How to measure effect of communities at the macro level?

by Mukund Mohan

It is absolutely facinating that some metrics can capture the imagination of the masses very quickly. Some examples include the airline industry (which I am told before the advent of SouthWest) did not care about cost per passenger mile until this new metric has become a key determinant of profitability. Similarly the Hotel industy used to care more about Occupancy Rate until a few years ago, when RevPar became a more important number.

The question that I have been asking several experts in the community area is:
At the macro level what impact will communities and social networks have in economic terms?

I have heard several responses which I am trying to summarize below, but to be honest I have not done a detailed assessment enough to claim what I am sharing below is comprehensively thought out.

1. Employee Productivity: This is a number that a few Wall Street analysts have been tracking for a few years. In simple terms take the total revenue, divide it by number of employees. Since internal communities (collaboration networks) will allow for employees to tap into the large knowledge, contacts and networks of all the employees of the organization, we should see a vastly improved employee productivity rate for companies that adopt communities faster than those that dont.

2. Transaction Friction Loss: Several prominent thinkers and experts have talked about reducing the friction “tax” that is paid due to inefficiency of information availability. In simple terms, I know something about X, but its useless to me for most parts. Someone else is looking for information about X but she knows how to monetize it. How do we connect her with me at the quickest time to monetization? Google, as an example has reduced the friction from lack of information (to a certain extent). Its not an easy metric to track or come up with, but this metric should reduce since networks will reduce the time, effort and money required to
connect each other.

3. Degree of Seperation. Degree, Network and Betweeness Centrality.“Social network analysis [SNA] is the mapping and measuring of relationships and flows between people, groups, organizations, animals, computers or other information/knowledge processing entities. The nodes in the network are the people and groups while the links show relationships or flows between the nodes. SNA provides both a visual and a mathematical analysis of human relationships. Management consultants use this methodology with their business clients and call it Organizational Network Analysis [ONA].”

Measuring how connected people are should reduce the degree of seperation with communities from 6 to less than 4 is what many people are expecting. The next question is:

“What is the value of reducing our degree of seperation?”

What do you think?

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This entry was posted on Friday, February 16th, 2007 at 12:21 pm and is filed under Community 2.0. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

4 Responses to “How to measure effect of communities at the macro level?”

John Maloney Says: February 17th, 2007 at 8:14 am

Hi –

“I have not done a detailed assessment enough to claim what I am sharing below is comprehensively thought out.”

Whew. Thanks for the disclaimer. We wish more of you ilk would do this. The Community 2.0 people are badly confused about SNA, collaboration, social media, and, in fact, community itself.

See authentic conversations, not lofty Las Vegas conferences, on collective intelligence.

http://www.vncluster.com/LAX.htm

Cheers,

-
Francois Gossieaux Says: February 17th, 2007 at 9:21 am

heh…here is a great way to enter into a conversation or argue a point…make a personal attack on 60+ people

Mr. Maloney…while you are at it, who exactly from the 60 presenters/provocateurs at the Community 2.0 or which one of the 22+ bloggers on this blog do you think is not getting it? Or badly confused as you say…Any of the academic participants? Any of the companies who have been running very successful communities? Or perhaps some of the well read authors? Or maybe you meant Corante, the oldest social media company who is hosting this conversation…

Next time do us all a favor and argue the point instead of attacking the people…that is, after all, social media etiquette 101.
Mark Sage Says: February 17th, 2007 at 12:50 pm

We’ve been looking at communities from a customer retention and loyalty perspective. Whereas previously you would have looked at a single customer and used a metric such as Lifetime Value (LTV) or Return on Customer (ROC) to measure their value to the company, communities bring a deeper measurment that allows you to see the value of a customer in relation to their network or advocacy. Measuring a customer from at a network level would allow you to value customer not by sales alone, but by their ability to generate sales throughout their network - almost a Return on Advocacy measure.
Jack Vinson Says: February 17th, 2007 at 6:52 pm

I am glad to see this question asked. I think a direction of thinking that might help discover an answer is around the problem that “communities” are intended to fix. Do you _know_ that people aren’t sharing knowledge (the I know X, you need X issue)? Do you need deeper integration of your supplier and vendor contacts into your business (Reed Studemann of Caterpillar has been talking about the success they’ve had in doing this). Do you need more innovation? Do you need fewer call center mistakes? Do you want more people directly involved in customer contact? I imagine the list could continue.

As you can see, depending on what you are trying to address, the measure will be different. But I think Mohan is looking for the right kind of metric: what should we see at macro level that suggests things are getting better (or at least “different”) as a result of the community work?