Managers who draw pictures of their networks, are able to make better strategic decisions.
Companies need to develop good relationships with customers, suppliers and other partners in order to create values. Relationships also function as a bridgehead in relation to other players, and the company is thus operating in a network of relationships where it has to navigate as best it can.
Important decisions are related to cooperating with and influencing others in the network. One way of understanding how managers make decisions in networks, is to understand their picture of the network. A network picture is a description or visualisation of which players are important to the company and how relationships with these players are correlated.
Pictures of networks
Network pictures are both personal (the individual manager's understanding) and collective (the management group's or company's understanding). Network pictures are a new research field and we still know very little about the correlation between network pictures and managers' decisions.
We therefore conducted a study from 2011 to 2014, where we followed a management group in the marketing department of a major Norwegian industrial corporation. We started by asking the participants to make network pictures for their company, and then to use these network pictures to look for opportunities for further development of their most important relationships.
Through subsequent group and individual interviews, we uncovered what types of insight the participants gained and which strategic decisions they made.
Strategic tool
We examined three issues.
1) To what extent are network pictures a useful tool for managers who want to understand their surroundings?
We asked the managers to visualise their network and look for opportunities for further development of existing and new relationships. This resulted in the managers having a better overview and a systematic description of the complexity that a network often represents.
Through looking at their surroundings with new eyes, the participants saw new possibilities for value creation. The managers also gained a better collective understanding of the company's strategic alternatives by discussing and challenging each other's network pictures.
2) How do managers describe and explain their network pictures?
We found that development of network pictures yields increased insight through three distinct phases:
- In the first phase, the managers try to understand the company's closest and most important relationships. The personal contacts and unique organisational factors are e.g. mapped here.
- In the second phase, the managers try to complete their network picture by describing affiliated relationships and expressing a more complex picture. Here, the relationships are described in multiple dimensions and different layers, such as the degree of resources that the companies create and share, and important activities that the companies carry out together.
- In the final phase, the network pictures are actively changed and completed through internal dialogue and in meetings with customers and suppliers.
3) How do managers turn network pictures into strategic decisions?
The new network pictures have resulted in several decisions. The company has, among other things, reorganised its sales department to have a more long-term approach vis-à-vis customers. The company has also created new meeting places where the sellers are in a closer dialogue with more and new contacts at different levels of the customer's organisation. Closer customer dialogue has led to the development of new products that are better adapted to the customers' needs. We have also found that the company has cooperated with existing customers to find new customers.
Our findings show that the process of visualising network pictures is a good tool for helping managers understand the complexity that affects their business relationships. Increased overview provides a better basis for making prioritisations and decisions.
Reference:
- Abrahamsen, M. H., Henneberg, S. Huemer, L. and Naude, P (2016) "Network picturing: An action research study of strategizing in business networks", Industrial Marketing Management, vol. 59, pgs. 107 – 119.