When Reid Hoffman, Founder of LinkedIn talked to the Fox Business Network at the recent Fortune Tech Conference in Pasadena, he stated, “we live in networks, and what online networks do is make you use the networks you already have more effectively.” He compared business social networks to Google. “There was all this information in the world before Google. Google just made it a lot easier to find it all,” Hoffman stated.

Hoffman has tried to differentiate LinkedIn from other social networks by focusing on business relationships. He describes it (see interview) as a professional social network connecting former coworkers, clients, suppliers to collaborate. There are numerous other public business social networks such as Plaxo, Xing, Referral Key, Partnerpedia and BizNik, all focused on business-to-business relationships. Even Facebook and MySpace have many business interest groups within their popular social networking environments.

Business Social Networks: Beyond Facebook and LinkedIn

As much as these public social networks try to cater to business users, where social networking should have an even greater impact is within the walls of organizations, inside the firewall, creating true collaborative work environments where organizations can harvest the collective wisdom of employees, suppliers, existing clients and prospective customers.

What a well-designed business social networking site does is put together all of the communication tools and technology created to manage projects and teams, share wisdom from the executive office to the shop floor and back, leverage previously unknown talent, and ultimately through virtual space understand collectively what’s really happening in and around an organization. Those tools include blogs, wikis, chat rooms, document sharing, shared calendars, meeting rooms, whiteboards and other gadgets and widgets that can be found on public social networking sites today.

Social Networks Coming in From the Cold

In a recent article by Andrew Conry-Murray entitled “Can Enterprise Social Networking Pay Off?” he talks about a number of companies that are investing in internally managed business social networks.

One of these is EMC. Using Jive as its social networking platform, EMC reports an active user community representing more than a quarter of its 38,000 employees. Another 40% are watchers and consumers of the social network content, but have yet to provide postings themselves.

Pfizer employs a number of different tools in its social networking environment. PfizerPedia is an enterprise wiki built using the same tool that underlies Wikipedia. In addition the company uses SharePoint for social profiles, and shared links and content. Drupal, the open source social media application tool has been used to develop an enterprise-wide blog. Pfizer reports that 63,000 of its 98,000 employees are regular SharePoint users. The blog receives 10,000 visits per month and 2,300 users are contributors to the wiki.

John Parkinson, the CTO of TransUnion, a credit rating company, estimates that his company has saved US$ 2.5 million in its first five months after implementing the social network platform, Socialtext, while spending only US$ 50,000. Parkinson derived the dollar savings by counting things that the company deferred from buying. He observed that brainstorming ideas across departments and groups had significantly reduced demand for new technology and outside consulting services. The need for new software tools, processing capacity and hardware dropped dramatically.

Internal demand by employees to use Facebook was the deciding factor in implementing a private business social network. Parkinson conducted a survey that showed more than 2/3s of TransUnion’s 2,700 employees were already on sites like Facebook and MySpace. Concerned with the fact that sensitive data and confidential credit reports might end up on these sites led to the launch of an inside-the-firewall social networking solution.

Business Social Networking Creates New Transparency

When Parkinson studied employee usage he soon discovered who among the staff were best at problem solving. “It was never very clear to us, looking in, who the authoritative sources were, who was good at solving problems,” Parkinson states. Now it is. The benefits are incalculable and Parkinson forecasts that the investment in enterprise social networking will yield between $5 and $8 million in savings in 2009.

Mark Brewer, CIO of Seagate Technology, implemented Confluence, a wiki/blog application originally intended for the company’s IT staff but now being used by corporate executives as well. Brewer remarks that “things become a lot more transparent” using these types of social media tools. Confluence has replaced a file-sharing system that Brewer considered to be a waste of data and resources because information was locked down behind passwords and therefore largely unavailable to those within the company that could use it.

Toronto District School Board has implemented a private social network built on SharePoint called Academic Workspace. At the same time the board is experimenting with Recess, a social network that offers students rewards for academic participation and provides links to mentors within the Greater Toronto community.

EMC, Pfizer, TransUnion, Seagate and Toronto District School Board are among many organizations experimenting with behind-the-firewall social network tools. Going this route is paying significant dividends for these early adopters.

What are some of these benefits?

  1. Return on Investment.
    Private social networks provide organizations with a return on investment for all their people. Whether you are the student at the back of the class or a timid employee who never talks in meetings, the use of a social network can reveal hidden gems, people who lack the nerve to talk aloud but have ideas and expertise to share. A social network can encourage and reward online contributions so that the hidden gems can reveal themselves through their contributions.
  2. Unlocked Information Silos.
    Many large organizations develop silos, departments that are self contained. Organizations that suffer from silos lose so much. Connections across the organization don't happen. With private social networks organizations can break down silos. They can let interaction, knowledge sharing, and collective problem solving become the normal communication pattern throughout the organization.
  3. Improved Teamwork.
    Sales is such a competitive occupation. Traditionally compensation plans reward individual sales achievement. Cross fertilization of successful strategies through the deployment of CRM tools runs counter to this “all-for-one” sales reality. A private social network that encourages mentorship and rewards such behavior can create winning sales teams where sales strategies are shared, and top salespeople are compensated for helping the “newbies.” This represents a significant cultural shift for the normal sales organization. It means new compensation plans that reward both individual sales achievement and collective knowledge sharing contributions to develop overall team success.
  4. Increased Customer Engagement.
    It is clear that with the advent of Web 2.0 applications, the relationship between customers and suppliers is changing. One can describe the new model as being “customer web-centered.” It has always been true that it is easier to sell to an existing customer than it is to recruit a new one. Hence the relationship with existing customers is something that private social networking can address. Through a private social network, customers can be invited into online communities. These communities may include other customers with similar challenges. Communities can become great listening posts for organizations to learn about common customer problems. They can be great places to do collective sales pitches.
  5. Better Employee Morale.
    Private social networks begin with individuals creating profiles. Profiles are great ways to discover hidden talents. We tend to pigeonhole people by job title but most of us are much more than our jobs. For example I write music and do orchestration when I am not working with clients. People in the accounting department or in shipping may also enjoy music or play instruments. This type of discovery can pay huge dividends in improving morale within an organization. It can even impact the bottom line when you find out that someone is experimenting with open source software application development at home and has come up with a new widget or gadget that can be shared with others in the organization with similar interests, leading to who knows what.

Collaboration, discovery, knowledge sharing, collective success, communication, fun and individual recognition are what social networking is all about. Whether for profit or not, private social networks can give an organization a distinct competitive advantage in both bad and good economic times.

A pilot project is an inexpensive way to test the waters. As John Parkinson noted in his implementation at TransUnion, US$ 50,000 spent on a social networking platform, yielded a US$ 2.5 million saving in less than 5 months and an estimated $5 to $8 million in total savings just in the first year. That’s a lot of savings for such a small investment.