighted the need for structural analysis, graphical representation and analysis of social patterns to understand the influence of informal links, cliques and relationships. In one, the Yankee City project, Warner and his associates analyzed social stratification in a New England industrial town. In another, a project for Western Electric (1931-1932), Warner and his associates analyzed interactions and relationships across individuals in a bank wiring room.

1937 Alfred Radcliffe-Brown (1881-1955):
In a series of lectures that were not published until the late fifties, Radcliffe-Brown articulated concepts regarding how social relations linked and arranged people in social systems into certain orders. He is credited with as being an early spokesperson for the structural analysis of social networks.

1950, Alex Bavelas:
Bavelas and his colleagues in the MIT Small Group Network laboratory at MIT, conducted research and a series of experiments that shaped concepts related to communication patterns (e.g., chain, wheel, star, all-channel and circle). He is also credited with originating concepts related to the role of centrality within a social network.

1958: Ithiel de Sola Pool and Manfred Kochen:
Pool and Kochen undertook what is now considered pioneering research related to contact networks and the role of influence. Much of this research supported what later became referred to as the “small world” problem. These insights were documented in a manuscript Pool and Kochen authored and circulated for some time before formal publication in 1978.

1965 Harrison Colyar White:
White is a highly regarded thought-leader in the field and perhaps represents the beginning of the more modern age of social network analysis. While at Harvard, White taught what has been considered a memorable course on social relations. Although the course was taught at the undergraduate level, concepts related to social networks had immense influence on students, many of which went on to be leaders in the field themselves.

1967: Stanley Milgram:
Conducted the small world experiment which supported many of the concepts related to “six degrees of separation”, a term that became popularized in a game

1972: Alchian, and Demsetz:
Known for their perspectives on Team production - and that the collective output is greater than the sum of individual outputs, and simultaneously, it is difficult to discover each individual's specific contribution to the group effort.

1973: Mark Granovetter:
Granovetter published a seminal document that examine the influence of weak social linkages between people (“weak ties”). Weak Ties is an evolving concept with reference to job seekers who are more likely to find work from contacts they did not know well. This concept is now applied to social capital as the community, organizations, and individuals begin to work together their connections strengthen, and their social capital increases.

1977: Barry Wellman:
Wellman founded the International Network for Social Network Analysis (INSA) which helped bring a fragmented collection of different disciplines (e.g., sociology, anthropology, psychology, econommics, geography, computer science, education, mathematics and communications) into a more coherent field of study. Wellman also was well-known and respected for his own research which examined interpersonal networks and communities as social networks. His research contributions however have continued and he is widely regarded as a thought-leader today.

1988: Coleman - ("structure of relationships"):
Social capital is defined by relationships and the accompanying access to information, resources, opportunities, and control.

1992: Bourdieu ("stocks of knowledge"):
Bourdieu defined social capital as the sum of resources, actual or virtual, that accrues to an individual or a group by virtue of belonging to a network of more or less institutionalized relationships of mutual acquaintance and recognition. An individual acquires "Stocks of knowledge" as he or she grows up via parents, friends and the resources, assets and advantages that they acquire as they participate in community.

1992: Robert Burt ("structural holes"):
Structural holes are essentially potentially resources or networks; organizations must be willing to actively seek out potential resources, even if they have no previous contact. By filling structural holes, they tap into a wider source of resources.

1992: Langley Keyes ("networking"):
A major attribute of social capital is networking. Networking takes on diverse attributes including: governmental, philanthropic, educations, and often instituions that channel fianncial, technical, political and other rtpes of support.

1993: Cortes ("collaborative time"):
Social capital is a measure of how much collaboration, time, and energy people have for each other, how much time their parents have for their children, how much attention neighbors give to each other's families, what kind of relationships people in congregations have for each other, how much time people in business have for one another, etc.

1993: Harrison White ("social structure and identity"):
White addresses problems of social structure that cut across the range of the social sciences. Most notably, he has contributed (1) theories of role structures encompassing classificatory kinship systems of native Australian peoples and institutions of the contemporary West; (2) models based on equivalences of actors across networks of multiple types of social relation; (3) theorization of social mobility in systems of organizations; (4) a structural theory of social action that emphasizes control, agency, narrative, and identity; (5) a theory of artistic production; (6) a theory of economic production markets leading to the elaboration of a network ecology for market identities and new ways of accounting for profits, prices, and market shares; and (7) a theory of language use that emphasizes switching between social, cultural, and idiomatic domains within networks of discourse. His most explicit theoretical statement is Identity and Control: A Structural Theory of Social Action (1992).

1995: Putman ("social trust"):
Social capital is a measure of social trust in the networks of a community. Strong social networks tend to foster sturdy norms of reciprocity and encourage the emergence of trust.

1995:Putman ("clusters"):
Companies exist in clusters, enjoying the benefits of competitive cooperation by flexibly sharing and subcontracting with each other a pool of specialists, knowledge of the state of the market and the technologies.

1997: Xavier De Souza Briggs ("leverage and social capital"):
Social capital (stored in human relationships, whether causal or close has two purposes - to help communities "get ahead" for social leverage, and to help communities "get by" from a (Social Support). In either case, social capital is only valuable when it connects someone with something new."

2003: Gordon, Cindy ("collaboration commerce"):
Collaboration commerce is a combination of disruptive, and collaboration business models, the integration of new mind-sets, shared values, community, and trust are core to collaboration enablement. Collaboration technologies can help to enable knowledge diffusion but without the social capital and social network foundations, collaboration commerce is weak.

2005: Verna Alle ("value Networks"):
Allee defines value networks as any web of relationships that generates both tangible and intangible value through complex dynamic exchanges between two or more individuals, groups or organizations. Any organization or group of organizations engaged in both tangible and intangible exchanges can be viewed as a value network, whether private industry, government or public sector.

Resulting Groundwork

Until the late 1970’s, the analysis of social networks should be viewed as a very fragmented field of study. Groundbreaking research was often lost or not leveraged by other groups working in parallel at the same time. Fortunately, some efforts were rediscovered decades later by other researchers but in some cases, theories and practices were re-invented (duplicating - but validating - earlier work). Heading from the seventies into the eighties, a transition into what might be called “modern-day” social network analysis, the field has continued to progress and mature as a respected field of study.

Below are several important points articulated between the 1850’s and 1970’s:

* Society can be examined through structural connections between actors (e.g., people or other entities such as organizations and nation states);
* Studying patterns of interaction within social structures can reveal a networks of relationships that join those actors;
* Actors are linked by a web of primary and secondary connections (e.g. strong and weak ties);
* Relationship structures can be visually rendered (e.g., what was once referred to as a sociogram is now labeled a social graph);
* Social structures influence diffusion of information- Certain actors can dominate communication networks (leading to concepts later referred to as “centrality”)
* Social networks can include sub-groups (e.g., cliques, clusters, blocks);
* Social structures are dynamic and continually go through stages of coupling and de-coupling as participants focus on particular activities; and
*Although a network is comprised of relations between two actors, its overall essence can continue indefinitely (e.g., small world concept).

It should be noted that many social network stories we read about today give the impression that they reflect recent developments arising from consumer sites or from technology vendors. In some instances, certain topics are even hailed as original thought (e.g., the social graph).

I think it is important, and respectful, that we understand (and learn from) historical precedents in the field of social network analysis. Much of the ideas and concepts presented today can trace their lineage back to the remarkable work and accomplishments of earlier researchers.

We also strongly recommend to our clients when they are developing their innovation strategies, that they ensure a social capital foundation and social network know-how is integrated into their innovation capabilities. Too many CEOs and senior leaders espouse the value of innovation - yet they have not created cultures where community values are deeply rooted, hence risk taking and knowledge diffusion behaviors can starve the creativity nutrients required to think outside the box and have the confidence and freedom to experiment and continually learn from diverse cultural tribes that make up an organization.

Source Content Recognition:

Mike Gotta wrote a very thoughtful analysis Of Social Networks: Telling Old Stories In New Ways in his recent blog entry which has been used to support this blog entry.

Tuesday, July 1, 2008

Social Networking : Good for Business or Not?

There is no question that right now, Social Networking and Social Mediated Business Models are Hot Hot Hot topics.

At Helix, we don't see any end in sight for creating new business models as companies go inreasingly digitally native. There is a long list of social networking solutions, from: Bebo, Facebook, Friendster, Linked In, MySpace, Neighborhood, Ning, Perfspot, Orkut, etc.

Masses of users are signing up to social network services at an astonishing rate; MySpace alone currently has over 300 million accounts. But even as social networking makes it easier than ever to communicate online in real time, democratizing the Web and deluging cyberspace with information and opinions posted by millions of people eager for ”virtual” conversation, poses many challenges for the business world.

Results of an exclusive MessageLabs survey conducted in September 2007, reveal that approximately 75% of companies said the number of visits their employees were making to social networking sites had increased over the previous six months.

About 60% thought this had damaged productivity; while over 75% believed corporate reputation could be seriously threatened if staff posted negative comments about their organization online.No wonder over 70% of respondents said they were thinking of restricting employee access to social networking sites.

There’s a lot of anxiety around at the moment in companies and many are struggling to get to grips with the full implications of social networking and what it all might mean for their business.

For many organizations, this free flowing, unregulated environment seems a truly intimidating place, the Internet’s answer to a lawless Wild West. With concerns over identities stolen or corporate networks infected with unwanted malware as cyber-criminals hijack social networking for their own malevolent purposes.

Hence, it is not surprising that a number of big-hitting organizations, such as Lloyds TSB and Credit Suisse, are reported to have outright banned employees’ use of social networking sites. The Ontario Government has banned the use of Facebook for its employees, and in recent discussions with their CTO they are planning to reverse this decision, given the enterprise application value of Facebook and recruiting linkages that Facebook is now providing to the marketplace.

But not every business has followed suit. Some see the craze as a gilt-edged opportunity to expand networks of contacts, accelerate business processes, engage with (and listen to) customers more closely, and even identify and recruit high-caliber staff more cost-effectively than previously possible.

Others are adopting a “wait and see” policy or looking to follow an intermediary path between unfettered access and blanket ban.

Recent research by Emedia revealed that over 10% of social networkers visit social networking sites for business reasons. This growing trend is reflected in the appearance of an increasing number of business-oriented sites, such as: LinkedIn, Viadeo, Huddle and BT Tradespace, designed to help companies initiate and strengthen relationships with colleagues, clients, suppliers and partners, wherever they are in the world. Moreover, this is a medium that not only promotes exchange of knowledge, ideas and information, but can also make it an unusually energizing and rewarding experience.

Social networking also plays a major role in collaboration and increasing staff communication,improving morale, motivation and job satisfaction. Big brands are also getting inon the act as they recognize the benefits of building a presence in the social networking environment.

Research by Microsoft has shown that almost three-quarters of UK social networkers have already visited profiles set up by companies specifically to promote particular brands.

On the other side, these solutions also can be addictive. In a recent poll by, 8% of workers owned up tospending between one and five hours a week and 2% admitted to spending between five and 10 hours a week – on social networking sites while in the office.

Facebook users spend on average over 20 minutes a day for example.

Risks that need to be understood are: bandwidth implications, the risk of indiscreetly broadcasting confidential commercial information and valuable intellectual property or inappropriate comments on the company that can have major impacts on brand reputation etc. Other real threats include: spammers, virus-writers and their partners in crime who set up false profiles, trawl through social networking sites and piece together job titles, phone numbers, email addresses and so on –just the sort of information they need to launch sophisticated, highly targeted attacks on corporate networks.

Results of an exclusive MessageLabs survey conducted in September 2007, reveals that approximately 75% of companies said the number of visits their employees were making to social networking sites had increased over the previous six months.

Leadership Actions

We recommend the following actions to our clients to take advantage of Social Mediated Solutions:

1.) Ensure you have a corporate policy defined clearly so employees understand expectations and limitations;
2.) Set up a governance counsel in the early stages for Web 2.0 or Web 3.0 to ensure the organization collectively learns on how to use these tools vs having one-off experiences;
3.) Ensure an overall architectural strategy for the Web 2.0 social mediated technology toolkits vs having a series of toolkits that are not easily integrated or provide the business intelligence on usage across different solution sets for: wikis, blogs, podcasting, IM, social networking tools (facebook) etc.,
4.) Fund pilots that help the organization learn from and then share these experiences to support the organization's learning

At this stage in the Canadian landscape there are some leaders in developing innovative Web 2.0 approaches in companies like: Bell Canada, MTS Allstream, Royal Bank of Canada, TD Canada Trust, and early days for Bank of Nova Scotia and CIBC as well.

Concluding Comments:

This is a new way of working and designing business processes. Community networks are critical for organizational evolution. No organization can hide from these new needs or block its evolution. The market is about conversational value and a new performance metric in time will impact an organization's valuation. Community Reach is powerful and as new accounting standards evolve based on Social Capital fundamentals, this will heighten organization's awareness for the need to change.

The biggest reality is to attract Gen X and Y talent and now generation V (Virtual) -organizations need a focused Web 2.0 and Social Mediated Business Strategy to take advantage and learn from the increasingly connected world.
Bookmark and Share