Innovation through knowledge creation is the key to the continued growth of large global enterprises. When it comes to management consulting firms, sustainable competitive advantage is as important to their success as growth — and just as dependent on innovation. In these firms, it falls to the senior partners to accumulate information about new industry practices, new products or new ways of implementing existing processes and then to interpret and integrate that knowledge to come up with innovative ideas to help their clients.
Louise Mors, Assistant Professor of Strategic and International Management at London Business School, set out to investigate the complex issue of the ways that individual partners in multinational firms utilise their informal relations to access and integrate the information needed for innovation in order to determine what works best for them in different contexts. She conducted in-depth interviews with 32 partners in a professional services firm owned and managed by a group of over 1,000 semiautonomous senior partners. She then tested the information garnered from those interviews on a unique data set of 1,449 informal relationships from a network survey of 79 senior partners based in 10 major offices across the United States, Europe and Asia.
The research showed that partners build informal networks of relationships — internal, external, local and global — as a means of gathering information. The size, or density, of their networks as well as their nature determines how well they work. 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.
The study required an examination of the context in which the partners operated and built their networks as well as the density of the ties within networks from sparsely connected (low density) to highly interconnected (high density). The goal was to determine, first, whether a dense network of connections would facilitate the interpretation and integration of diverse information and knowledge. Next, it was important to determine whether operating in a confirmed homogeneous context could make it more difficult for partners to access the diverse information and knowledge necessary for new knowledge creation. In such a context, she believed, partners might benefit from low-density networks.
The research showed that partners operating 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.
Overall, the findings support the view that there may be much to be gained from deliberate network strategies when it comes to innovation. For example, 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.
This is taken from Louise Mors’ research paper ‘When the problem is too much diversity’, Strategic Management Journal 31, no. 8, August 2010.
This article was taken from Business Strategy Review, for the latest business thinking from all London Business School faculty