IMD: Leading through networks

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We're here at IMD's restaurant, called The Meeting Place, to emphasise networking. Leading through networks is critically important in global firms. Hierarchies are, of course, important. Hierarchies help us understand where the lines of decision-making and authority are. It's important in global firms that the hierarchies are clear but relatively simple. As we talked about yesterday, if they're too complicated, then nobody knows where to go to for advice or for decision-making.

But to complement those clear, simple hierarchies, it's important to have networks. Networks are systems of relationships that cross boundaries across the network outside the organisation in order to pass on information and influence to get things done. OK, you know what organisational charts look like in the hierarchy, the picture of the hierarchy. Let's take a quick look at what a picture of a network looks like.

Here's an example of a network. This is the flow of information and communications in a key account team of a global financial services organisation. You can see in this team, which is actually the flow of the communications, how they talk to each other, who talks to whom about the account.

This looks quite different from an organisation chart. In fact, it's difficult to tell in this picture who's the boss or the managing director of this team. In fact, it's number one. It's this person here, but this is not the same person who receives most of the communication. So the hierarchy helps understand where the decision-making accountability and authority are, but looking at this helps us to understand where the communication flows are. And it helps this team to assess whether or not the right people are talking to the right people.

Now, every global leader needs two basic kinds of networks. And it's best to think of these as fishing nets and safety nets. We use fishing networks, so networks of humans, to catch all kinds of resources-- obviously to catch ideas, to catch innovations, but also to catch people, for example, new recruits, new candidates for your organisation. Also to catch customers. We can use fishing nets to catch customers, to catch suppliers, alliance partners, financing partners. Any kind of resource that your company needs can be fished through a human fishing net.

The characteristics of a good human fishing net are similar to those of a good real fishing net. For example, you want the connections to be as far apart as possible. In other words, if everybody in your fishing net knows everybody else in the fishing net, then you're just catching the same information or the same resources over and over again. It's much more efficient to have connections that do not know each other. And then the connections should be spread over as large an area as possible, and the net should be cast in the right place. So for example, if you're looking for financial resources, and you're fishing net is cast over university researchers, you're probably not going to catch the right resources.

Let's take a look at one company's fishing net. This is the fishing net of a global engineering firm. And the different colours represent people who are in different countries spread across the world. The lines represent knowledge paths. These are people who know about each other's work, and therefore tend to share knowledge along these paths.

We see that, in general, this is a pretty efficient fishing net, that knowledge about engineering applications in different parts of the world can pass around the world through some of these key connections. On the other hand, there are a couple of people down here who happen to specialise in pharmaceutical plant applications in Latin America that are not connected with the rest of the net. And if somebody over here needs to know about pharmaceutical applications, they're not going to be able to get the knowledge. So when the company saw a picture of this fishing net, they knew that it was important to create some ties between these people and the rest of the net in order to fish better for their ideas.

So the fishing net is the first kind of net that all global managers need to catch resources. The other kind of net that's important is a safety net. A safety net, for example, the ones used by trapeze artists or tight rope artists in circuses, catches you when you fall. The characteristics of a good safety net is that the holes are smaller so that nothing falls through. The ties are very, very strong, and they're also very flexible.

Other things being equal, safety nets can be smaller than fishing nets, because they have to catch just something in a very specific area. Human safety nets do the same thing. These are our networks of very strong, close, trusting relationships. These are the people that we can discuss things with and try out new ideas with.

For example, I'm thinking of launching this new service idea next week, but I'm really worried about how some of the employees might take it, because it's going to change how they work together. What do you think? How should I do that? That's the kind of question you can ask your safety net. Also if something fails, your safety net is the group of people that catch you and bounce you back up again. Because global management is so full of complexities and risks, it's important to have a strong safety net.

Let's take a look at one person's safety net. In this case, this is a private banker in Moscow. And for his business in private banking, he really needs to have everybody in his network knowing each other very, very well so that he has a safety net through which he can do business to catch him in the uncertainties and the unpredictabilities of the market that he's in. When he saw this network, he was quite excited, because this is exactly the kind of business he feels he needs in order to be effective. His safety net is for doing business. His fishing net is a different network.

So all global managers need both fishing nets and safety nets. And I would ask you to think about two questions. The first one is, do you have the right fishing nets and safety nets? In other words, are you set up to catch the right resources and also to take risks and use your safety net? But the second question is, are you using them?

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