Hey, I’m Over Here

Since the digital revolution has affected every aspect of business, it should come as no surprise that networking has entered the digital age. To beef up our referral base, it’s no longer a matter of how many business cards you can collect or how many Elks Club dinners you can attend. To amass a reliable database of solid referrals, you need to network with the big boys, using big toys, with big expectations. Yes, it’s now Internet networking that promotes connections through Web-based groups established for the purpose of getting you hooked up with the people you need to meet.

Separation  Degrees

In 1967, Harvard psychologist Stanley Milgram published an article that, based on a study he did, claimed every person in the world can find a connection to every other person through a series of acquaintances – specifically, six on average. Thus was born the notion that six degrees of separation lie between you and every other person. (This notion still remains largely unproven, as there have been no major studies subsequent to Milgram’s, which was quite limited.)

Fast-forward to the present, ignoring for the moment the parlor game of Kevin Bacon and his six degrees of separation from every other known movie actor. There is the new social- networking technology that’s based on Milgram’s notion. It has attracted millions in venture capital, lots of press and a bunch of people wondering who their Rolodex could link them to if they could only figure out who knows whom. For some salespeople, this technology is producing results, but in truth, it’s still largely unproven.

Virtual Connections

Most social-networking sites operate similarly– they connect people to new people. Social-networking technology mines through databases of contact names, interests, former employers, colleges attended, emails, calendar entries and other information to identify a network of acquaintances that lies between you and someone you want to meet. Using algorithms, it searches, weighs and ranks others in the database for those who are likely to be of value to you. To rank contacts for relevance, the various products use parameters such as frequency of email correspondence, job title and seniority.

In effect, the software knows whom you know, and then if any of those people are in the system, it knows whom they know, and then whom those people know, and so on, until it reaches our target. Usually, the software limits the number of degrees of separation to between three and six degrees.

In fact, some think that without referrals, it’s almost impossible to make a sale. “We’re in a business where the cold call is dead,” says Anthon DeToto, a private-wealth advisor in the San Francisco office of Merrill Lynch. “One-way solicitation of clients isn’t effective. We have done some analysis of where our new clients have come from, and it’s through referrals from a trusted advisor network, such as attorneys and accountants.”

Examples of Social-Networking Technology in Action

Joerg Sperling, who is based in Munich, German, and is director of business development at Ikanos Communications, headquartered in Freemont, CA, recently wanted to drum up business in Greece, where he had no contacts. Normally, he would have used cold calls and emails to make connections. but instead he went onto the LinkedIn network, searched it for contacts in the telecommunications industry in Greece, found 50 to 60, winnowed this list down to about 10, and through his contacts on LinkedIn, made contact with five. “Without LinkedIn, my hit rate would have been lower and [the sales process] would have been more time-consuming,” says Sperling.

Peter V. S. Bond is vice president for consumer solutions at Clarity Payment Solutions, a New York City-based provider of prepaid card solutions. He wanted to make a pitch to a major tire manufacturing company where he had no contacts. He went onto the Spoke Software social-networking site, found he had links to the tire maker’s vice president of marketing and made contact with him through a series of referrals. At the same time, he found someone on the Spoke network at the target company with the title of “database marketing manager” – his likely target. Because he didn’t have any direct links to this man, he emailed him directly. Shortly after, the tire maker’s VP of marketing got back to Bond and also suggested he contact this database marketing manager. Now Bond had both the support of the VP of marketing and his own direct communication to catch this manager’s attention.

It worked, and the man asked Bond to submit a proposal. Bond made this connection in almost no time, while sitting comfortably at his desk. “I turned this around in a few hours,” says Bond. “Otherwise [using traditional cold calling], it would have taken me weeks.

The technology can also bring prospects to you. DeToto tells of being contacted by someone who needed financial counseling because he was soon to come into a lot of money as a result of a public offering of his company. He chose DeToto because he saw on LinkedIn that two of the network’s members, a venture capitalist and an attorney, endorsed DeToto, and this man knew both of these referrals personally. “I was a water-walker according to these two people who trusted me,” says DeToto, and that’s why this prospect – who became a client – contacted DeToto. DeToto says he deals in accounts of $10 million or more, so this one contact brought in considerable business.

Cynthia Reaves is a partner at the Detroit law firm of Honigman, Miller, Schwartz and Cohn, which uses InterAction, a CRM product of Interface Software that has a social-networking feature set. he recently used InterAction’s social-networking capability to create a matrix of large employer groups who were clients of the firm, along with the attorneys who do employee-benefit work for them. Using this matrix, she asked the attorney for introductions to the employer groups with the goal of selling them additional services. he says of her use of InterAction, “I think people do it intuitively, but with InterAction, we have a more comprehensive report of who knows who.”

Two Markets

Social-networking technology has found uses in two markets. First is the social market, used perhaps  those looking for a date. The best known brand in this sphere is Friendster. Among the other players is Orkut, which is related to Google, and Wallop, a service Microsoft is testing. Meanwhile, Yahoo is dropping hints of wanting to enter the fray. The second is the business market, which uses the technology primarily to generate sales leads and to recruit. Interaction, LinkedIn, Ryze, Spoke, Visible Path and ZeroDegrees are among the players in this market.

The high-tech industry thinks social-networking technology has major potential. The excitement can be seen via the tens of millions of dollars in venture capital that has gone into the technology during the past couple of ears and the fact that such high-profile players as Google, Yahoo and Microsoft are nosing around it.

Then there are services behind the firewall. Such software products as InterAction, Visible Path and ZeroDegrees will mine the contacts in your company’s database, which generally includes the contacts of all the company’s employees and spreads out from there, rather than in public. These are like intranets, available to a select few behind the firewall, such as employees and maybe important customers. There are also variations, such as Spoke, which has both a public site outside the firewall, and a product that resides inside the firewall and can be purchased by  an enterprise. It can also link a company’s in-house contact database, which is behind the firewall, with Spoke’s public site, if desired.

As a general model, here’s how a salesperson might get involved. You either register with a public service, or if our employer has set up a database, you are likely already permitted to use it. You provide information 1) about yourself and 2) about people you know. Now you are ready to go.

If you say you want to meet someone at a certain company in a certain department, but do not have a name, or you want the name of the head of sales at a prospective company, you can enter those targets and the software will go from you to our contacts on the system (first degree of separation) to their contacts (second degree of separation) to subsequent degrees, up to a maximum, usually three to six degrees of separation, until it either finds our target or comes up empty-handed.

If it identifies a path from you to our target, you contact the person you know, explain why you want to meet the target, and then that person decides whether or not to pass on our request to the person he or she knows. Assuming everyone is willing, our request finally lands in the inbox of our target, having been passed on in the last step by someone the target knows. This differs from cold calling in that you are getting in touch with a person via a referral.

Different services work in somewhat different ways. If an enterprise has licensed Spoke, for example, the software creates a private relationship network for that organization. It can be totally isolated from the outside, or it can be connected to Spoke’s central public network. “Larger companies who have hundreds of users may find their own network is large enough,” says Michael Trigg, Spoke’s vice president of marketing. “A smaller company may want to connect with our central network.” The software can pull in contact information.

Using the social-networking functionality of InterAction is, of course, limited to those who work at the 400 or so companies using the product. Each company has its own independent network. John Lipse, director of corporate communications at Interface, sas his firm’s product, InterAction, allows users to lock down entire records or just limited fields within a record. A contact’s office phone may be included on the network, but not that person’s cell phone. “The user can share with no one, with specific groups, or with everyone,” says Lipsey.

You can get involved with LinkedIn, which is the largest public site (it has 650,000 users, whose contacts total 29 million, and is growing at a rate of 30,000 users a week), in one of two ways: be invited by someone on the system and accept the invitation, or go to the site, upload our address book (it works with Outlook, Palm, Macintosh and others) and see who in our address book is on the system. You don’t have to manually upload anything. LinkedIn analyzes our contacts folder and email archives and allows the user to review contacts before they are uploaded. If you upload your contacts, they are not exposed to the searches of other people.

Here’s how Visible Path works, according to Lynda Radosevich, company spokesperson. The company using the software appoints an administrator, typically someone in sales. The administrator emails invitations to join the network to people inside the company and, if desired, individuals close to the company, like attorneys, accountants and investors. Within that email is a link to a small executable installation program. If the person elects to join the network, he or she runs this program, which contains the relationship-mining engine. It shows a list of all the folders and applications that contain relationship information, such as Outlook and Lotus Notes. The user selects the applications and the folders he’d like scanned and protects those he or she does not want scanned. The relationship-mining application scans the applications the individual has agreed to and this information is now part of the network. The information is updated periodically on a frequency set by  the user, usually weekly. People can invite their contacts in but the administrator has to approve. There is no link to any public network with Visible Path.

The technology promises a number of benefits, which is why salespeople need to pay attention to it. Ben Smith, former president and CEO of Spoke Software, cites three benefits: 1) It provides you with knowledge of people you may already have access to but didn’t know you did; 2) It makes you better informed by  providing information about prospects; and 3) It allows you to leverage people who have influence, allowing you to lean on people who trust you.

In addition, it can shorten the sales cycle, as Bond discovered in the above example when he wanted to find a contact at a tire manufacturer. DeToto estimates that using social-networking technology shortens his sales cycle  25 percent.

Anthon Brydon, president and CEO of Visible Path, notes that salespeople can use this technology throughout the sales cycle to identify prospects, qualify buyers, discover where in the sales cycle they are, make contact and find other points of influence who might help with closing the sale. After the close, the system can identify additional points of contact to strengthen the relationship. He estimates that people using his software have reduced sales-cycle time 27 percent, increased their close rate 22 percent and boosted their deal size 10 percent.

Trigg said a study done of Spoke’s early users found that salespeople picked up leads 31 percent faster when the leads came from Spoke, because they were more apt to pick up a lead with someone they had a relationship with. And the conversion from leads to legitimate opportunities increased 126 percent.

Dhillon of Zero Degrees says, “Using our relationships effectively will shorten the time it takes to close a deal  30 to 40 percent.”

Perhaps the greatest benefit of social-networking technology cannot be measured, namely, the opportunities it creates and the contacts it points to that would otherwise not exist. One user tells the story of tring to make a connection to a German company where he knew no one. Using a social-networking product, he discovered that, unbeknownst to him, a group within his own company based in Italy had good.

The Downsides

As with any sales approach, social-networking technology has its negative aspects. One of the more notable may not be readily apparent: this is still new. As such, it’s hardly a proven sales approach. There’s a lot of hype, but less proof. Sure, some sales folk have had success, but most have been using it for only a short time, rarely more than several months.

As an illustration of how new this technology is, LinkedIn, the largest of the public sites, didn’t become a full-fledged offering until late in 2004. The company expects to continue to offer free services and start charging for “premium” services.

Privacy is, of course, an issue. Some sites let you see who all our connections are between you and your target. Others let you know you have connections, but don’t tell you who they are. In this case, if any of those connections refuse to refer you on to the next person, you don’t know who it was that turned you down. If you are asked for a referral, you may be more comfortable in this type of situation. You may not want those you turn down to know you did so.

The time involved dealing with requests can be a drawback. So far, users say they aren’t inundated with requests for referrals, but they do get requests and these take time to deal with. And as the technology becomes more popular and more people join the networks, the number of requests could increase significantly, putting a time burden on those who get lots of requests.

Right now, the technology is new and innovative, and this can help boost its effectiveness. But, over time, if it becomes more commonplace, its novelty could wear off – along with its effectiveness. Over 30 years ago, Richard Nelson Bolles wrote a job-hunting book, What Color is Your Parachute?, that recommended job seekers ask potential employers for referrals to other potential employers. For a long time, this was a new approach, and relatively few used it. But eventually this strategy became so widespread that some employers complained they were being overrun by  job seekers using it. Social-networking software is still new, but it may eventually prove, like the cold call, to have become so popular as to lose some of its effectiveness.

Then there is the cost. Sites such as LinkedIn and Ryze are free, at least for now. Others charge. A “typical” Spoke implementation, says Trigg, runs in the “low six figures,” though individuals using Spoke’s hosted version are charged $40 per month per seat. For InterAction, which is a CRM program with social-networking features, the cost runs $29,000 for a server license, plus a one-time fee of $389 per user license. Visible Path is $100 per year per user.

The bottom line: networking technology accelerates sales. Salespeople and sales managers should definitely consider it. It’s probably worth experimenting with. But if you think this will forever remove the need for you to make a cold call or schmooze with prospects, forget it. This technology, promising as it is, is still to be proven.

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