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Innovation ROI – Why Every Enterprise 2.0-Enabled Connection Counts


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 E2.0 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.

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About Hutch Carpenter
Senior Consultant for HYPE Innovation (hypeinnovation.com)

9 Responses to Innovation ROI – Why Every Enterprise 2.0-Enabled Connection Counts

  1. Jeffrey says:

    Hi Hutch:

    A great post. Two things to think about: first, there’s the effect that the more integrated you are and more connected you are, you may have more receptivity to your ideas because you are well known and able to surface your ideas to the right people. That can be a good thing or a bad thing. Often what happens is that well connected people can get their ideas reviewed and approved. That does not make their ideas necessarily “better”, just means they have better relationships and their managers are aware of the individuals.

    Second, recent work that will be published in the December HBR suggests that the connectedness matters more when the people you connect with are outside your sphere of influence or knowledge. The more interactions you have with people with different perspectives or experiences, the more likely you are to have better ideas. Yet most firms encourage little reading or interaction outside of the industry, much less interaction and engagement beyond the bounds of a market or industry.

    • I agree Jeffrey – connected people get easier airings for their ideas. But this particular study wasn’t affteced by that. The idea submitters gained no advantage via pre-existing connections to the two executives who did the rating. The executives just looked at the written-up idea itself, without know the person’s identity.

      On your second point – agreed! Getting outside your own personal echo chamber is immensely valuable. Andrew McAfee has a nice post from a few days ago talking about the this: “Colonizing the Outer Rings” http://andrewmcafee.org/2009/10/colonizing-the-outer-rings/

      I’ll keep an eye out for the HBR article.

  2. Hi Hutch

    Love the analysis – would however I would have also expected to see a law of diminishing returns with regards to the number of connections too though – ie, there’s got to be a point at which adding one more connection doesn’t help you anymore. The connections are only useful for as long as you can get input from them – either in the form of help generating the idea (or inspiration for one) – or, as Jeffrey mentioned above, in the ability to get the idea reviewed and approved. Surely, you’ll get to a certain point, where you can no longer process the input out of sheer quantity?

    Any thoughts on this?

    Best

    Boris

    http://www.completeinnovator.com

    • Boris – that is true. Since a connection requires some relatively recurring exchange of information, I can see a scenario where there are coworkers with whom you share little. The need to exchange information with them regularly crosses from helpful info to noise.

      That, to me, demands the ability to work with those people when these is a specific common need. The temporary joining of minds on a specific matter, then off to the rest of your days separately.

      But if that happens, even if you don’t keep up with someone regularly, that’s a connection, if not a relationship.

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  5. Jo Jordan says:

    Hutch, why did you reverse the scale of connectedness? And is the increase in an idea’s value from 2.5 base rate to 3 discernible in practice?

    • Hi Jo. The graph itself is directly from Professor Burt’s paper. The X-axis itself measures the degree of insularity as the numbers get higher. If your connections score was at 100, that means it’s entirely redundant – all your connections know only one another, and no one else. To make the presentation better, I focused on the connected, and added the description of what a low score on the X-axis means versus a high score.

      I can’t say for sure how much difference a 0.5 score in idea quality means. But one interesting aspect of this. That 2.5-score idea likely gets stronger if it was exposed to a larger community who could see relevant things in it. Let others who have a similar issue weigh in and add their perspectives.

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