Tuesday, January 3, 2012

What networks are good for what?

There are two extreme types of network structures that are good for different things—open networks and closed networks. This post will describe advantages and disadvantages of an open network.
Open networks are networks where your partners are disconnected. For example, you may know 5 people and if these people don’t know each other, you are in an open network.
This network is great for generating innovative ideas. Because these people don’t talk to each other, you can get information from each one of them, combine them and produce your own idea that none of these people had. What made Steve Jobs so creative? One explanation is that he was able to speak to people who did not speak to each other. By talking to technology people (and being a technology person himself), he knew how computers worked. By talking to designers of electronics, he knew what designers knew; by talking to music executives he knew what they knew. But because technology people did not often talk to designers and neither designers nor technology people often talked to the music executives, no one of them was able to generate great ideas such as ipods, ipads and itunes. This description is a bit simplistic, of course, but helps illustrate the point: if you talk to people who don’t talk to each other you can access information that none of them has on their own and then you can create something that none of them was able to create on his/her own.
A person in an open network can refer to him/herself as a broker. This is not in the financial sense, of course, but rather in the sense of being able to broker information across different people.
A lot of academic research done, for example, by Ron Burt at the University of Chicago, shows that people who occupy positions in open networks are more likely to be perceived by their supervisors as generating good ideas, these people are promoted faster and are given better salary raises.
The disadvantage of such a network is that it is difficult to maintain. If you want to keep your partners unfamiliar to each other, you need to make sure you meet with them separately. It would have been much easier to maintain relationships with them if you invited them all to the same party, but then they would get to know each other and come to know what each one of them knows. So, your information advantage will be reduced. The more these people talk to each other, the more likely is your information advantage to be eliminated completely.
It is also difficult to verify the quality of information you receive. If one of your partners tells something to you, you have no idea whether this is true or not. Had your partners been connected, you could have verified by talking to another partner whether this person receives the same information as you are.