How to do a Business Network Analysis

How to do a Business Network Analysis by Graham Durant-Law Copyright HolisTech 2006-2007 Information and Knowledge Management Society 1

Format for the Evening Presentation (7:00 pm to 7:40 pm) Essential Terminology What is a Business Network Analysis How to Do a Business Network Analysis Pitfalls and Problems Group Discussions (7:45 pm to 8:10 pm) Group task Discussion and Questions (8:15 pm to 8:45 pm) Feedback Types of Business Network Maps Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 2

Essential Terminology Simplicity is the key to effective scientific inquiry. Stanley Milgram, Sociologist, 1973. Copyright HolisTech 2006-2007 Information and Knowledge Management Society 3

Nodes, Ties and Networks A node is a unit which may contain and pass on information in this case they are individuals, otherwise known in the literature as actors. A connection between two actors means that there is some passing of information between them. These connections, also known as ties, mean an information network is established. An emergent network results from the myriad of decisions by individual actors to pay attention to, or not pay attention to, other actors - these decisions are egotistical. Lazer, D Information and innovation in a networked world in Breiger, R, Carley, K & Pattison, P (eds) 2001, Dynamic social network modelling and analysis, The National Academies Press, Washington, pp. 101-118 Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 4

Centrality Centrality is the degree to which an actor occupies a central position in the network in one of the following ways: having many ties to other actors (degree centrality) being able to reach many other actors (closeness centrality) connecting other actors who have no direct connections (betweenness centrality) having connections to centrally located actors (eigenvector centrality) Kilduff, M & Tsai, W 2005, Social networks and organisations, Sage Publications, London, p 132 Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 5

Ego Roles and Brokerage Coordinator an actor who brokers connections within the same group or sub-group. B is coordinating the actions of the sub-group and belongs to the same sub-group. Gatekeeper an actor who transmits information and other resources to the network from sources usually, but not always, external to the network. B is in the same sub-group as C and acts as the gatekeeper for A. Consultant an actor who intermittently takes the central lead by connecting others in the same group or sub-group, but who belongs to another group or sub-group. Representative An actor who transmits information and other resources from one group to another usually, but not always, external to the network. Liaison An actor who transmits information and other resources from one group to another group whilst themselves belonging to a different group. This can also apply to a sub-group. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 6

What is Business Network Analysis? Each of us is part of a large cluster, the worldwide social net, from which no one is left out. We do not know everyone on this globe, but it is guaranteed that there is a path between any two of us in this web of people. Albert-Laszlo Barabasi, Physicist, 2002 Copyright HolisTech 2006-2007 Information and Knowledge Management Society 7

Our Definition Business network analysis is a methodology that elicits the capacity of an organisation to effectively engage in its activities. It provides the ability to examine quantitatively, qualitatively, and graphically macro and micro linkages between nodes, where nodes are individuals, projects, project teams, business units, entire organisations, or even business functions, policies or documents. A connection between two or more nodes means there is some sort of relationship and information is, or should be, passed between them. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 8

Uses of Business Network Analysis Assess the state of social capital by identifying individuals and teams playing central roles, such as key knowledge brokers. Accelerate the flow of information and knowledge across functional and organisational boundaries by detecting and correcting information bottlenecks. Improve decision making in senior leadership and middlemanagement networks by mapping inter and intra organisational dependencies. Assess business operations by mapping communication and process integration following a restructure or reorganisation. Support collaboration by identifying potential partnerships and connecting people to people to ensure effective knowledge creation and sharing. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 9

BNA Components Business Network Analysis BNA Type Example Questions Organisational Interface Maps Project Interface Maps Organisational Interface Mapping Please identify up to 10 people who work in external departments and who are important to you in your professional network. These can be people who provide you with information to do your work, help you think about complex problems posed by your work, or provide developmental advice or personal support helpful in your day-to-day working life. These may or may not be people you communicate with on a regular basis and must come from an organisation external to yours. Information Flow Maps Collaboration Maps Social Capital Maps Graphical and Qualitative analysis Project Interface Mapping Information Flow Mapping Collaboration Mapping Please identify the people in other project teams that you rely on to provide information for your project. For each person you have identified please assign a score based on the amount of contact you have with them. 1 is the most amount of contact. 10 is the least amount of contact. Each score should be different. Please identify the people in your department you have passed documents or e- mails to in the last month. These may or may not be people you communicate with on a regular basis, but they must be part of your department. Please identify the people who are important to you in your professional network. These can be people who provide you with information to do your work, help you think about complex problems posed by your work, or provide developmental advice or personal support helpful in your day-to-day working life. These may or may not be people you communicate with on a regular basis and must come from within your organisation. Policy Relationship Maps Social Capital Mapping In your workplace who do you go to for information that helps you solve problems or capitalise on opportunities? Quantitative Analysis Report Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 10

How to Do a Business Network Analysis Copyright HolisTech 2006-2007 Information and Knowledge Management Society 11

The Generic Process Determine the unit of analysis. This is arguably the most important step, as it determines how data is collected and which tools and analysis techniques should be employed. Determine the questions. The questions depend on the unit of analysis, and what you want to discover. Collect the data. Typically the questions are answered using a survey. The survey can be done in person, on paper, or be web-enabled. Where appropriate data collection can also be done using data-mining techniques. For example intra-departmental e-mail traffic could be mined. In the case of a policy relationship mapping exercise the documents are parsed for key words, headings and other relevant attributes. Import the data into a visualisation tool. Typically data is entered into an Microsoft EXCEL workbook or database, and then imported into a visualisation tool. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 12

Visualisation and Analysis Tools HolisTech uses UCINET (NetDraw), NetMiner II, NetMiner III, NetMap Analytics, and PAJEK depending on the requirement. The visualisation tools also provide some back-end statistical analysis capabilities. Colours and layers are more easily applied in NetDraw. Spring diagrams are easier to layout in NetDraw. NetMap Analytics is very good at Step Analysis. UCINET is good for analysis, but the understanding of the measures is assumed. NetMiner brings analysis and visualisation together. The strength of NetMiner is the visualisation of many of the measures, and particularly centrality measures. PAJEK, NetMap Analytics, and NetMiner III are best at handling very large datasets. An essential sub-set of data analysis is the common sense check!! Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 13

UCINET (NetDraw) - actkm Network @ 30th of June 2006 Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 14

NetMiner II - actkm Network 2006 Eigenvector Centrality Note the central hub-nodes which are characteristic of a small-world network. A small-world network is a class of random graph where most nodes are also neighbours of one another. Most pairs of nodes will be connected by at least one short path. Small-world networks also have a power law distribution. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 15

NetMap Analytics actkm Network 2006 Step Analysis Patrick Lambe Three Steps i.e. Patrick Lambe s Reach Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 16

Pitfalls and Problems Science is built with facts, as a house is with stones. But a collection of facts is no more a science than a heap of stones is a house. Henri Poincare, Mathematician, 1901. Copyright HolisTech 2006-2007 Information and Knowledge Management Society 17

Caution!! Mathematical approaches to network analysis tend to treat the data as deterministic. That is, measurements are viewed as an accurate reflection of the real or final or equilibrium state of the network. Observations are usually regarded as the population of interest rather than a sample of some larger population of possible observations. You must understand your organisation, the data, the resultant network and the assumptions you are making! Hanneman, R & Riddle, M 2005, Introduction to social network methods, http://faculty.ucr.edu/~hanneman/ Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 18

Centrality Measures - Closeness Closeness Centrality being able to reach many other actors. analyses the centrality structure of a network based on geodesic distances among the nodes. the extent to which the most direct paths connecting an actor to each of the other actors in a network are short rather than long. A high closeness score means an actor can access many other actors and is relatively independent of the influence of others. But this measure s utility degrades if the network is not fully connected and has many isolates. Some authors suggest it should not be used if the network is incomplete. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 19

Note the clustering of like nodes. This is characteristic of a scale-free network. A scale-free network is a specific kind of complex network. In scale-free networks, some nodes act as highly connected hubs (high degree), although most nodes are of low degree. Scale-free networks have a power law distribution. NetMiner II - actkm Network 2006 Closeness Centrality A high closeness score means an actor can access many other actors and is relatively independent of the influence of others. But remember there are many isolates in this network therefore closeness probably is not an appropriate measure. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 20

Eigenvector Centrality Eigenvector Centrality analyses the centrality structure of a network based on the iteratively weighted degree of the nodes. measures actor centrality taking into account the centrality of the actors to whom the focal actor is connected. An actor who has three highly connected actors linked to themself, will have a higher eigenvector centrality than an actor who has three partially connected actors linked to themself. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 21

NetMiner II - actkm Network 2006 Eigenvector Centrality Note the central hub-nodes which are characteristic of a small-world network. A small-world network is a class of random graph where most nodes are also neighbours of one another. Most pairs of nodes will be connected by at least one short path. Small-world networks also have a power law distribution. A higher eigenvector score means an actor can access many other actors and is relatively independent of the influence of others. This is a more appropriate measure because the data is normalised and takes into account isolates. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 22

NetMiner III IKMS 2007 Network (Spring Diagram) IKMS network N = 220 n = 26 Egos = 5 Alters = 21 Response rate 12% Therefore the network is incomplete and the results are unlikely to be statistically significant or accurate! Note the alters did not respond but are represented is this ethical? Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 23

Capitalise on Opportunities IKMS network N = 220 n = 26 Egos = 5 Alters = 21 NetMiner III - ikms Network 2007 Closeness Centrality A high closeness score means an actor can access many other actors and is relatively independent of the influence of others. But remember there are many isolates in this network and it is incomplete therefore closeness is not an appropriate measure. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 24

Capitalise on Opportunities IKMS network N = 220 n = 26 Egos = 5 Alters = 21 NetMiner III - ikms Network 2007 Eigenvector Centrality A higher eigenvector score means an actor can access many other actors and is relatively independent of the influence of others. This is a more appropriate measure because the data is normalised and takes into account isolates. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 25

Group Discussions Copyright HolisTech 2006-2007 Information and Knowledge Management Society 26

Task (7:45 pm to 8:10 pm) Identify a business networking opportunity in your organisation and frame possible project suggestions. Consider what type of maps you might require. Consider the type of questions you might ask. Consider what tools you might need. Identify what problems and pitfalls you may face. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 27

http://www.holistech.com.au Graham Durant-Law HolisTech Pty Ltd Knowledge, Networks, Research Canberra, ACT, Australia Phone: +61 2 6255 0122 Fax: +61 2 6255 0133 Mobile: +61 408 975 795 Email: graham.durantlaw@holistech.com.au Pat Byrne HolisTech Pty Ltd Projects, Knowledge, Research Canberra, ACT, Australia Phone: +61 2 6255 0122 Fax: +61 2 6255 0133 Mobile: +61 412 103 629 Email: pat.byrne@holistech.com.au Discussion Questions Copyright HolisTech 2006-2007 Information and Knowledge Management Society 28

Types of Business Network Maps Copyright HolisTech 2006-2007 Information and Knowledge Management Society 29

The individual or project team is the unit of analysis. These maps can be used to: Assess the state of individual and project team social capital by identifying trust, support, and advice networks. Assess business operations by mapping the formal and informal process flows of an organisation. Support collaboration by identifying potential partnerships and connecting people to people to ensure effective knowledge creation and sharing. Support collaboration by identifying and weaving communities of practice. Collaboration Maps Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 30

Individuals, teams, departments or organisations are the unit of analysis. Information Flow Maps These maps can be used to: Accelerate the flow of information and knowledge across functional and organisational boundaries by detecting and correcting information bottlenecks. Accelerate the flow of information and knowledge across functional and organisational boundaries by identifying where increased knowledge flow will have the most impact. Assess business operations by mapping communication and process integration following a restructure or reorganisation. Assess business operations by plotting the path and time taken for a decision to propagate through an organisation. Support collaboration by raising the awareness of the importance of informal networks. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 31

Organisational Interface Maps The business unit or organisation is the unit of analysis. These maps can be used to: Accelerate the flow of information and knowledge across functional and organisational boundaries by detecting and correcting information bottlenecks. Identify opportunities for intradepartmental knowledge flow improvements. Improve decision making in senior leadership and middlemanagement networks by mapping intra-organisational dependencies. Assess business operations by mapping communication and process integration following a restructure or reorganisation. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 32

Policy relationship maps provide a powerful way to understand how work, documents and policy relate to each other. A policy relationship map can be used at the level of business units, departments or organisations to: Identify and then integrate current practice across core processes. Ensure internal consistency between documents and policies. Understand inter-departmental document relationships. Identify opportunities for knowledge flow improvements. Policy Relationship Maps Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 33

Project Interface Maps Projects are the unit of analysis. Project interface maps can be used to: Accelerate the flow of information and knowledge across functional and project boundaries by detecting and correcting information bottlenecks. Identify opportunities for intradepartmental knowledge flow improvements. Improve decision making in senior leadership and middlemanagement networks by plotting project dependencies. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 34

Individuals are the unit of analysis. Social capital maps can be used to: Assess the state of social capital by identifying individual trust, support, and advice networks. Assess the state of social capital by identifying individuals who have central roles, such as key knowledge brokers. Support social capital by identifying potential partnerships and connecting people to people to ensure effective knowledge creation and sharing. Improve decision making in senior leadership and middlemanagement networks by identifying and correcting structural holes in personal networks. Social Capital Maps Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 35

References 'I never commit to memory anything that can easily be looked up in a book.' Albert Einstein Copyright HolisTech 2006-2007 Information and Knowledge Management Society 36

Essential Reading Barabasi, AL 2003, Linked. How everything is connected to everything else and what it means for business, science, and everyday life, Plume, New York. Breiger, R, Carley, K & Pattison, P (eds) 2001, Dynamic social network modeling and analysis, The National Academies Press, Washington. Buchanan, M 2002, Nexus. Small worlds and the groundbreaking theory of networks, W.W. Norton & Company, New York. Cross, R & Parker, A 2004, The hidden power of social networks, Harvard Business School Publishing, Boston. Durlan, MM & Fredericks, KA (eds) 2006, Social network analysis in program evaluation, Wiley, Minnesota. Scott, J 2005, Social network analysis: a handbook, 2 edn, Sage Publications, London. Surowiecki, J 2004, The wisdom of crowds. Why the many are smarter than the few, Abacus, London. Watts, DJ 2003, Six degrees: the science of a connected age, W.W. Norton & Company, New York. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 37

More Advanced Reading Carrington, P, Scott, J & Wassermann, S (eds) 2005, Models and methods in social network analysis, Cambridge University Press, Cambridge. Cross, R, Parker, A & Sasson, L (eds) 2003, Networks in the knowledge economy, Oxford University Press, New York. de Nooy, W, Mrvar, A & Batagelj 2005, Exploratory social network analysis with PAJEK, Cambridge University Press, New York. Freeman, LC 2004, The development of social network analysis. A study in the sociology of science, Empirical Press, Vancouver. Hanneman, R & Riddle, M 2005, Introduction to social network methods, http://faculty.ucr.edu/~hanneman/ Hill, R & Dunbar, R 2002, Social Network Size in Humans in Human Nature, Vol. 14, No. 1, pp. 53-72. Kilduff, M & Tsai, W 2005, Social networks and organisations, Sage Publications, London. Wassermann, S & Faust, K 1999, Social network analysis, Cambridge University Press, Cambridge. Copyright HolisTech 2006-2007 The Project and Knowledge Management Professionals 38

http://www.holistech.com.au Graham Durant-Law HolisTech Pty Ltd Knowledge, Networks, Research Canberra, ACT, Australia Phone: +61 2 6255 0122 Fax: +61 2 6255 0133 Mobile: +61 408 975 795 Email: graham.durantlaw@holistech.com.au Pat Byrne HolisTech Pty Ltd Projects, Knowledge, Research Canberra, ACT, Australia Phone: +61 2 6255 0122 Fax: +61 2 6255 0133 Mobile: +61 412 103 629 Email: pat.byrne@holistech.com.au Discussion Questions Copyright HolisTech 2006-2007 Information and Knowledge Management Society 39