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Author's profile photo Richard Howells

The Network Effect

By now most of you are LinkedIn with business contacts,” facebooking” with friends, and  twittering to anybody who will listen to you (follow me @howellsrichard).   I recently went to speak at a conference in Australia, and on my flight from Boston to San Francisco remembered that I had friends who I had not seen in over 20 years in the country.  I sent a facebook message to them in my 50 min layover (I don’t recommend a 50 min layover) and by the time I had reached Sydney, had a schedule set up for the complete weekend. Now that is the power of a network at its best.

We are also seeing this phenomenon on the business front as our supply chains are becoming more global and we are collabo ating with partners to design new products, plan across departments and companies, respond to changing market dynamics, produce through contract manufacturers, deliver on the promise of the perfect order, operate and maintain equipment and monitor the network. It is truly a case of “the outcome being greater than the sum of its parts”.

This has resulted in networks of suppliers who can bid on contracts. Networks of outsourced manufacturers scattered in far fling areas of the world who can deliver products at a lower cost than your own facilities.  Networks of logistics providers who can tender bids on shipments and deliveries at the click of a button. Networks of companies who are shared shipping cutting expenses and carbon when they “compete on the shelf and collaborate on the back of a truck”.  And of course networks of customers who are always on, always connected, and doesn’t make a move without consulting that font of all knowledge…the internet!  Many of the more strategic partners can play multiple roles and belong to multiple networks, so we are seeing a network effect as “networks of networks” evolve. 

Networks are having a significant effect on companies of all shapes and sized. They can help small companies appear to be much bigger and global than they are, and help big companies appear to be more nimble and agile. Many small businesses have found that joining a business network has given them a leg up in competing with larger companies, which in turn drives growth and company expansion. Others are using business networks to implement capabilities that allow buyers to accelerate payments to them in return for a discount. A recent article titled “Small firms spark growth when they plug into business networks”, gave some great example of how, through the use of business  networks, companies can:

  • Receive active leads from a global community of qualified buyers rather than simply tracking them.
  • Manage orders and statuses in real time rather than chasing paper.
  • Accelerate payments for goods and services and optimize cash by making early payments.
  • Gain new community-based intelligence and insights to make better decisions.


This network effect spans across the complete global supply chain and isn’t limited companies. In a recent blog I wrote about the “Internet of Everything”, and how millions of “connected” devices (Cisco predicts there will be 60 billion internet-connected things by 2020 ) are producing data that is regularly collected, analyzed and used to initiate action, and provide business intelligence for planning, logistics, execution and decision-making. This only adds to the pressure to be part of a network (or network of networks) that have access to this wealth of “big data” to help drive your business decisions.

In a networked economy, collaboration is not an option. It’s the key to driving business process transformation, and new levels of business performance.

Are you seeing the network effect taking hold of your business processes?  Are you already collaborating with suppliers, customers, contract manufacturers and logistics service providers? If so, are these processes automated and optimized to manage these relationships most effectively?

Let’s leverage the network effect, and keep this conversation going.

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