As organizations increasingly put in place matrix structures, create virtual teams, forge alliances, and outsource functions, they are placing their faith in relationships to get work done. Since the Hawthorne studies in the 1920s, people have understood the importance of social interaction on work life. It's only been relatively recently, however, that organizations have been able to visual and analyze networks of social relationships (i.e. the water-cooler networks) using tools like social network analysis (SNA). The results are astounding. Informal social networks have a huge impact on organizational outcomes from individual employee retention to team performance to organizational change. What's really fascinating, however, is how different these networks look compared to what we might expect from organizational charts or standard operating procedures (see Figure 1). The resulting blindspot creates tremendous opportunity for companies who care to investigate further.
One place where companies are successfully applying SNA is in the area of innovation. This makes perfect sense when you think about it. Innovation is fundamentally a network phenomenon. It's about bringing together pieces of disparate information to spark a new insight. According to Dr. Mike Addison, Section Head for Corporate R&D at Procter and Gamble, "Innovation is all about making new connections. Most breakthrough innovation is about combining knowledge in new ways or bringing an idea from one domain to another."
Using SNA, companies can x-ray their organization to understand what we call their innovation network (please see figure 2).
Companies with a loosely coupled network of innovators that crosses functional silos and geographic boundaries exhibit an Exploring innovation posture (Quadrant 1 in Figure 2). This type of innovation network generates great ideas that often collect dust because network members lack the ability to effectively execute. In contrast, companies with a tightly-knit, centralized group of innovators with few relationships outside the group represent a Producing innovation network (Quadrant 3). Their 'group think' makes them very effective at execution but prevents them from coming up with transformative ideas. These companies typically develop lots of me-too products.
Any company focused on true innovation wants to be Quadrant 2. Quadrant 2 depicts the Winning innovation network. It results in a steady stream of original ideas that impact the top and bottom lines. This innovation posture incorporates the best of both worlds: a close-knit core group that can effectively execute and has relationships with multiple, external domains, providing access to new and novel information.
By assessing their innovation network, companies can understand which quadrant they fall into and then takes steps to restructure their innovation, network appropriately. Thus, when in search of innovation it would appear that the old adage is true, "It's not what you know, but who you know."
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Leadership Crescendo - Reflections and thoughts on leadership learned after thirty years of thinking about, experiencing, teaching and coaching executives for leadership effectiveness, written by Kaveh Naficy