1. 1.2.2017 Data-driven business Professor Henri Schildt
Graphs and networks
Data-driven business
Professor Henri Schildt

2. The relational way of thinking
Sciences have traditionally focused on the attributes of various ”things”
Network perspective draws focus on the relations in-between
Examples
Communication networks, information flow
Friendships, interpersonal trust
Flows of resources between companies
Source e.g.: Emirbayer & Mische (1998), American Journal of Sociology

3. Network Analysis is: An alternative way to view the world
Instead of the properties of actors, we examine the properties of relations among actors
Selection of methodological tools
Measures, algorithms, survey designs, data representation techniques, etc.
Research program(s) in social sciences
Directs the attention of scholars to certain research questions and constructs

4. The History of Social Network Analysis
Morenon graafit piirrettiin käsin. Laatikot poikia, ympyrät tyttöjä.
Moreno’s (1930) description of friendship ties in a school class. Data is based on self-reported information (a survey). Boxes are boys, circles are girls. ’M’ denotes mutual (bi-directional) friendship.

5. Network Analysis Timeline
18th century: graph theory
Invented by Euler to solve the bridges of Köningsberg puzzle
1930s: Moreno invents sociographs
1950s: Harvard studies
Hawthorne studies and ”Yankee city”
1970s: Methodological development
”Social Network” Journal founded in 1978
1990s: Social network analysis becomes common in strategic management & organization theory
Physicists become increasingly interested in networks
2000s: ”Social networks” start-up hype
Physicists re-invent many social network concepts

6. Attribute vs. relational data
Networks are represented as graphs. Circles denote the members of the networks, nodes. The lines represent ties or relations between nodes. The radius of circles typically represents some quantitative attribute of the node. Width of lines represents tie strength.
Motorola
Attribute data corresponds to the properties of nodes. E.g. for comapnies: the number of employees, sales, revenue, profitability, market share, etc. 1 3 5 10 6
Relational data corresponds to ties (relations, connections, linkages) between nodes. In strategic networks, such data may include e.g.: the number of alliance deals, the extent of mutual trust, the intensity of communication, mutual investments, the amount of trade, and other forms of interdependence. 1 5 3
Nokia
IBM
Samsung
Symbian

7. Relational and structural theories
Network studies distinguish different forms of effects concerning
(1) The relationship between two actors
(2) The wider structure of the network
Motorola
Let’s suppose that ties represent knowledge flows between companies.
What benefits does IBM gain from the fact that none of the other companies have ties to Samsung?
Nokia
IBM
Samsung
Symbian

8. Some relevant forms of networks
Social networks
Nodes are individuals
Ties represent friendship, trust, communication intensity, task relatedness (workflow), etc.
Strategic networks
Nodes are firms
Ties represent strategic alliances or other repeated interaction among companies
Other interfirm networks
Ties represent firm similarity, interdependence, flow of money, communication, knowledge flow, common members of the board

9. Gephi – plotting networks
It’s not great, but it is free and powerful
Loads of add-ons you can install to do stuff
Let’s see if it works
Open up first the Jazz network
Filter nodes & edges
Go to Window => Filters
Select Edges => Weight (& adjust)
Select Topology => Degree Range (& adjust)

10. Deep structural holes & good ideas

11. From affinity matrix to network
We can turn attribute data to similarity data
Can you figure out how similar students are based on the courses they attend?
Can you figure out how similar the courses are based on the students who attend?
Data-driven business
Strategy work
Intl. Human Resource Mngmt.
Mary 1
Paul
Jack
Kate

12. How to create affinity matrix?
To 4x4 matrix with similarity of people, choose 4*4 area, write the formula
=MMULT(<matrix>; TRANSPOSE(<matrix>))
+ press shift+ctrl+enter
To create 3x3 matrix with similarity of courses, choose 3*3 area, write the formula
=MMULT(TRANSPOSE(<matrix>); <matrix>)

13. Entering data into Gephi
Compose an affinity network based either on the courses you have taken or your hobbies
Include some friends you know
Copy the matrix you created, and paste it into a new worksheet
You need to do Paste Special & choose “Values” so that you don’t paste the formulas
Alternatively, form the new matrix into a new sheet
Save the worksheet as a csv file; now you can open it in Gephi

14. Can you use this approach to map out intensity of competition among airlines?

15. Free web-based tools quite strong