Louise Mors, Assistant Professor of Strategic and International Management at London Business School, studied the ways that one global multinational professional services firm utilises informal relationships and networks. How did the firm convert new knowledge into a reputation for innovation, a key to sustaining its competitive advantage? Professor Mors talks with eBSR about her research.
What does it take for large global enterprises, especially global management consulting firms, to flourish?
Innovation through knowledge creation is the key to their continued growth and sustainable competitive advantage, and it falls to the partners of these firms, who are the most senior and experienced players, to facilitate innovation by bringing to bear the knowledge they have accumulated about new industry practices, new products or new ways of implementing existing processes. These partners have the enormous responsibility of both managing and implementing existing client engagements and evaluating and obtaining knowledge and expertise available within the firm — and, at the same time, developing new business opportunities and collecting new knowledge and expertise from external sources.
How large a firm are we talking about?
The firm we studied was owned and managed by a group of over a thousand semiautonomous senior partners. At the time the study was conducted, the firm employed more than 55,000 professionals and operated in some 100 countries
What is actually involved in the collection of all this information?
Partners collect this information by building informal networks of relationships — internal, external, local and global. The size or density of their networks makes a difference as does their nature. For example, some networks are internal and local, while others are external and global, and still others can be internal and global (ties to contacts inside the firm but outside the primary country) — or external and local (that is, ties to contacts outside the firm but in the same country).
What happens once this information is gathered? In other words, how does it get turned into innovation?
It requires interpretation and integration, a difficult process that is affected by the amount of information available and the context in which it is found. For example, integrating information across functional areas poses difficulties, while commonalities that result from flows within firms ease the process because of the shared language of communication and the similarities of culture and procedures within the organisation. These complications are at the heart of my study.
Since management consultants are notorious for never having a spare moment, which often leads to a reluctance to spend valuable time codifying what they do and how they do it, how did you manage to get them to agree to help you collect the data needed to explore this complex issue?
I was very lucky to have the support of a number of very senior partners in this firm, their support allowed us to conduct in-person, in-depth interviews with 32 senior partners from a wide variety of industries and functional specialisations in five Western European countries. We then tested the information garnered from those interviews on a unique data set of 1,449 informal relationships from a network survey of 79 of the senior partners based in 10 major offices across the United States, Europe and Asia.
What were some of things you examined in order to determine what kind of networks work best?
It was important to examine the context in which the partners operated and built their networks — were they homogeneous or heterogeneous — as well as the density of the ties within networks. It seemed likely that a dense network of connections would facilitate the interpretation and integration of diverse information and knowledge, while operating in a homogeneous context could make it more difficult for managers to access the diverse information and knowledge necessary for new knowledge creation. In such a context, they might benefit from low-density networks.
While previous research has shown that the structure of personal networks affect innovation outcomes, such work has tended to ignore the context in which managers operate. This is, of course, particularly salient in multinational companies, and so I felt it was important to understand how the context would affect the relationship between network structures and innovation performance.
Did your study bear out these assumptions?
What we discovered was that partners who operate in homogeneous contexts (in which the primary challenge is to access diverse information) benefit from networks with limited density. In contrast, when firm and geographic boundaries are broader, partners with dense networks are more innovative because their network interactions facilitate their ability to integrate the diverse information to which they are exposed.
Were there any unexpected findings?
Yes, for example, partners rely on their internal ties to create new knowledge, but on their external/local ties for revenue generation. This shows that separating between different types of network ties could provide valuable information about the different benefits that accrue from various types of ties.
So there are lessons here for other professional firms?
Absolutely. In certain contexts, there are benefits in terms of innovation performance from less structure; and, in other contexts, benefits come from more structure. Overall, my findings support the view that there may be much to be gained from deliberate network strategies in terms of innovation. In that case, when the context is homogeneous, actors should aim for less structure — and, when the context is heterogeneous, the aim should be for more structured networks.
Louise Mors’ (email@example.com) full study can be found in this publication: ‘Innovation in a global consulting firm: When the problem is too much diversity’, Strategic Management Journal 31, no. 8, August 2010.