“Social Systems, Networks and Business 2.0”
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Pablo Riera Táboas
President of Grupo P&A |
Customarily consultants, trainers, managers and academics in the field of business administration are used to seeing business organizations from the perspective of its formal organization. For an easier understanding and communication—explanation of this, we will make a simplified form of their structures with a relatively detailed flow chart that will attempt to explain the different hierarchical levels of power, the different positions y job posts of the organization, specify their occupants and the mechanisms of the relationships and coordination between the pieces of the puzzle. These simplifications of reality in the form of a flow chart can take different forms attempting to describe different organizational realities and so we find ourselves with other hierarchical or traditional structures, divisional organizations, territorial organizations, matrixed or organizations based on processes with others.
The truth is that as a mere representation of the reality they are, few times do they come close to or reflect, the true nature of the real organization, the real positions of power and influence, the real relations between the parts and the real flows of communication, information, work and decision.
Social Systems and The Organization as a Network
Another way of looking at organizations is from the sociological perspective of the “Social Systems”. This is (according to Wikipedia) a group of related and interrelated people and groups, joined together by some concept or common objectives, politics and processes which are the basis for which they interact, and a series of criteria comprised of identity, culture or norms that allows them to maintain a certain equilibrium for a period of time.
This model is similar to the Ecosystem of the human ecology, to biology and the systemic formulations. It is about a global analysis where the most important part, rather than being the form of the organization, are the exchanges between individuals and subsystems; they fill the content of the organization while they interact through the networks and nodes of the structure.
Here we’ll talk about organizations as complex networks of individuals and groups where the structure is represented or mapped out taking into account each one of the individuals or groups (network nodes) and the relationships—exchanges of greater or lesser intensity between them. These types of representations can circumscribe the internal confines of the company or even its relations with other organizations and networks (customers, suppliers, consultants, etc.) reflecting in this way, the relations and contact nodes of the organization with its transactional surroundings.
Diagram 1. Example of Enron’s network based on information and communication flows between individuals
In this new way of seeing, analyzing and representing the organizations, we have two principal elements: the nodes which represent the people, groups, departments or divisions depending on the type of analysis done, and on the other side, the lines that join them and represent the relations, links, interactions or flows of information or resources between the different nodes of the network. These connections can be represented in different thicknesses or colors depending on the level of intensity of the link or relation between nodes, intensity that will be determined depending on the objective or interest of our analysis by the number of interactions, the number of time invested in them, the frequency, the level of trust between the individuals, or the influence that they might exercise in the network
When it’s time to analyze which are the key nodes (individuals, divisions or groups) in the organization, those which develop a greater capacity to relate, connect with others and/or influence the network, we have to pay attention to three properties or characteristics of the nodes: on one hand the “degree” , determined by the number of lines (relations) that an individual (node) has with the others in the network. On the other hand, the thickness or intensity of these relations or links, and lastly and perhaps the most important: their level of clusterization, in other words, their capacity to connect other people with whom they (the original node) have relations. Let’s look at the diagram:
Diagram 2. Representation of the degree of the relations and the clusterization of an individual or node
When we analyze an organization from this perspective of networks and social systems and we compare it with its formal organizational structure, we can uncover incredible findings and contradictions between both representations, and in this way we see people that apparently have a high degree of power and influence in the formal organization are nonetheless, nodes with a low degree of relations (few connecting lines) and low intensity in the network. Nevertheless we can discover people that apparently go unnoticed in the formal organization and appear represented in low levels of the hierarchy and influence and yet in the Network they have an enormous influence, with an elevated degree of connections, some of them very intense and with a high level of clusterization which means they are connectors, facilitators of relations between other individuals and groups. An interesting question comes up here:
Which of these two individuals would be more important to have involved and committed in managing the process of change or improvement of the organization?
From a perspective of change, the most powerful agents would be those individuals in the network with more relations, of greater intensity and with a high capacity to triangulate o cluster, in other words those people who not only know and interact with many others, but who also put them in contact with each other and favor the building of new relations. In our previous diagram it would be the type “A” that has a direct relation with B and C, and moreover connects and favors a direct relation between them. Another characteristic of the most influential nodes (individuals) is the capacity to “build bridges” or strengthen relations or links between groups that are separated or connected by superficial or weak relations.
Diagram 3 . Building brides between groups and/or networks
In the previous diagram we see how the type “A” is strongly linked and clusterized with BCDE and is also very influential because it has the capability to connect, “build a bridge” to the group FGHIJ via its connection with F, which would permit new flows of information, resources and knowledge between both groups, until now unexplored in the organization.
As we see here in a very simple way, the power and value that this new way of seeing and studying organizations provides can be immense and its applications to management, decision-making, organizational development, leadership and the processes of change are potentially immense.
If in addition we incorporate to the network analysis of an organization its transactional environment (customers, users, investors consultants, technologists, suppliers, etc.) new opportunities and applications appear in the environment of marketing, innovation, product development, logistics and many other areas of business management as we will see later.
Until not long ago, this type of network analysis was very complicated from a practical point of view due to the difficulty, on one hand, of obtaining reliable data on relations, communications or flows between individuals and groups, and on the other hand due to the absence of systems or tools which allowed for analysis, interpretation and diagrams of the networks. Today, due especially to the huge growth of Internet and mobile communications, there are a multitude of software tools that exist which allow us to do these types of studies very simply using the data flow from landlines to mobile phones, e-mail flows, Internet chat applications, Instant Messenger applications, etc.
| Diagram 4. Network based on the number and call duration to company mobile phones. |
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On the other hand, since only a few years ago, the world of social networks and online communities has experienced a tremendous growth due to the possibilities that Internet and bandwidth growth offer. Everyone is familiar with now, if we’re not already users of, global social networks like Facebook or Twitter, with millions of users worldwide, professional networks like LinkedIn or Plaxo, with thousands of groups and subnetworks of users connected around common interests and private social networks created with tools like Ning or intranets for company employees, university students, or business schools, researchers, academics, entrepreneurs, lobbists, business people, etc.
In addition, the launching, growth, and management of these networks is very fast due to the speed of the interrelation and communication in real time that the Internet allows its users.
Business 2.0
Conscious of the enormous potential for network analysis and management both internal and external and of the tremendous opportunities that their application could have for the business world, a group of academics and researchers started to develop this concept of Business 2.0 approximately 3 years ago, towards the end of 2006.
One of the principal experts on the subject, and one of the few who has done the most to research, publish and disseminate this concept is Andrew McAfee, an academic from the University of Harvard, who considers business 2.0 as that which is capable of utilizing and benefiting from the study and management of the networks (the private internal ones, those which connect their groups of interest like customers and suppliers and the social networks) and all the tools and applications of social software in Internet (denominated web 2.0) to obtain competitive advantages and to have a better management of the company.
Here, the technological element is merely a means, a tool that now lets us do this work quickly and efficiently, that until recently would have been impossible, but the really important thing is the concept of a network as a social system with all its capacities to create connections and relations among its members, with its nodes of influence, with the speed of communication between its members and above all, its independence to generate and share content, opinion or knowledge based on the participation of the network’s own members.
McAfee, using the acronym SLATES, defines the principles that characterize a business 2.0 that works in a network:
- Search: refers to the people in the organization, or the nodes, of the internal network, or intranet, that search and find the contents or knowledge necessary to develop the best way work.
- Links: refers to the fact that the way we search isn’t like the formal organization from bottom to top and vice versa, but rather through the network connections, directly to the source by way of links or contacts. The link or relation is the order of the companies in the network.
- Authoring: refers to the freedom to authorship, to which everyone can create, make available and share content and knowledge from what they know whenever it’s useful for the rest.
- Tag: they are the people, the members of the network and not the machines that label the contents and knowledge making the search more human and personal.
- Extensions: knowledge is organized in the network, not in watertight compartments and the value or the relevance of a content or knowledge is given by recommendations or the frequent use by the members of the same network.
- Signals: as a way of knowing something relevant had happened or that an important knowledge is available on the network. We can’t pursue everything that interests us when the quantity of information, content or knowledge is immense, almost infinite if we consider the external networks of the company. We need to receive signals when something moves around the objects of interest that we previously established.
There are already many companies that to a greater or lesser degree are trying to become businesses 2.0, work with a philosophy and network organization, incorporate all or some of these work principles and take full advantage of the existing social software tools. There are many applications and with a great potential for growth:
So we have applications designed more for inside the organization, the employee network, which allows us better knowledge and better relations of members and among the members, their participation in decision-making, increase the quantity and quality of internal communication, collect ideas or knowledge for innovation, product development and internal improvement or create communities or subnetworks for groups of people that have to work together on projects and share information or knowledge.
Potential applications of great value also come up when we connect or incorporate key individuals (nodes of influence) to our network or our networks of external interest groups like customers, shareholders, suppliers, universities, and technological centers or mass media. Here processes like marketing, market research, customer service, development and launching of new products, public relations, corporate communication or innovation is radically transformed when the level of relations and interaction with the interest groups, giving them power and knowledge in our network and making them participants in some of our business decisions, involving interest groups in our company management in a way never seen before until now.
As guru and management best-seller, Gary Hamel, author of Leading the Revolution and Competing For the Future, says:
““We are before a new management revolution that will be so profound and upsetting like that which gave way to the modern industrial era. Propelled by the birth of new technologies of powerful collaboration, this transformation will radically reform the nature of work, the boundaries of companies and the responsibilities of business leaders.”
If your intention is to position your company and business in the future, and you would rather be at the front of the line and not the back, you need to incorporate these concepts in your business strategy.
Bibliography
- “Social Systems and Complex Networks”, Handout from the program of Consulting and Coaching for Change by HEC y Oxford Sais Business School, Felix Reed-Tsochas, July 2009..
- “Enterprise 2.0: The Dawn of Emergent Collaboration”. Andrew McAfee. MIT Sloan Management Review, April 2006.
- The Transition to Business 2.0 – Good and Bad Practices Michael Chui, Andy Miller y Roger Roberts de McKinsey, Feb. 2009.
- Enterprise 2.0: New Collaborative Tools for Your Organization’s Toughest Challenges, Andrew McAfee, Harvard Business Press, 2009
