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Social ROI: Intuition, Metrics, and Social Network Analysis

Meghan M. Biro
  • On April 12, 2010
  • http://www.forbes.com/sites/meghanbiro/
Meghan M. Biro
by
April 12, 2010

Today’s post is by our guest blogger, and friend, Jeff Wilfong.  Jeff has assisted with web 2.0 and business strategy for a number of large-scale organizations like Conoco-Phillips, the City of Sacramento and a multinational conglomerate based in India.  Jeff is currently earning his PhD in Organization Development with emphasis in Web 2.0 management. Learn more by visiting his site, E2.0 Pros.

I have been pondering lately about how we can measure, quantify, or understand whether we are getting value from a social technology. If we are going to move organizations into networked structures with all the latest and greatest tools (such as Web 2.0, E2.0, SCRM, and much more), then we better know what we are heading into. In my view, business ROI metrics that arise from a linear, cash-oriented productivity model are going to increasingly fade away as the analysis becomes much more sophisticated. Too many business analysts state that ROI is just too hard to measure and often horribly inaccurate.

So, how is ROI currently being measured in the new networked model?

One stream of thought is that you intuitively know when you find value. For instance, when I start meeting many different individuals on Twitter and find their thoughts interesting and creative, I then link up with them on LinkedIn and perhaps schedule an hour-long phone call to get the human-to-human connection going. That tells me that the technology was valuable. By the way, I have had numerous of these happening lately as I have developed my weak-link network. The weak-link network theory, aka “Brokerage and Closure” (see Ronald S. Burt’s book), states that social capital exists in structural holes. People become brokers between the links to get access to new knowledge and spread ideas. However, too much closure creates too much similarity in thinking (aka “group think”).

The tools I like to use for my informal network creation are TweetDeck, Skype, LinkedIn and of course my trusty iPhone.

Another stream of thought about Social ROI is more quantitative: it states that we need to analyze metrics, the mathematical properties of the social networks, and user behavior.

Regarding metrics, we examine:

  • the time spent on the site,
  • the the click rate (which links are clicked on and which are not,
  • the quality of postings on a subjective scale (perhaps through user voting),
  • the length of postings, and
  • the various words used (i.e., tags).

We analyze the social network itself by looking at:

  • the number of connections,
  • the density of connections,
  • the number of weak links and the number of cliques (or strongly connected groupings),
  • and the dispersion, the average length of paths, the hubs or connectors, and the outliers (to name a few).

Photo by Wikicommons

With respect to user behavior, we look at which social tools are used most and examine the long-tail effect of user participation, the fact that a majority of behavior comes from a small few. Typically, this ratio is 20/80 where 80% of the behavior is accomplished by 20% of the population, and this exponentially tapers off (see Barabasi). Wikipedia follows this as do most other communities. Is the community an 80/20, or are more people engaged than this?

We can compare these metrics to established norms from other studies and cases, and determine how well we are doing. Still, the human in us tells us that we can do more with the networks. For example, we can design a better user-interface (a more human-centered design if you will) and psychologically fit the group to the tool. This is all cutting edge stuff, and we will see more in the immediate future.

We need to start examining a model of ROI in the new, networked organizations. This will get us closer to Org 2.0.

Interesting books:

Wasserman and Faust (1994) Social Network analysis

Clay Shirky (2009) Here comes everybody: The power of organizing without organizations

  • http://hrmarketer.blogspot.com/ Kevin W. Grossman

    Jeff, thank you for the thought-provoking post. For me, it’s all about the power of networking (around for the ages), relationship building, and influence we gain and give.

    We can measure visibility, traffic, reach, influence — but it’s messy and human like life and I want to keep it that way.

    Many folks are focusing more on “return on influence” as opposed to a hard return on investment, and I definitely agree with that. Social media pundit and online marketing expert David Meerman Scott scoffs at measuring hard ROI.

    We’ve gleaned media coverage from social media, connected with prospects and closed deals, found contractors to work with us and clients, made friends and partnerships — all in the old school spirit of networking and relationship building.

    I’m digging it.

  • http://www.talentculture.com/ Meghan M. Biro

    Jeff, thank you for sharing thoughts here. I’m impressed with your research – 20/80 makes sense if you account for differences in personality and behavior styles of those participating in the social community. I would like to see more active numbers – wondering if people are still understanding “what this is” and perhaps not acting organically just yet. What accounts for the numbers re: adoption?

    I also have an interest in the intersection of human behavior and the rich research just waiting to be investigated re: social networks. One cannot help but ponder what lies beyond all the talk of “ROI” in terms of tangible innovation and product touch points as well. The strong humanistic part of me says it’s truly about connecting and relationship building first and foremost. Study, Learn, Engage, Grow! Very interesting.

    It’s all good. :-)

  • http://thelovecolumn.com RB Love

    Forgive my ignorance, but this seems like a very topographical view of how we’re going to measure the Return On Investment of what? Time? Participation? Sales? Membership? Connections? Social Networks of people? Movement of product? Or Everything?

  • http://jeffwilfong.wordpress.com Jeff Wilfong

    Great comments, keep them coming…

    Kevin- I have heard many people say that business is entirely about relationship building, and I couldn’t agree more with your comment. And, any attempt to measure relationships, whether it is reach/influence, popularity, trust, and most other qualitative (or people) variables are difficult at best to measure. I do believe that the financial ROI model is very limiting and should be part of the assessment for business needs and planning. However, as you say, Return of Influence is very important as well. Return of Knowledge from a network is another great resource, as well as Return on Innovation and Return on Collaboration/Sharing. Very thought provoking response…

    Meghan – Thank you! The web extrovert vs the web introvert is interesting to study. Generational studies suggest Gen Yers are more inclined towards media production, that is, actually writing posts, commenting, rating, and engaging with the web. Therefore, they tend to be more a part of the 20%. However, everyone seems to be trying to produce (and therefore connect) these days, at least on Facebook. Interestingly, adoption of IT software solutions, enterprise applications, or social media historically has been very slow and haphazard. I do not yet think we have hit mainstream, except for perhaps Gen Y. Give it some years and social media will be much more prevalent and easy to use. I have read countless analysts state that the market is contracting and a few key players are coming through the finish line. As these companies continue to innovate, it will be easier to engage. Personally, I would like to consult with businesses on adoption issues of technology from a people/process dimension. Most the research suggests that IT and business leaders stress only technology in initiatives and this tends to fail, and fail badly!

    RB Love – Thanks for finding your way to TC. Definitely, it helps to define what business leaders wish to study and what measures are important to them. ROI -> Purely focused on finances. Social ROI -> Much more complicated. Trust, connection, influence, collaboration, and much more could be examined both from quantitative and qualitative angles. At this point, we enter psychology, sociology, anthropology, mathematical modeling and many other fields of study. I do think it is necessary to ponder, before ironing out definitions and therefore, limitations. My post was intended to help the pondering. Yes, indeed my post was a topographical view. Entire books will be written on this in the future… Would love to speak more about this and feel free to contact me anytime.

    very best,

    Jeff

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