What Enterprise Social Networks Do Well: Produce Higher Quality Ideas

Idea generation at some point involves someone moving knowledge from this group to that, or combining bits of knowledge across groups. Where brokerage is social capital, there should be evidence of brokerage associated with good ideas, and vice versa.

Professor Ronald Burt, University of Chicago, Structural Holes and Good Ideas

Allow me to note a top-down benefit for companies that excel at innovation. Boston Consulting Group (pdf) calculated that leading innovators generate 430 basis points more in shareholder return than do average companies. Put another way, if an average company were to return 7.7% on your investment, leading innovators would return 12.0%. As an investor, that’s pretty attractive.

And  as an employee, being part of an innovation culture must be immensely satisfying.

On Wednesday, May 13, Oliver Young of Forrester Research and I will host a one-hour webinar, Tapping Communities to Accelerate Corporate Innovation. The session will cover strategies, practices and findings with regard to what leading companies are doing today to accelerate innovation. You can register by clicking the graphic to the right.

A topic we will address is the role and value of communities in increasing the number of good ideas generated for companies.

Which brings me back to Professor Burt, whom I quoted above. In his article, he discusses in-depth research he conducted on the Supply Chain Group for a major American electronics company. The results are eye-opening, and are compelling evidence for creating a common way for employees across a company to share ideas, knowledge and perspectives with one another.

Before discussing his findings, let’s go right to one of Professor Burt’s conclusions:

Thus, value accumulates as an idea moves through the social structure, each transmission from one group to another having the potential to add value. In this light, there is an incentive to define work situations such that people are forced to engage diverse ideas.

Brokerage Across Structural Holes

Professor Burt speaks in terms of “brokerage” and “structural holes”. The sociogram below depicts a typical social network structure:

There are essentially three nodes in this social network: A, B, C (+D). The structural holes exist between A and B, B and C & A and C. Notice the two actors. James is relatively “network constrained”. His social world really revolves around a tight core that all know one another. Robert is not constrained. He has ties into different groups, allowing him to tap non-redundant sources of information. Reaching across these social nodes is known as brokerage.

Professor Burt describes for levels of brokerage for which a person could create (increasing) value:

1. Make each side aware of the other’s interests and difficulties
2. Transfer best practices
3. Draw analogies between groups ostensibly irrelevant to one another
4. Synthesize beliefs and behaviors that combine elements of both groups

From simple to complex brokerage, there is value in making connections. Specifically, value in terms of the quality of ideas produced.

The High Correlation Between Idea Quality and Brokerage

The study of the supply chain group involved 673 managers. Professor Burt was given detailed access to the employees’ backgrounds, job titles, salaries, and performance reviews. He constructed the sociogram for the workers through online surveys, giving him information on which workers were network constrained, and which ones spanned structural holes.  Basically, he had a wealth of variables to test.

And what did he test? The quality of the ideas submitted by these 673 workers. He asked each of them to answer this question:

From your perspective, what is the one thing that you would change to improve [the company’s] supply chain management?

Let each employee provide their idea for how things could be approved. These ideas were then evaluated by two senior-level executives who had gained prominence for running the respective supply chains of their business units.

These rated ideas were then statistically analyzed against all those variables. What Professor Burt found was that there were general patterns to idea quality:

• More senior managers provided better ideas
• More educated managers provided better ideas
• Managers in urban centers had better ideas

Yet within these variables that correlated to idea value, there was an overall trend that held true across the board. Those managers who were network constrained consistently scored lower in the idea evaluations. So even though the more educated employees had better ideas on average, within their ranks, there was clear difference between those who span the structural holes, and those who do not.

Bottom line: Connecting with those outside one’s closed network results in higher average quality of ideas.

Wrapping Up

I wrote earlier about the revenue advantage accruing to employees with more diverse internal social connections. That study looked at the revenue per employee generated, and was fundamentally a productivity measurement. This field research by Professor Burt introduces a new benefit for creating an enterprise-wide view of ideas proposed by employees. The ability for others to know about an idea, and to see the value and the application of that idea in their own realm.

By enabling communities to post, critique, collaborate on and refine ideas, companies are certain to reap the benefits of accelerated innovation. As Professor Burt puts it:

People connected to groups beyond their own can expect to find themselves delivering valuable ideas, seeming to be gifted with creativity. This is not creativity born of genius. It is creativity as an import-export business. An idea mundane in one group can be valuable insight in another.

There’s a lot more where that came from. Oliver Young and I look forward to seeing you at the webinar (registration link) on May 13 at 1:00 pm Eastern.

I’m @bhc3 on Twitter.