Network Imperative

by Barry Libert, Megan Beck, Jerry Wind

Pivot your organization toward a more scalable and profitable business model. Digital networks are changing all the rules of business. New, scalable, digitally networked business models, like those of Amazon, Google, Uber, and Airbnb, are affecting growth, scale, and profit potential for companies in every industry. But this seismic shift isn’t unique to digital start-ups and tech superstars. Digital transformation is affecting every business sector, and as investor capital, top talent, and customers shift toward network-centric organizations, the performance gap between early and late adopters is widening.

So the question isn’t whether your organization needs to change, but when and how much.

The Network Imperative is a call to action for managers and executives to embrace network-based business models. The benefits are companies that leverage digital platforms to co-create and share value with networks of employees, customers, and suppliers are fast outpacing the market. These companies, or network orchestrators , grow faster, scale with lower marginal cost, and generate the highest revenue multipliers.

Supported by research that covers fifteen hundred companies, authors Barry Libert, Megan Beck, and Jerry Wind guide leaders and investors through the ten principles that all organizations can use to grow and profit regardless of their industry. They also share a five-step process for pivoting an organization toward a more scalable and profitable business model.

The Network Imperative , brimming with compelling case studies and actionable advice, provides managers with what they really new tools and frameworks to generate unprecedented value in a rapidly changing age.

Genres: Business

256 pages, Hardcover

Published June 28, 2016

Reviews

[Đạt Tiêu · Rating 3 out of 5]

Network Imperative Notes

I. The promise
- Network firms are valued more by investors than traditional firms (mostly x8 vs x2).
- Business has been shifting to network-centric model from firm-centric model.
- Four basic business models:
+ Asset builders: -> physical goods
+ Service providers: -> skilled people
+ Technology creators: -> ideas: IP, patents...
+ Network orchestrators: -> relationship: provide platforms -> connect people
- Each business model scale differently:
+ Asset builders: rely on fixed assets, variable assets -> cost much to deliver more goods.
+ Service providers: need more people to provide more services.
+ Technology creators: marginal cost is low (R&D may be high).
+ Network orchestrators: almost free when scale, easy to scale (exponentially) (where is the cost for servers???)
- Network orchestrators tend to be valued more (higher multiplier) due to their high growth potential and big future profit.
- Network can provide intangible means for intangible needs: self-esteem, self-actualization,...
- Network orchestrators are currently the minority.

II. The network principles
1. Technology: Physical -> Digital
- Digital technology: convinience, easy access, easy integration and scalability, easy for analytics.
- Digital technology consists of:
+ Mobile technology: -> smartphones
+ Social media: -> Facebook, Youtube,...
+ Cloud technology
+ Big data analytics
+ IoT
- Digital technology -> digital platform -> connect people and let people contribute to the network.

2. Assets: Tangible -> Intangible
- Intangible assets: -> people: ideas, relationships, advocacy, experience, skills, ... (human capital)
-> Levered by digital technology and not depreciate like tangible assets
- Customers, suppliers, employees, investors,prospects,... are great sources of assets.

3. Strategy: Operators -> Allocators
- See business as a portfolio -> asset allocation (time, money, human resources).
- Have a specific strategy: S.M.A.R.T goals, reasonable budgeting and adaptations.

4. Leadership: Commanders -> Co-creators
- More options, more information and more participation -> changes in employee and customer behavior -> new style of leadership.
-> Be open, accesible, creating shared vision and values, letting people participate and contribute.

5. Customers: Customers -> Contributors
- In network-centric firms, customers are the source of value creation.
- Engage with customers, provide them flexible options, listen a lot from them and give back.

6. Revenues: Transaction -> Subscription
- Customer subscription provides recurring stable and predictable revenue, less cost(marketing and ads) than getting new customers.
- Transaction is non-repeat whereas subscription builds a long-term relationship.
- Subscription helps business gather data from customers, their feedback and their contribution -> future improvement
- 4 assets types of subscription offering:
+ Things-based subscriptions: physical goods.
+ Service-oriented subscriptions: repair and maintenance, customer support, education.
+ Information subscriptions: software, product insight, data and research.
+ Network subscriptions: provide access to a platform or group of people.
- How to do:
+ Offer something new and interesting to enhance customer experience -> builds customer loyalty and affinity.
+ Asking customers for feedbacks, opinions, ratings.
+ Make personalized products and service for each customer.

7. Employess: Employees -> Partners
- New model of employement: the contractor model, partnership with independent workforce.
-> Bring new side of employement: uniqueness, expertise, sense of ownership, commitment and focus.

8. Measurement: Accounting -> Big data
- New kinds of assets (intangible assets) -> new approach to data.
- Traditional accounting:
+ Focus mostly on tangible assets.
+ Only gather internal information: sales number, inventory, productivity,... (not external ideas and network)
+ The data is gathered quaterly or annually (not real time).
-> Big data analytics comes in: gather lots of data from people, customers, networks,... -> analyze in real time -> Quick adaptation.

9. Boards: Governance -> Representation
- Bring diversity into the board.
- The board should have shared experience with employees, customers and broader community.
- The board has vision and understandings of network-centric firms.

10. Mindset: Closed -> Open
- Openness is needed to embrace new changes, new ways of thinking -> Implement nine above principles.

III. The PIVOT process
1. P: Pinpoint
- Define the current business model.
- Identify the business characteristics.
- Review the business financial performance.
- Pinpoint the mental model: skills and values (tangible and intangible) that the business has

2. I: Inventory
- Inventory business assets:
+ Physical capital: Cash, plants, equipment, property...
+ Human capital: Skilled and capable employees, partners, contractors,..
+ Intellectual capital: patents, trademark, copyright, brands, logos, software,...
+ Network capital: customers, prospects, employees, suppliers, distributors, investors, competitors, peers, alumni,communities,...

3. V: Visualize
- The network orchestrator business model consists of: the network, the company and the platform.
- Identify potential networks based on step 2 Inventory.
- Analyze the value the business bring to those networks.
- Choose the platform and get everything needed to bring the network and the business together.

4. O: Operate
- Create the platform.
- Make the network up and running.
- Manage the business and the network.

5. T: Track
- Track the performance of the network:
+ Size of the network: number of active accounts, number of products/services for sale,...
+ Level of network activity: number of transactions, postings, ratings, communications,... by participants.
+ Value created by the network: amount of money or goods exchanged, number of new connections, reviews,...
+ Network sentiment: service requests, complaints, feedbacks.
+ Network loyalty: number of repeat transactors/participants, active subscriptions by attrition rate.
+ Network growth rate: how fast the number of participants increase, ...
- Track the platform:
+ Ease of use: track requests for help and support, incomplete transactions.
+ Uptime and downtime.
+ Number of interactions: number of log-ons and transactions daily, monthly or annually.
+ Number of active users: number of "active" profiles.
- Track the team: team morale, on-time and on-budget projects, interactions with networks.
- Experiment and adapting.

IV. The practice
-> Need to be open, innovative and ready to change core beliefs and mental models.

[Kelly · Rating 4 out of 5]

If you read the first 24 pages of the book, you'll get over 80% of the value it provides - this covers the "four types of business models" framework made popular in HBR.

[Darren · Rating 5 out of 5]

Our world is ever-connected by networks. Not just traditional things such as logistics networks or communications networks but business and society networks too. Companies offer platform-like services, spreading out their business networks around the world that are used by all of us. Think Amazon, Uber and Airbnb: they are all networks providing services and often not always actually holding the products or producing the services that they sell. The power of the intermediary, network operator should not be ignored.

For companies that manage to establish themselves as a “key network provider” there can be great riches ahead. Of course, today’s king can be deposed by an upstart or a revolution. Some of the current-day kings such as Amazon and Google are attempting to diversify and have several networks, so if one business area ever starts to dry up and become less relevant they don’t entirely fall over. They are benefitting from and often contributing towards dramatic digital transformation, research and development and major shifts in society. Their work is far from complete…

According to the authors, established non-digital, non-network business models make up more than 98 per cent of the market and have a lot of work to do. Some, but far from all, companies are trying to update and become relevant for the future but the gap between do-ers and non-doers is widening at breakneck speed.

The authors have done a great job in distilling this knowledge into an easy-to-read and informative book, looking both at what companies have done thus far and considering how organisations can change to possibly take advantage from the network effects and other transformative disruptions. Not every company can become the next Amazon or Google, yet there is still a lot of market space for smaller networks to form, interlink, cooperate and transform too. Once a company is in this reactive space, the potential to grow, scale, transform and develop can be easier and it can take place at breakneck speed.

Contributing to this book is the collective research into over 1500 different companies that the authors have been involved in, leading to ten key principles being developed that are said to help companies grow and profit irrespective of their industry, boosted by a five-step pivot if necessary into a scalable, profitable model of operation. Despite the wealth of information on offer, the authors have done a good job in writing an easy-to-follow, incredibly more-ish sort of book that oozes a sense of credibility and potential.

This is a highly recommendable book. Nothing more needs to be said. If you don’t have a business or occupy a senior management position you will find a lot of interesting reading nonetheless. Should you be a business owner or senior executive, this may be essential, “golden” reading that probably should not be described as optional.

[Carter · Rating 5 out of 5]

The digital environment, is quite different from the physical one. This has been the subject of many recent business books. The prescriptive approach, implies slightly different recommendations, as different elements of old frameworks are brought into this "space". The focus, has been on graph theory and networks- physical space is nonessential. Recommended.

[Paulo Peres · Rating 4 out of 5]

Um livro bom introdutório pra abrir a mente sobre ecossistemas

[Nic Bede · Rating 3 out of 5]

First chapter was probably enough.

[Warre]

Only read the first chapter, since the rest of the book is not relevant for an entrepreneur wishing to create a new platform from scratch. As I haven't read the full book, I'm not in a position to give it an adequate rating.

[Greg Hawod · Rating 4 out of 5]

The ideas presented in this book are very timely. The main point is that it is highly important for organization to develop their network capacity and leverage technology on how to it. The authors also show how companies can implement the necessary changes.

The book lays the ground rules as to how companies differ in terms its business models. Some are physical asset dependent while others are technology driven. The important thing point for the book here is that it delivers the message that companies can orchestrate networks as part of its business models.

I would like to see in the next editions of this book or in entirely different book how sample companies use the PIVOT method in action.