In this chapter we will discuss networks. You as an individual are located in a network. Also companies are located in networks. Network position is important, but how do these positions emerge? Do they emerge purely by chance e.g. you decide to move and live in another city, or you were offered a study opportunity abroad? One things leads to another and there you are.
Or is it the other way round? All your friends know that you are e.g. an excellent arranger of parties, or great in mathematics and because of these skills everybody always contacts you relating to your particular expertise.
At the end of the day, this is a difficult chicken and egg problem: do you e.g occupy a central position because of your particular competence or have you emerged to occupy a particular competence position because nobody else in your immediate network has neither had the interest or the skill? Understanding networks is difficult: It can become even more difficult if one needs to take into account both the network position and then combine that with the idea of inter dependency (game theory). However some insights can be learnt and I hope that you will find them interesting.
Family networks are networks we are born or married into. A very famous network is the Medici family network in the 1400. We are also born into religious networks. A recent book (Linjakumpu 2018) studies a particular religious network in modern Finaldn and its effects on entrepreneurship.
One of my favorite movie scenes is the scene known as ”clever girl” in the movie Jurassic park. In this particular scene the well equipped and experienced hunter meets the long since extinct dinosaur. Have a look at the clip.
(note the bove video has a creative commons licence)
The movie clip paints a very competitive environment. It also demonstrates that by co-operating as a network we can outsmart the toughest competition. In many cases we succeed by helping each other, companies become successful also by collaborating with each other. However remember that there is a fine line between legal and ilegal collaboration.
It is very difficult for us humans to understand and observe what our position in a network is. Are we in a particular position because of unique assets either material resources or intellectual competence? Above all even though we might be creating value through our competence, we need to understand how we can divide this value and in particular how do we capture the value to ourselves.
In this chapter I will guide you through a structured approach to understanding networks. Also I encourage you to think, how in your personal life, you will be and could be a builder of value, how you share this created value with others and how you need to act to also capture the value to yourself.
Measuring Networks
In the first clip, please have a look at some of the many different ways position in a network can be measured (adapted from Coursera course, Networks without Calculus).
The Book Analyzing Social Networks (Borgatti et al 2018) is a good source for understanding many of the difficulties and details in doing research related to social networks. One of the challenges is understanding the mathematics related to networks, but there are also many challenges related to the research design and also on the reliability of social research.
Games in Networks – insights into the value creation and value capturing process
In the next video I take an example from the Harvard Business review article ”The Right Game” from 1995 by Adam Brandenburger and Barry Nalebuff. The article has several nice examples and makes a nice read, I recommend you access it through your university library or visit a university library. The article might be accessible through Google search, but I also recommend that you try and use Google scholar and if you are a student at some university, connect your university library to google scholar (type how to connect my university library to google scholar on your search engine for directions. Note reading the article might take an hour or two, but to really understand it you should spend far more time.
Porter´s five forces is a classical way and well established theory on how to evaluate a companies strategic position in a network. The Brandenburger, Nalebuff model is sometimes referred to as the sixth force, although Porter himself does not accept the classification. In a recent article Ryall (2013) has argued that five forces are not needed and that it is enough that there is one connection between parties.
The book The Network Imperative (Libert, Beck & Wind, 2016) lists ten strategies for creating network value. I recommend you look into the book. These ten principles are:
– Principle 1, Technology: From Physical to Digital
– Principle 2, Assets: From Tangible to Intangible
-Principle 3, Strategy: From Operator to Allocator
– Principle 4, Leadership: From Commander to Co-Creator
– Principle 5, Customers: From Customers to Contributors
– Principle 6, Revenues: From Transaction to Subscription
– Principle 7, Employees: From Employees to Partners
– Principle 8, Measurement: From accounting to Big Data
– Principle 9, Boards: From Governance to Representation
– Principle 10, Mindset: From Closed to Open
This is a good list to keep in mind and to look at the business you are in and to reflect where you and/or your business is at the moment.
References
Borgatti, Stephen P.; Everett Martin G.;Johnson, Jefrey C.; Analyzing Social Networks, Sage Publications 2018
Brandenburger, Adam M., Nalebuff, Barry J. The Right Game – Use Game Theory to Shape Startegy, Harvard Business Review, July-August 1995
Libert Barry, Beck Megan, Wind Jerry, The Network Imperative, How to Survive and Grow in the Age of digital Business Models, Harvard Business press 2016
Linjakumpu Aini, Vanhoillislestadiolaisuuden Taloudelliset verkostot, Vastapaino 2018
Ryall, Michael D, 2013 The New Dynamics of Competition – an emerging science for modelling strategic moves. Harvard Business Review June 2013 p 80
Porter Michael, How Competitive Forces Shape Strategy, Harvard Business Review March-April 1979
The Digital Landscape 