What about the personal implications of network stars? If Greg and I had known what we know now at the start of our careers, neither of us would have bothered to work in any other type of firm.
So, not all businesses are equally attractive. Maybe 5 per cent of all businesses provide more than 95 per cent of all valuable new products and services, and probably a higher percentage of all new value creation to their owners. These most elegant businesses are all stars–the leading firm, preferably the overwhelming leader, in a market that grows fast for many years.
However, not all stars are equal. Some are predictably the most compelling, magnetic and seductive. Tapping the explosive energy of networks, new ventures can mushroom, bestriding their niches. The types of business that will take you furthest, and most likely give you enjoyment and freedom to widen your horizons, are the stars that happen to benefit from being the leader in a powerful network. Betfair and Auto Trader have not just been stars but network stars, where the network itself has created the growth and worked to produce a dominant leader.
In network markets, a small number of hubs, and usually just one, will predominate.
For anyone who works, there is no contest. It is immeasurably better to work in a young network star than anywhere else. The growth and cash created by these ventures give the early participants wonderful opportunities. And to start a new network star is even more rewarding. If you can identify one and set it up, success will be more likely than otherwise. Forget what you have been told–correctly–about the high failure rate of new ventures. New network stars go bust far less often if they are properly conceived. If the idea is good enough, if the new venture really taps the atomic energy of networks, it is much less likely to fail.
This, in short, is the business of hubs.
But there is more. There is the business of weak links.
CHAPTER ELEVEN
THE BUSINESS OF WEAK LINKS
How firms can benefit from weak links
A network-based social structure is a highly dynamic, open system, susceptible to innovating without threatening its balance.
Manuel Castells79
Weak ties provide the bridges over which innovations cross the boundaries of social groups.
Mark Granovetter80
Have you ever lived in an isolated small town? Everyone knows everyone else–or, indeed, is related to everyone else–and anonymity is impossible. Friendships can be strong; but so can feuds, dividing not just individuals but families and wider groupings. The classic example is Verona, the setting for Romeo and Juliet. If a small town is not growing–if there is no fresh blood flowing into it–then it can become incestuous, narrow-minded and intolerant. Even if these dangers are avoided, it will feel sleepy–at least to someone with wider horizons.
A small town with a stable population has this basic problem–there are too many strong links and too few weak links. Because family and friendship ties predominate, to the virtual exclusion of serendipitous new weak links, fresh information and initiatives find it hard to flourish.
Contrast that with a big city. Cities are huge incubators of weak links. We shouldn’t be surprised, therefore, that they are also great centres of innovation.
Is it possible to look at our work and at firms in the same way? What is the relationship between weak links, strong links and innovation in the workplace? What facilitates innovation? What hinders it?
The knowledge we have of networks should lead us to believe that innovation and market growth would be greatest where there is a preponderance of weak links bridging different worlds–where, out of all links, the weak outnumber the strong.
Young firms fit this description, because most new firms rely heavily on external weak links. New ventures typically draw some of their most important ideas from external sources; and they are staffed, by definition, by people who haven’t been in the new firm for long, and therefore retain links to their old firms. People in new ventures also tend to be more motley–drawn from a greater variety of companies and backgrounds–than the staffs of more mature firms, which usually develop established sources of hiring, both institutional and personal. There is less time for connections to formalise and harden into strong links and for established hierarchies to materialise. For all these reasons, new ventures generally have a higher proportion of weak links than more established firms. Of course, young firms may be more innovative for reasons unrelated to weak links–the people who start a firm have to break new ground in order to get going and survive. But we’d still expect the preponderance of weak links to help a great deal.
We would also expect small firms to have relatively more weak links than bigger firms. Small ventures are more likely to outsource some functions and less likely to rely on internal central services. A small firm will usually have less hierarchy, and be more exposed to random outside influences. And small firms have less volume, so jobs are less specialised and particular. Generalist or wide-ranging jobs are much more likely to have weak links than jobs in larger firms, where sub-division and automation are used to drive down unit costs. Think how few weak links an operator on a car assembly line has. Compare that with the manager of a small garage, who has to fix the car, deal with customers and suppliers, do the accounts, and so on. In small and growing firms there is also much less time for relationships to calcify because there is more change, more upheaval, more internal job redefinition and rotation, more fluidity.
We would also expect weak links to flourish where many different firms, some in different industries, are located in the same city or region, and where there is frequent job-hopping and social contact between the employees of different firms. Here we would predict that such cross-fertilisation of knowledge and skills would facilitate innovation and market growth. In a similar way, where there are frequent casual links between universities and firms, and between firms and non-academic incubators of innovation and sources of knowledge transfer–such as consultants–then innovation will flourish.
On the other hand, what we have said about strong links would suggest that when firms are introverted and secretive–relying on their own people rather than sharing with and learning from outsiders–innovation will be stultified. Such firms, one might reasonably expect, would tend to be large and confident in their own abilities–and therefore, if this is not too much of a paradox, historically successful.
Can we find hard evidence to support these suppositions? And, equally, are there any surprising or counter-intuitive patterns relating to strong and weak links?
Economists have long debated whether innovation is likely to be greatest in cities with lots of different industries and types of firms, or in those where all companies are in the same business.81 Jane Jacobs (a great, intuitive expert on cities) plumps for the first view, claiming that many industries and cross-pollination between them stimulate innovation.82 She illustrates this idea with a story about the invention of the bra in 1920s Manhattan. Ida Rosenthal made fine dresses for rich ladies but observed that her clothes often didn’t hang well on her patrons. She reckoned the reason for this was poorly designed underwear–hence her innovation, the brassiere. She then gave up dressmaking and became an entrepreneur, making and selling bras. But how did someone with no experience of running a business manage to do this? She outsourced, and she found all her suppliers locally. In New York, she dealt with sewing-machine and textile suppliers, box makers, shippers, wholesalers and financiers. Without this diverse set of weak links all readily to hand, Ida and her bra might not have made it.