A Social Capital Model for Business

What is “Social Capital?” It is a measure of both the economic and non-economic value of ones social ecosystem. And the context of this article, the online social network. More specifically, it’s about engagement. At an individual level, most of us measure the value of our social connections using very soft, non-economic terms, who we dialog with, who we follow, what we self promote, etc. A business should take a more nuanced and qualitative approach by developing an ROI model of their social capital.

However, measuring social capital can be a real pain. What do you measure? The easiest metrics like the number of connections, the number of follower or the number of posts, really don’t give true insight as the value of the network.

Also, by focusing on an ROI model, it lends greater credence to its overall importance to one’s business – and that it is as importance as any other financial metric of a company. Start at the end – that is, what metrics best reflect the value of social capital. Once there is an understanding of these metrics, we can better understand the strategies and tactics to increase the value of our social capital.

The 3’Rs of Engagement

Social capital is fundamentally a measure of the type of social engagement among participants within your ecosystem. Every business is different but there are three fundamental metrics, or the 3’Rs, reputation, referral and reach. These three can then be combined into a singular, Net Social Capital Index.

Reputation is a reflection of how well a company is in building their brand online. These include such components as thought leadership, innovation or customer satisfaction.

Referral is a more active metric. That is, does your community recommend your company to others? This is much different than what is often done in a customer satisfaction survey where a customer is asked it they are willing to recommend or have recommended the company to others. These are you influencers of opinion – a very important element to know. Online, we can actually see what members of your network are telling others about your company and/or its products and services – both positive and negatives.

Reach is a measure of the ability of your network to amplify your messages, that is, what is commonly referred to as the network effect.  Its not simply the size of your network. Reach is an exponential metric. For example, having 100,000 connections within your network is one thing but if each of those connections have reach of 100, that is orders of magnitude more powerful.

I’ll leave the process of how one actually measures the 3’Rs of social capital and how to combine them into the Social Capital Index for another article.

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