art-of-biz  

In this segment, we discussed a critical contributor to building a business – capital.  But, we didn’t take the normal road in discussing capital.  We spoke of social capital.  Author of “Achieving Success through Social Capital”, Wayne Baker, defines social capital as “the resources available in and through personal and business networks.  These resources include information, ideas, leads, business opportunities, financial capital, power and influence, emotional support, even goodwill, trust , and cooperation.”

However, the question concerning social capital in business is “how to translate social capital to the bottom line.”  This is where our guest expert, Verna Allee of Value Networks, really opened our eyes.

First, social capital is held within social networks.  Verna indicated that we participate in them on a personal level.  The network does not have a shared purpose working toward common objectives.  However, to maximize social capital we need to evolve the relevant social networks to what Verna calls value networks.  Value networks are people who come  together in a loose association to achieve some business, economic or social good.

Verna adds that value networks actually marry both the tangible assets, e.g., cash, buildings, and the intangible assets, e.g., social capital and human capital, to provide a complete picture of your business strength.   For example, if intangible assets represent 50% or more of the value of your business as research says, a business valued at $500,000 based on its financial would really be valued $1,000,000 at minimum.

To translate intangible assets to the bottom line, Verna says businesses need to first measure performance both in financials and non-financials.  Second, businesses need to identify the people and their roles in the value network.  Third, businesses need to identify the transaction flows, which are both formal/tangible and informal/intangible, between the roles. An example of a formal/tangible flow, or deliverable, is a product.  An example of informal/intangible deliverable is information.  Once businesses are able to identify and map these elements, they can see both the strengths and gaps in the value networks.

Value networks have tremendous power to help businesses cut costs, grow and manage risks.  For example, once the value network is mapped, an entrepreneur can identify costly and inefficient areas.  In another case, you can use the value network to identify new growth opportunities in product and service offerings.

In actuality, using social networks and value networks goes hand in hand.  However, each serves a different role.  For example, social networks are great for company, brand and product awareness activities.  Value networks helps you identify and manage ways to increase the value of your company, brand and/or product to your customers.

Take time to listen to the entire radio segment. (http://www.blogtalkradio.com/art-of-biz/2009/11/12/Power-Push-Using-Social-Capital-for-Success)

To learn more about translating social capital to the bottom line, visit http://www.valuenetworks.com/.  In particular, check out Verna’s paper, “Value Network Analysis and Value Conversion of Tangible and Intangible Assets.” (http://www.openvaluenetworks.com/Articles/Value_Conversion_JIC_online_version.pdf)

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