My People Know Your People

Social networking software can be used to make business connections that lead to new deals.

London-based international venture capital firm 3i Group PLC wanted to buy part of the chemical business of a German company going through a management upheaval. The problem was that 3i's German team lacked good contacts at the chemical company, says Rod Perry, 3i's director of technology investing.

So 3i turned to the social networking function of InterAction, a CRM product from Interface Software Inc. in Oak Brook, Ill. The software showed that, unbeknownst to 3i's German team, the firm's Italian team had good contacts at the target company. The Italian team made the introduction, and a deal is now in the offing.

This all came about thanks to social networking technology, which mines databases of contact names, interests, former employers, colleges attended and other information to identify a network of acquaintances.

Like instant messaging, social networking is a hot technology that started in the consumer market (examples include Friendster.com and Meetup.com) but has now emerged with business-oriented applications. It could turn out to be a big success in business -- generating sales leads and connecting deal-makers -- or it could flop like "push" technology did in the 1990s. But corporate IT managers should at least be aware of the phenomenon.

In essence, social networking is "a search engine for people and relationships," says Jas Dhillon, CEO and president of Santa Monica, Calif.-based ZeroDegrees Inc., which was recently acquired by online conglomerate InterActiveCorp. Dhillon figures that his software cuts the average time it takes a salesperson to reach a buyer by 35%.

Antony Brydon, CEO and president of Visible Path Corp. in New York, claims that people using his software have reduced the sales cycle by 27% and increased the close rate by 22%, while the average deal size has gone up 10%. Efficiency is improved, he says, because cold calls are replaced with personal introductions, and salespeople get access to decision-makers.

That's how it worked for Curtis Estes, founding principal at Strategy Benefits Group LLC, a financial planning practice in Los Angeles.

Estes tried over and over again to meet a certain wealthy individual, without success. Then he went on Spoke, a social networking service from Spoke Software Inc. in Palo Alto, Calif., where he found 10 people on the network with connections to this person.

Within days, Estes had an introduction. "I expect Spoke will increase our revenues by 25% this year," he says. "It saves countless hours and dramatically increases our ability to get in front of our best prospects."

Inside or Outside The Firewall

The technology comes in two basic forms: outside the corporate firewall for making public connections, or behind the firewall as sort of a giant corporate index-card file.

Examples of the public version include services from LinkedIn Ltd. in Mountain View, Calif., and Ryze Ltd. in San Francisco. You register with a service, provide information about yourself and then upload information about people you know.

If you want to meet someone at a certain company in a certain department but don't have a name -- like the head of sales at the company -- you enter the target, and the software will search your contacts, your contacts' contacts (assuming they're in the database) and so on, usually up to a maximum of three to six degrees of separation.

If the service identifies a path from you to your target, you contact the person you know and explain why you want to meet the target, and then that person decides whether to pass your request down the line.

Assuming that everyone is willing, your request finally lands in the in-box of your target, having been passed on by someone the target knows.

Ryze has given a boost to Un-Marketing.com, a Toronto-based marketing consultancy. Owner Scott Stratten reports that his firm has gained 15 paying clients in the past six months from the service.

Working behind the firewall, products such as InterAction, Visible Path and ZeroDegrees will mine only the contacts in your company's database.

Cynthia Reaves, an attorney at Honigman Miller Schwartz and Cohn LLP in Detroit, says she knew of an executive at a prospective client whom she wanted to meet but had no contacts at that company.

Using InterAction, Reaves learned that one of the partners at her law firm knew this executive; an introduction was made, and a six-figure deal resulted. "[InterAction] allows us to cross-market services from various departments," she says.

The Downside

But privacy can be an issue, since the contact data may include personal details and some contacts may not want to be pestered. The vendors deal with this by giving users the ability to limit what others can learn about their contacts and by allowing them to refuse to pass on a request for an introduction.

Also, entering contact information can become a time-consuming hassle and a task that's easily ignored once initial enthusiasm wanes. Some products let users automatically upload information from Outlook, Notes and other software programs. Others automatically scan e-mails and other data for contact information.

Participation requires "getting people to feel there's a general personal advantage for them," says 3i's Perry. Even then, he acknowledges that people are lazy and prone not to maintain their contacts. So 3i has trained assistants to enter business card information quickly, freeing their bosses from the chore.

Despite the hype and hope, social networking is still an emerging technology. "It's an early-adopter market now," says Denis Pombriant, an analyst at Beagle Research Group in Stoughton, Mass. "I think [social networking] is going to be important, but it may be a [CRM] feature, not a free-standing system."

Horowitz is a freelance business and technology writer in Salt Lake City. Contact him at alan@ahorowitz.com.

Copyright © 2004 IDG Communications, Inc.

  
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