Category Archives: social networks

Collaborate to Innovate: Learning to Unlock Value from Your Alliances and Partnerships

How can you achieve competitive advantage using your alliances and partnerships?

What is “Network Advantage” and how can your company benefit from its collaborations with customers, suppliers and competitors?

How do giants like Philips and Samsung achieve profitable growth using their alliances?

I recently gave a 7 min TEDx-style talk for INSEAD Alumni reunion to answer these questions.

Collaborate to Innovate: Learning to Unlock Value from Your Alliances and Partnerships

How can you achieve competitive advantage using your alliances and partnerships?

What is “Network Advantage” and how can your company benefit from its collaborations with customers, suppliers and competitors?

How do giants like Philips and Samsung achieve profitable growth using their alliances?

I recently gave a 7 min TEDx-style talk for INSEAD Alumni reunion to answer these questions.

Benefit from the networks of your lost employees

Is losing employees bad for your firm? An intuitive answer would be a straight “yes” because by losing employees, your organisation seemingly loses not only its human capital (i.e. their skills and tacit knowledge accumulated over the years) but also its social capital (i.e. all the internal and external connections your employees have made over their career inside your firm). In other words, conventional wisdom suggests that by losing employees, companies lose both brains and address books. This idea is out of date.

The late 1980s spawned the War for Talent mantra: in essence, firms have to make sacrifices and be very creative to retain talent. Hence management should attract the best, make sure they grow, keep them as long as possible and make sure they do not leave. Twenty years ago, these were considered insightful and thought-provoking ideas. Talent was seen as a scarce resource in an increasingly competitive and globalised world. We think that the rules of the game have changed. Fighting to get the best talent is still important, but having the courage to let them go is also crucial because there are benefits in letting people go, whether in good or in bad economic times.

My research at INSEAD, together with Frederic Godart and Kim Claes focusing on the antecedents and consequences of performance in creative industries, shows that firms can actually benefit from losing employees. To back our claims, we conducted an intensive study of the global fashion industry, including dozens of interviews with senior industry executives, and collected information on the careers of thousands of fashion professionals. Using this wealth of data, we analysed the impact that losing designers to competitors has on the performance of fashion houses.

Surprisingly, we found that designer departures can actually lead to greater performance of fashion houses that lose them. This can be attributed to the ability of source fashion houses to benefit from the social capital of departed designers. First, gaining information about what competitors are doing is critical, because this is how houses can gain insights into the newest and hottest trends. When designers go to work for another fashion house, they maintain contacts with their former employers, while creating new connections in the new place of employment. These contacts result in an informal communication bridge between the two houses and through this bridge the ‘source’ house can learn what is going on at competitors. The insights collected from different competitors can enable source houses to generate new ideas and produce more creative and critically-acclaimed fashion collections. In the fashion industry, famous designers pay a lot of attention to where their assistants and apprentices go and maintain close relationships with them. This holds also true in many other industries where alumni maintain close relations with their former employees: both the international consulting firm McKinsey & Company and global consumer products manufacturer Procter & Gamble (both unequivocal leaders in their respective fields) maintain strong networks of departed employees that feed their former organisations on the whereabouts of clients or competitors.

Second, departed employees can be a basis of a source house’s influence in the industry. This is because departed employees expose competitors to the house’s operating philosophy and principles, which increases the industry’s perception of the house’s creative thought leadership. Thus, fashion houses such as Prada or Marc Jacobs have become ‘platforms’ of recognised creativity. Designers join these houses for a while, learn the trade of fashion there – generally with a clear focus, for example, on knitwear or leather – and move on to work for the other fashion houses spreading the positive buzz about their prior employers. Other top fashion houses such as Lanvin are generally well known to expand their influence in the fashion industry by letting designers work at other places: for example in the case of their recent collaboration with H&M, a way for the company to grow its market. In other industries, companies like GE also rely on their past employees to showcase their thought leadership and spread their management methods, such as renowned quality management methodology Six Sigma, which leads to new business for these companies.

Third, designer departures enable organisational turnover. When designers leave, they provide room for new designers to come into the fashion house and bring their unique experiences from the outside. This brings in fresh ideas, positively impacting creative performance. Moreover, some fashion houses purposefully let some of their people go to work for competition in order to help them develop their careers and not feel upset from the lack of personal development opportunities. As one of the fashion executives interviewed for this article put it: “If our company cannot provide room for a designer to grow, we would prefer that he or she goes work for the competition as opposed to staying with us and feeling unhappy.” As it turns out, unhappy designers are also not very good contributors to organisational performance, but a designer who left to work for a competitor might return at some point to the source fashion house with newly-acquired expertise. Top consulting companies know this and do not hesitate to ask their young analysts to leave for a while, before coming back as associates. This is also the raison d’être of MBA programmes: provide high-potential employees with new horizons. Let them come back if they wish; some degree of turnover is good for employers and for employees.

Whole industries, beyond fashion, are based on the premise that letting people go is not necessarily bad. Think about how high-tech firms in Silicon Valley rely on personnel exchanges to grow and get new ideas. This is also true of the Hollywood and ‘Bollywood’ movie industries where temporary teams of actors, movie makers, producers, technicians and script writers assemble temporarily and move across projects. In banking, analysts and investment bankers do not hesitate to move around, to the benefit of their employers who can get them back later with better skills.

Letting some people go is healthy and the biggest beneficiaries of talent loss will be firms which recognise that departed employees and their networks are important drivers of competitive advantage. Except that, in this case, competitive advantage is obtained not from the physical assets possessed by the firms, but rather from the social networks of the departed employees. The bottom line is that in the 21st century the whole global economy should learn how to benefit from well-managed professional mobility.

Social media improves internal communication!

This is the final installment of the presentation of our survey results on the impact of social media on the competitive advantage of organizations.

In the survey, we asked about the impact of organizations’ using social media for internal communication (e.g. internal blogs, internal wikis, internal social networking) on three processes:
a) speed of decision making
b) vertical communication (i.e. communication between different levels of organizational hierarchy, for example between CEOs and employees)
c) horizontal communication (i.e. communication across different functional areas, such as sales and marketing)
What we learned, surprised us:
Internal social media use had a dramatic positive impact on the vertical and horizontal communication in organizations. In other words, different functional departments inside companies talk better to each other as a result of using social media use.
CEOs in companies that use social media appear to have easier time communicating with lower level employees (and vice versa) than in companies where social media is absent.
However, if companies used social media to increase their speed of decision making, well, there is a negative surprise for them. In most cases, internal use of social media did not improve the speed of decision making.
Ultimately, social media is just another tool in the box of a company’s strategist. It will not solve all organizational problems, contrary to what some evangelists might propose.
Social media will help information flow better in an organization, but it will not make an organization faster is making its decisions.
However, the increase in the quality of information exchange across functional areas might lead to the increased organizational innovation and creativity. So, this is good news.

Use social media to connect to your… suppliers!

Last year, an INSEAD professor Quy Huy (who also has a separate INSEAD blog), and I collected data on how companies used social media to achieve competitive advantage. We are currently working on a major thought piece using the most useful insights, but given that the journal review process takes a very long time, I thought that I could sharesome results in their general form.

We asked close to 1000 executives worldwide. About 50% said that their companies did not use social media at all, which was an interesting finding in itself.

The graph below shows which social media tools (video sharing, blogs, social networking, wikis, podcasts, microblogs) the companies that did use social media relied on and for what purposes. What is interesting is that companies use social networking as a principal social media tool, while they use microblogging and podcasts to a substantially lesser extent.

One of the more surprising findings was that social media tools are mostly used to interact with customers, as one would have expected, but they are used very infrequently for communicating with suppliers.

But this strikes us as a missing opportunity! Why do companies use social media to communicate with customers? Because they want to know more about customers, to build informal communication channels and build their brands with customers.

Why don’t companies want to use social media with their suppliers to build collaborative communities with them? Using social media to build communities with suppliers could help customers exchange information with them, enabling suppliers to serve these customers better and make suppliers feel more attached to their customers.

One executive we interviewed told us an interesting story. A research and development department in his company used social media to build a collaborative community with a research and development department in a supplier’s company. The engineers from both companies really enjoyed being members of this community. One day, the supplier’s senior management decided to stop working with this company and start serving the company’s competitors. Once the supplier’s R&D engineers learned about this, they went to these executives and pushed really hard to continue working with their current customer, so that they could continue being members of the inter-firm collaborative community. Faced with this surprising revolt, the executives had no other choice than to stay with this customer.

So, our learning from this is the following: just like we want to connect to our customers with social media because we have a fundamental human need to be connected, we should do the same with our suppliers. In the networked world, connections to both customers and suppliers are important for the companies’ competitive advantage.

Another interesting learning for us was that companies also used social media to improve horizontal communication across different functional units inside their organization (e.g. helping R&D departments to talk to Marketing) as well as to improve vertical communication across the levels of hierarchy (e.g. senior executives talking to lower level executives and the other way around). More on that usage of social media for competitive advantage in the next post…

Click on the image to enlarge: