Peru, Business and SNA - Arnaldi Paredes

   My home country is Peru. In the last 30 years, we have witnessed deep social, political and economic changes. An internal civil war and terrorists associations that killed several thousands of people characterized the second half of the 80s and the beginning of the 90s. For the rest of that decade, the country went through a recovery process, but politic corruption and human right’s abuses kept the country far behind when compared to our closer neighbors, such as Chile and Brazil. The new century brought new hope. People could feel a change atmosphere, society started the healing process after all the violence (which is still going on now), and finally Peru became an attractive target for foreign investments, which helped economy recovery.

In 2014, according to the Latin American Trade and Investment Association (LATIA, 2014), Peru is one of the best places to invest in the Latin-American region because of:

• Sustained growth of the economy in the last ten years.
• Strategic location in South Pacific.
• Increasing participation in the global market.
• High potential sectors such as energy, hydrocarbons, culture, capital market, ports, telecommunications, land, tourism, mining, agriculture, among others.

View of Business Centre, Lima - Peru

In the last 15 years, several foreign investors and businesses got in to the country with innovative models, and venture capitalists started looking for new opportunities. Some of them succeeded, some of them failed. The question I have been asking myself for some time is how new investors and businesses can be helped to make the best of their investments in a place they don’t know well? What are they missing and how can they get it? After spending the whole weekend in the SNO class, I finally saw the light. Perfect plans only work in a piece of paper, but when brought to reality, they fail if they don’t know the real market they are getting in. And knowing the market is translated into knowing people, knowing who is who, and understanding how social networks work in a particular place and how to take advantage of them.

In 2011, SNA expert Erich Sommerfeldt, an Assistant Professor in the Mass Communication and Communication Studies Department at Towson University, performed a SNA in Peru to

“(…) identify the structure of the network of media development organizations in Peru, that is, organizations (donor or otherwise) that are somehow connected to the advancement, reform, or protection of Peruvian journalism and free media. The results of the network analysis show that the Defensoría del Pueblo (the ombudsman’s office) was thought to be the most important actor with whom to maintain a relationship in the media development community, as well as one of the most trusted and cooperative organizations in the network.”

In this example, it is clear that the only way to understand how people and organizations are connected, and who has more power or influence, is through understanding the social network. For a foreigner, formal structures do not say much about how a particular market or industry work, who has power and influence, which are the key contacts, and how to get things done. A SNA says a lot about it.

Imagine that a foreign investor or company is analyzing the chance to get into the Peruvian market. Besides the financial and marketing analysis, the next big question is how to make this work, whom should they contact? Is there any powerful potential partner they should be looking for? How to identify and hire the best management team for that specific market? These questions can be answered by a SNA.

SNA put into action

Before deciding to get into a market:

• Identify potential partners (organizations or people) and through a SNA, analyze which one is more powerful and influential.
• Identify possible candidates for the management team and determine who is best connected, who has more influence. Skills and experience are written in a resume or LinkedIn profile, but real influence is discovered through SNA.
• Communities have strong power, and can make the difference between big success and failure. Mining companies have understood this several years ago, but none of them has applied SNA to understand who the community leaders are, who influences whom. Understanding this could save a lot of time, money, and will make the difference between success and failure.
• Political and legal issues have a big weight when getting into a new market. A SNA would allow uncovering the way this world work. Sometimes the person with the highest position is not necessarily the most influential, and it is important to discover this to determine who would be a key ally to overcome any political, and legal issues (obviously, within ethical limits).

Consulting firms focused on evaluating new investments in Peru have a big opportunity to offer this service as part of their analysis. The chance of advising successfully to their clients would be higher, and it would contribute to maintain or increase economic growth in Peru. Wisely understanding social networks is the new business strategy and can become a competitive advantage for any business that is willing to do it well. The opportunity is there.