 Part 1 of this series discussed the benefits for non-government organizations (NGOs) in using value networks to activate informal social networks. Part 2 discussed the new network paradigm, the production of intangibles, and value optimization managed through networks. Part 2 ended in noting that NGOs do not understand intangible value creation within the context of network potential. And NGO funders generally do not have tools to assess intangible value or its generation capacity.
This third and final part of the series acknowledges the role of the social entrepreneur and his/her relationship to complex network environments, and how entrepreneurial success may ultimately be dependent on understanding and managing intangible value and value creation capacity within the intersecting social networks in which the entrepreneur interacts.
A social entrepreneur is someone who recognizes a social problem and uses entrepreneurial principles to organize, create, and manage a venture to make social change. Whereas a business entrepreneur typically measures performance in profit and return, a social entrepreneur assesses success in terms of the impact on society as well as in profit and return.
Successful Social Entrepreneurs Must Know Their Networks
Recognized or not, social entrepreneurs operate within complex network environments. Entrepreneurial success may ultimately depend on understanding and managing intangible value and value creation capacity within the intersecting social networks. A key activity of social entrepreneurs is managing these complex relationships and interactions.
Jeffrey A. Goldstein and James K. Hazy note in their article Complexity and Social Entrepreneurship that at the heart of social entrepreneurships “lie innovative organizational and partnership forms which aim at ameliorating social and communal values so that they truly embody an increase in social capital which emerges from the cooperative interactions of social networks. This understanding of the added value accrued by social networks and the collective/cooperative effort that comes from their interactions set the stage for innovation and emergence.”1
Goldstein & Hazy go on to recognize that “all there really is anyway is a vast web of social networks, at small, midsize, large sizes and every scale in between. What we mean by social entrepreneurship projects are all the varied organizational forms which increase social value through the multitudinous interactions making-up such networks.”
Kevin Kelly, author of New Rules for the New Economy, observes that are very efficient at disseminating information (call it bits, data, or knowledge) and, by extension, power and wealth. By definition a network is decentralized, with no hierarchical authority. As such, they tend to undermine authority structures, shifting individual allegiance from traditional social entities (companies, families, neighborhoods) to networks of peer groups and interest groups. The effects of networks on dissemination of wealth are “not about economies of scale, they are about value that is created above and beyond a single organization – by a larger network – and then returned to the parts, often unevenly.” Networks create an environment for new opportunities from a collective, ever-changing “whole” that has vastly more potential than its individual parts. Networks enable people to make new connections, see new possibilities, and cultivate new relationships.
According to Open Cultures and the Nature of Networks by Felix Stalderit, it is out of relationships (between concepts, ideas, and human interaction) that new products, services, and intangibles are spawned. Networks are about intangible value and, for the entrepreneur, intangible value creation capacity. Networks favor intangible things – ideas, information, and relationships. Because of this, they tend to influence our perception of self and others, in that through networks meanings of words are altered to fit the emerging ideas, markets, and societal change.
What these authors and ValueNet Works founder Verna Allee (The Future of Knowledge: Increasing Prosperity through Value Networks and Value Networks and the True Nature of Collaboration) point to is a paradigm shift for NGOs, social entrepreneurs, and their funders, in understanding what constitutes value and what tools can be used to activate and manage value creation capacity within their networks.
Cracking the Code on Measuring Impact
One last and critical point is that using value network methods and available software from www.valuenetworks.com means that monitoring and measuring network value dynamics does not need to be cumbersome or expensive. Value networks have “cracked the code” on the very tough problem of measuring network impact.
As pointed out in Developing the Field of Social Entrepreneurship: A Report from the Center for the Advancement of Social Entrepreneurship (CASE), a report from Duke University, The Fuqua School of Business, June 2008, “We need to crack the code on social impact… Reliable, timely, and cost-effective measures of social value are crucial for demonstrating success, providing better information to the financial markets, and informing the strategic decisions of social entrepreneurs. Yet, social value is notoriously difficult to measure and to attribute to a specific intervention… Many of the most important ways in which social entrepreneurs can make the world a better place are long-term, intangible, qualitative, not easily reduced to any single common metric (such as money), and hard to attribute to a single cause. Systemic impact can be particularly difficult to measure. When you talk about social impact, most funders only want to talk about direct impact. You have to ask yourself, are you mobilizing resources to [serve] the right long term goal?”
A long-time issue at the center of the field can now be addressed with value networks. As noted in the CASE study, “Overall, there is no sound measurement system that allows people to compare and contrast organizations… Along with the inefficiencies of the financial markets, this is the most commonly mentioned problem, despite all the work that has been done to develop new and better approaches to performance measurement, including Social Return on Investment (SROI), the “triple bottom line,” balanced scorecards, “blended value” propositions, and even “randomized” trials of social innovations… Some saw this as an area for greater academic contributions. However, the social sector has long had evaluation consultants, usually academics or Ph.D.s in social sciences, but they do not seem to meet the expressed need for reliable, timely, cost-effective, comparable, and informative measures that social entrepreneurs and their funders are calling for… And, “Measurement is at the heart of a disciplined approach to creating social impact and demonstrating the value of the field. If you add up all of the social entrepreneurs and have no idea of impact–what they have done–the field cannot advance. You really need numbers to support the idea of impact.”
Simply stated, we strongly believe that Value Network Analysis (VNA) bridges this critical requirement gap with cost-effective visualization and analytical tools that bring understanding to network value and value creation capacity. VNA provides reliable, timely, cost-effective, comparable, and informative measures, albeit not the ones that social entrepreneurs and their funders have traditionally been calling for, which typically are lagging indicators. VNA offers leading indicators for how the networks are being activated to optimize and sustain value creation. These measures bridge NGOs, social entrepreneurs, and their funders, to the new network paradigm and provide a direct way to better manage complex networks.
1 This work and many other fine articles can be found in Complexity Science and Social Entrepreneurship: Adding Social Value through Systems Thinking, the ideas and insights of which are an outgrowth of the First International Conference on Social Entrepreneurship, Systems Thinking, and Complexity held at Adelphi University, Garden City, New York, April 24-26, 2008.
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