Blog Assignment: leverage social networks in the B2B secondary market.

Introduction

The Hult Impact Challenge (HIC) is an eight-month, hands-on project during which every team needs to provide an impactful solution to a problem faced by a company. In our team, we worked on the circular economy concept for Philips. The goal was to eliminate wastes in B2B by encouraging harvesting and refurbishing initiatives. To tackle this challenge, some of the competitor teams worked on creating reverse supply chains for the harvested components. Others, thought about creating new warehouses to store this old components. For both cases, costs are high and the projects might not be financially sustainable. The solution we came up with in our team does not require any infrastructure. It consists of creating a network between all the electrical subcontractors in New England through an IT platform. In the first part of this article, I will explain more in details the concept behind our solution, and in the second part, I will focus on the major takeaways from social network analysis that we can use in order to improve our unique value proposition.

Part I

There are two types of operations done by the electrical subcontractors: 

• Installment of new components.
• Dismantlement of old deployed components. 

After being dismantled, the old components are thrown away and in 80% of the cases these equipment are still working and still have a long life expectancy. Our idea is to connect companies through an Add-on that we plug into Philips website. This way, the potential buyer of new components will be proposed to buy old components (as it is done today on Amazon).

Of course to spot this kind of opportunities, there is a whole process of profile matching which should be done, according to the geo-localization of both companies, the period during which the selling company are willing to keep this old components in its inventory, the remaining life expectancy of these components, etc...This Add-on will also allow the companies to rate each other, follow one another and to re-post the selling announcement done by other companies (same principle than re-tweeting)

Part II

For sure we will not save all these old components from being wasted: we only target to save 1% in the first year. However, the first year will be very useful to identify the key players with whom we will work during the second year. First of all, the partners: this means the companies who participate the most in this program, who buy old components and who succeed to sell the ones that they dismantle. This companies are likely to create also matching opportunities between other companies within their network. For them, Philips will be very willing to provide incentives (e.g. carbon footprint certifications, discounts on the new components) to encourage them to keep participating in this program. To identify this partners we will use the Centrality Measures and we will look for the high-level leaders in the network, those who have the highest Eigenvector and betweenness (i.e. the most influential players).
However, before that, we need to define the connections. We can say that we have a connection each time that we have a transaction between two companies (One company is buying from the other) or we can create more complex type of connections which takes into account a weighted combination of the following facts: whether there is a transaction; whether one is a follower of the other; whether they are close to each other geographically.

Finally, the most important part is how to identify the missing connections. With the market research that we did, we came to realize that companies from Massachusetts generally know each other, and even know on which project the competitors/counterparts are working on, but they do not know what happens in the neighboring states.  Here, a real optimization process needs to be done: what are the two companies from different states that, by connecting them, we will increase considerably the density of the whole network?  
Valdis Krebs is making a very good point is his article by saying that “the optimal connection in network efficiency […] may not be a practical connection” because when it is about spreading awareness of the different refurbishing opportunities in the network, it is better to create a new big player than to add a new connection to an existing big player. That’s why I would go for the one who has at the same time high Eigenvector and low Degree (i.e. the one who is connected to many influential players, but who does not have a lot of connections himself). Now creating this missing connection should not be very difficult as we can always use the recipe given by Cross and Parker in their book: invite both companies to one event (e.g. conference in Philips headquarters) or invite those responsible to a fancy show (Opera, Theatre) in which we can decide in advance about the seating arrangement, etc… 
Of course the higher we succeed to improve the density in the network over the years, the more opportunities of harvesting and refurbishing we will spot. What we are trying to achieve, compared to the other teams, is what the sociologist Ronald Burt describe as the creation of a competitive advantage by leveraging the network effect and creating the ties that connect the parts inside of the network.

Conclusion

For the sake of simplicity, I deliberately chose to omit all the constraints related to the challenge as well as a lot of details related to our ongoing project. But the idea is this one: How to use social networks to get rid of the need of infrastructure and replacing it by a distributed system in which we take advantage of the storage capabilities of all the participants in this program. Then how to use social network analysis to identify the key stakeholders and manage at the same time the global awareness of the whole network. Finally, how to identify the missing connections that we need to add, which can improve drastically the performance (hence the profit) of the network. These are some key questions, among many others, that we need to address as accurately as possible if we want to win the competition and meet Philips investors next August in Davos.