Six Degrees of Cooperation

If it's who you know that counts, social-networking software will make sure your colleagues know them, too.
Yasmin GhahremaniNovember 30, 2004

Andra Marx knows the value of a good connection. Marx is a senior account executive at IntraLinks, a New York company that provides online meeting rooms in which employees of financial institutions, law firms, private-equity firms, and corporations hash out mergers, acquisitions, and other financial transactions. Earlier this year, she was chasing a lead at a firm that was undertaking a private-equity fund-raising. Using software from Visible Path, she was able to discover, within seconds, that a colleague knew a key decision-maker at the target firm. Sending a quick E-mail that stated her need, Marx secured a reference that eventually led to a sale. In a business in which deals can run to millions of dollars, uncovering those kinds of contacts is like striking gold. “The deal involved some fortuitous timing, but it certainly wouldn’t have transpired if I hadn’t been able to connect the dots,” she says.

Marx is not alone. The corporate world is waking up to social networking, a concept already familiar to huge numbers of adolescents and lonely hearts. The aim is to electronically bridge the gap between you and the person who can bring you love, companionship, or, in this case, money. Popularized by Friendster and similar consumer-oriented sites, social networks acquired a business focus through public sites including LinkedIn and Ryze. Now Visible Path and such competitors as Spoke, Contact Network, Tacit, and Interface Software are installing systems behind corporate firewalls on the theory that employees of a given company are likely to have much more closely aligned interests than users of public sites.

The value proposition is simple: a company with thousands of workers could have millions of contacts. But making them commercially useful requires being able to dig up the right one at the right time. “It’s like finding a needle in a haystack,” says Colin Mathews, vice president of business development at Contact Network. “And we’re a needle-in-a-haystack-finding machine.”

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In this case, the haystack is relevant data spread across E-mail servers, contact books, and customer relationship management (CRM) or sales-force automation systems. By crawling through these systems, enterprise-grade social-networking software fills holes left by traditional CRM. “Many CRM systems run into problems because salespeople keep the best contacts out of them,” says Scott Allen, coauthor of The Virtual Handshake: Opening Doors and Closing Deals Using Online Social Networks, which is due out next year. These systems dig deeper, he says, so “it’s harder to hide who you know.”

“Every system I’ve seen still puts the owner of the contact in control. If it didn’t, it would be difficult to get participation,” says Allen. “What is different is that the owner of the contact is allowed to control access, sometimes anonymously — that is, they can view requests and assess them without having to indicate that they are the owner.”

How well they know a contact also counts: most social-networking software includes information about the strength of relationships. Visible Path takes into account everything from the number of E-mails two people exchange to how often they appear in the “cc:” instead of the “to:” line. If there are several relationship paths connecting a user to a contact, each is ranked by strength.

Making Connections

Applications for this kind of information are as varied as the reasons people swap business cards at cocktail parties — recruiting, business development, even credit checks. But sales is the most obvious: warm introductions beat cold calls any day. “It’s just like calling a friend of a friend,” says Marx. “You don’t have to establish credibility with the person.” In fact, in a survey of senior executives by the University of North Carolina, 84 percent of respondents said they would always or usually take a sales call from someone a colleague referred, whereas only 8 percent said they would usually take a call from a total stranger, and none said they always would.

That doesn’t mean social-networking tools will always move the merchandise. They make the most sense in industries in which deals are big and relationships are a key differentiator. Companies that are spread out geographically with a large number of contacts are especially good candidates. London-based venture-capital and private-equity firm 3i uses InterAction, a system from Interface Software, to connect 750 employees dispersed across 14 countries. “In each country, we compete with firms that have small teams that can shout across the room at each other to find out if anyone knows someone at this company or that company,” says Rod Perry, director at 3i. “We wanted a solution that would give us what I call the one-room company. We had to appear to each other as if we were in one room, even though we’re in 14 countries.”

It’s worked. In one recent instance, a Spanish 3i executive was interested in the potential $300 million disposal of a French company’s Spanish subsidiary. Without InterAction, she might have posted a notice on the company intranet asking if anyone had a contact at the company’s French headquarters, then waited several weeks for everyone to read it. Instead, InterAction immediately told her of a 3i executive in Paris who knew the French company’s mergers-and-acquisitions director. The two teams are now working together on the deal, which could eventually earn 3i a $100 million profit.

Vendors cite some impressive statistics. Spoke says that by prioritizing sales leads according to the strength of connections, one of its clients saw a 35 percent increase in lead pickup the first day, and sales were closed 2.5 times as often. Visible Path’s initial data indicates users shorten their sales cycles by about 20 percent and raise their close rates by the same amount.

While it’s hard to calculate ROI, IntraLinks’s vice president of marketing says he had no trouble justifying the purchase of Visible Path after a six-month trial. “In terms of deals that we wouldn’t have gotten otherwise, I’d say there are no more than 10,” says Julian Henkin. “But it doesn’t take more than a couple of those to make something like this make sense.”

Henkin wouldn’t divulge the cost of the software, but Visible Path says it charges $100 per user a year. Allen’s coauthor, David Teten, advises users to bargain hard: “This space is very new. Everyone is cutting deals because they’re so eager to get customers.”

There are trickier considerations, though. Privacy is the biggest. People don’t want Big Brother reading their E-mails, handing out ex-girlfriends’ phone numbers, or revealing confidential client information. Vendors are trying to answer those fears with participation options and privacy safeguards. Visible Path stresses that E-mail content is never monitored, and contact owners remain anonymous until they agree to requests for help. “We not only protect the CEO’s Rolodex,” says Visible Path co-founder and CEO Antony Brydon, “we protect the CEO by allowing him to remain anonymous.”

But people have wildly different notions of what’s invasive. When Spoke first rolled out its software, 20 percent of users said it didn’t provide enough privacy, while 80 percent complained it gave too much. Now the system is configurable at both the corporate and individual levels. “There is no agreed-upon definition of privacy,” says Ben T. Smith IV, chairman and CEO of Spoke.

He’s not kidding. One consulting firm using Contact Network’s software worries about a revolt if it mines company address books, but has heard few complaints about E-mail scanning. Meanwhile, 3i’s E-mail-scanning pilot met with so much resistance that the company dropped it, but management won’t let employees hide even sensitive contact information such as home numbers from the system. “We’ve tended to take the line that the more information we have for the business, the better,” says Perry.

Making IT Work

Once you’ve convinced employees that the system can help them without harming them, you’ve still got to get them to help one another. Some companies say loyalty and team spirit are motivators enough. When law firm Duane Morris enabled InterAction, upper management led by example. The chairman was the first person to share all of his contacts, followed by the executive committee and all 50 of the firm’s partners board. “The message is that we all must share to make this work,” says Edward M. Schechter, chief marketing officer at Duane Morris. Everyone must share “to get the most of our existing relationships,” he says. “The InterAction software enables us to more easily tap into firmwide resources — that is, our contacts. If you don’t have commitment with a capital ‘C’ at the top of the organization, it won’t work.”

At 3i, like many other companies, employees’ cooperativeness is reviewed during performance evaluations. Perry says that sharing contacts and information forms one part of the staff-assessment system. Employees are reviewed against each criterion, and their bonus pay depends on the review.

This approach comes with caveats. “If use of the system is monitored for performance reviews, the company shouldn’t be specific about what metrics are used,” warns Allen, “because people will game the system.” In other words, if management declares it will give bonuses to the three people who respond to the most requests, employees may get their buddies to make fake requests purely so they can respond.

Other companies prefer to offer carrots. At IntraLinks, anyone who grants access to a contact gets a $25 American Express gift certificate. If the contact results in a sale, the person gets a 2 percent sales commission. “We liked the fact that for the first time we could commission people outside the sales department who help with sales,” says Henkin.

If all of these issues can be sorted out, social-networking tools could become a ubiquitous part of larger enterprise applications, just as search engines have. “It’s hard to imagine that five years from now someone will be wandering the halls of IBM looking for inroads into another company,” says Brydon. Instead, they’ll be firing up the machine that can help them quickly find that needle in the haystack.

Yasmin Ghahremani is a freelance writer based in New York.