Networks: A Powerful System

Networks deliver three unique advantages: private information, access to diverse skill sets, and power. Executives see these advantages at work every day, but might not pause to consider how their networks regulate them.

When we make judgments, we use both public and private information. These days, public information is easily available from a variety of sources, including the Internet; but precisely because it is so accessible, public information offers significantly less competitive advantage than it used to.

Private information, by contrast, is gathered from personal contacts who can offer something unique that cannot be found in the public domain, such as the release date of a new product, unpublished software code, or knowledge about what a particular interviewer looks for in candidates. Private information, therefore, can give top executives an edge, though it is more subjective than public information because usually it is not verified by an independent party, such as Dun & Bradstreet. Consequently, the value of your private information to others—and the value of others’ private information to you—depends on how much trust exists in the network of relationships.

Lisa Bristol (not her real name) is the president of a financial institution in the mortgage-lending industry. Historically, her firm had hesitated to share private information with potential alliance partners for fear of appropriation or misinterpretation. Bristol realized, however, that when she began developing trust with them through trade shows and informal shared activities, private information started to flow in both directions. This helped Bristol solve problems and develop financial strategies more efficiently than when she relied solely on public information, which most of her competitors also possessed. For example, the public information concerning her industry indicated that success was based on price points. But, through her network, Bristol became one of the first executives to piece together the features of her industry’s new competitive driver: She learned that some companies had been experimenting with value-added services and that they were achieving greater success than companies that relied on price points. By using this information, she was able to position her company at the forefront of this trend and capture market share before other companies attempted to move into the niche.

The next advantage that a network like Paul Revere’s confers is access to a diverse array of skill sets. Linus Pauling, one of only two people to win a Nobel Prize in two different areas and considered one of the towering geniuses of the twentieth century, attributed his creative success not to his immense brainpower or luck but to his diverse contacts: “The best way to have a good idea is to have a lot of ideas.” While expertise has become more specialized during the past 15 years, organizational, product, and marketing issues have become more interdisciplinary, which means that individual success is tied to the ability to transcend natural skill limitations through others. Highly diverse network ties, therefore, can help you develop more complete, creative, and unbiased views of issues. And when you trade information or skills with people whose experiences differ from your own, you provide one another with unique, exceptionally valuable resources.

The final advantage of a network like Paul Revere’s is power. Traditionally, executive power was embedded in a firm’s hierarchy. When corporate organizations became flatter, more like pancakes than pyramids, that power was repositioned in the network’s information brokers, who could adapt to changes in the organization, develop clients, and synthesize opposing points of view. These brokers weren’t necessarily at the top of the hierarchy or experts in their fields, but they linked specialists in the firm with trustworthy and informative ties.

Most personal networks are highly clustered—that is, an individual’s friends are likely to be friends with one another as well. Most corporate networks are made up of several clusters but with few links between them. Brokers are especially powerful because they connect the separate clusters, thus stimulating collaboration and exploiting arbitrage among otherwise independent specialists.

When Bristol actively expanded her network to include people whose expertise and positions differed from her own, she could link with brokers in her own field as well as in other areas that were strategically important to mortgage lending. These ties spurred creative problem solving and prompted invitations for Bristol to speak at industry events that valued and showcased forward thinkers. Soon, she earned a reputation for spotting promising innovations in their preview stages. Informal post-talk discussions spilled over into formal office discussions, and Bristol went on to lead an advisory group made up of ten high-level financial executives. Bristol didn’t need to change her work style fundamentally or develop an entirely new expertise to achieve this success. Rather, she used her new network to turn what she already knew into power, both individually and for her firm.

Sometimes, however, the advantages of private information, access to diverse skill sets, and power, can work in opposition to one another. Choosing contacts to maximize a sense of trust in your network, for example, can inadvertently undercut its diversity—that’s what thwarted William Dawes’s network. You can avoid the pitfalls, but first you must learn how to diagnose your network.