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Why networks need managers

April 11, 2012

While reading a recent HBR article by Gary Hamel I was struck by his description of food industry pioneer Morningstar’s innovative management system and its relationship to our work. In particular, Hamel highlights the need for clearly designed structures and community managers to make complex networks successful.

Most of our clients bring us big, complicated problems. They want to design data-driven networks to solve global irrigation problems. Or create open source licenses to easily exchange patents with competitors. The challenges are exciting, but the networks needed to address them are pretty complex. “As economists like Ronald Case and Oliver Williamson have noted, markets work well when the needs of each party are simple, stable, and easy to specify, but they’re less effective when interactions are complex.” (1)

Hamel talks about how Morningstar was able to create a “self managed” environment that empowers employees and increases results. One reason Morningstar’s system works is that they have clearly defined the relationships between staff and the external world. This is the first place any great organization needs to start: by defining what the network does and how it should function. Interestingly, we’ve seen that this task makes many of our clients incredibly uncomfortable.

Hamel outlines a series of principles, such as “freedom to succeed” and “clear targets, transparent data.” These point to the need for a clear structure for participation, where the value proposition and process for engagement is simple and rewarding. And this is where we get into market territory: asking individuals to transact in a supply-and-demand manner to encourage new breakthroughs.

Which takes us back to those statements many of our clients make about an organic network. What these organizations are referring to is the concept of free markets, where the transactions are so simple that we need little to no help learning how to participate. The reality is that if the transactions were that simple, you probably wouldn’t need help creating the network – in fact, you might not even need a network at all.

After you create a well-structured network, you need to address the role of management. In Hamel’s article, he states “… managers do what markets cannot; they amalgamate thousands of disparate contributions into a single product or service.” While he is discussing the role of managers in the corporate environment, the statement also holds true for networks, and is manifested in the relatively recent phenomenon of the community manager. This individual facilitates a complex market, meaning they design opportunities for participation, manage reward structures and analyze activity to improve how the network meets the needs of its members. This emerging field has been led by Jeremiah Owyang, who is worth checking out.

Incorporating community into your business is a big decision, and done correctly, a rewarding one. But just like any new service or product, you need a clear, highly structured plan to achieve your goals. Without this, you are hoping the free market will do the work for you, which is equivalent to “build it and they will come,” a promise that only plays out in the movies.

(1) Gary Hamel, “Let’s Fire All the Managers”. Harvard Business Review. Page 50. December 2011.

Why networks need managers

Charlie Brown

CEO & Founder

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