Two Cornell University mathematicians have now shown that small worlds are probably common in many networks found in nature and are easy to create in systems as diverse as networks of people, power grids and the neurons in the human brain. All it takes is a few extra random connections. ~June 4, 1998, Bill Steele, Cornell University
The keys to the game “Six Degrees of Kevin Bacon” are the connections between Kevin Bacon and other actors/actresses through the films they worked on together. This is how it works – actors are connected by 1 degree if they have worked on a film with Kevin Bacon. If an actress knows an actor that worked with Kevin Bacon, the actress has 2 degrees of separation from Kevin Bacon. This is the same as the website Linkedin showing that you are linked to the VP of Marketing at ACME because your neighbor knows her. With each degree of separation the numbers of people in your network increases exponentially.
In the context of Business Networks, companies are connected to each other through business relations that are often transacted by EDI or B2B data exchanges. Company A may send EDI messages to company B, and in turn company B sends EDI messages to company C…
It is interesting to think about the concept of Small Worlds and Six Degrees of Kevin Bacon as it relates to Business Networks using electronic data exchanges (EDI/B2B).
- Company A electronically connects with company B via an EDI/B2B managed services hub, and sends electronic purchase orders to, and receives electronic invoices from, company B.
- These electronic data exchanges(purchase orders and invoices) are first configured and then added to the repository in the EDI/B2B managed service hub they both share.
- Eight additional companies join the EDI/Managed services hub and then query the Hub’s repository and find they can make use of those pre-configured electronic purchase orders and invoices to also communicate with companies A & B.
- The eleventh company that joins the hub can connect to these electronic data exchanges with all 10 companies that are using them (assuming they conduct business with them)
- Company A can see that company B is also exchanging electronic ASNs (advanced shipping notices) with 34 other trading partners – 28 of those trading partners also do business with company A.
- Company A requests connections via the hub to the 28 using the pre-defined ASN messages. Connecting once to the ASN enables company A to support and exchange another 28 electronic messages with trading partners with very little effort.
- Each of those 28 companies can now view and understand how they can connect with other companies that utilize the hub. This is what is called the Network Effect! Every new connection adds value to all business network participants.
- If 1,ooo companies on the hub each activated one new and unique trading partner per month you would have 12,000 additional companies on the network each year with pre-configured and pre-defined EDI/B2B messages. Working on your own would provide you with only 12 new trading partners per year rather than 12,000. The second year, with no growth you would have over 24,000 companies on the business network rather than just 24 that you could add on your own.
- The value of connecting to a rapidly growing EDI/B2B managed services hub grows exponentially each year that it operates. Again, let’s consider the value of Linkedin. The value of Linkedin increases substantially with each new contact and their network that is added. It works the same way with an EDI/B2B managed service hub.
“It’s not just the world of people that’s small,” says Steven H. Strogatz, professor of theoretical and applied mechanics. “There’s a unifying mechanism in nature that makes things small.” The useful part is that adding just a few connections to something like a cellular phone system or perhaps even the Internet (or EDI/B2B Business Network) might greatly speed up communication. (June 4, 1998, Bill Steele, Cornell University)
The game of Six Degrees of Kevin Bacon works because the links between clusters (i.e. films and actors/actresses) are collected, stored and queried in a database that is accessible. The same is true with Linkedin. The value of Linkedin is the gathered, stored and searchable database of links between people that is accessible by others. The world of EDI/B2B is being transformed with these same aggregation strategies. Gather the names of the companies, their links (supported EDI/B2B messages), integration maps and make this information accessible for reuse by the entire business network.
So far in this article we have just focused on the value of the network effect as it relates to connecting with other companies quicker and easier using pre-existing connections that are listed in a data repository. There is an even more powerful network effect if the participants share the same back-end software application, such as SAP, and use the same set of pre-defined business processes. Why, because if the back-end application and the data that is produced and consumed by this application’s business processes are known in advance, then they can be pre-built once and used millions of times in the business network. The efforts invested in the first implementation can be reused by the entire business network that share the same back-end software application and business processes.
If the EDI/B2B managed service hub added and stored information on SAP and its business processes that are connected to the EDI/B2B managed services hub, you could quickly connect your SAP business processes to all other trading partners that produce or consume those SAP centric electronic exchanges. In addition, if the EDI/B2B managed services hub was also built on SAP Netweaver technology, then the back-end integration would become even simpler and Netweaver would become, in effect, your gateway to the EDI/B2B hub and the entire business network. Suddenly, there becomes the very real opportunity to quickly and cost effectively communicate EDI/B2B messages with potentially tens of thousands of connected companies in a business network.
It is important to recognize what makes a network effect possible. The network effect is not available if a company chooses only to use point-to-point EDI/B2B communications from your private internal EDI/B2B system. The network effect requires the aggregation of company and EDI/B2B message information across a community or business network. The network effect is the result of reusing and exploiting all the connections and integrations that other business network participants contribute to the managed services hub. There must be a centralized data repository that enables companies to recognize and realize reusability of EDI/B2B connections and SAP (or other ERP) integration maps.
The Six Degrees of Kevin Bacon game demonstrates how easy it is to be connected to people around the world. In the game, it has been found that nearly everyone on the planet is connected to everyone else within 6 degrees of separation. In the world of business the degrees of separation are even less. Taking advantage of this phenomena in the world of business requires connecting to other companies that share a common business network and an EDI/B2B hub. Exploiting this phenomena is called Business Network Transformation.
The question for business managers and IT managers today is this – are you taking advantage of business networks, the network effect and the phenomena of the Six Degrees of Kevin Bacon? If not, you are significantly limiting your EDI/B2B value and potential. Most companies that limit their EDI/B2B communications only to the connections that their internal EDI team can fit into their busy schedules rarely implement with more than 10-20% of their trading partners. Implementing with only 10-20% of your trading partners severly limits the potential ROI, real-time visibility to data and costs savings available to companies that automate their external business processes.