Does the Network Work?

post # 133 — July 14, 2006 — a Strategy post

Here’s an old question that’s newly relevant. In a network of operators, how do you tell if the network is working?

The network could be the different offices or departments of a single firm. In these days, when whole departments move between one professional firm and another, this is a highly relevant question. Groups that are shopping around have to decide which networks or ‘firms’ to join.

Or the question could apply to today’s “virtual” firms, where professional providers act in informal cooperation with each other over the internet without being legally bound.

Or it could be something in the middle: declared alliances without overlapping ownership.

In any of these cases, there follows the question: How do you tell whether the network is really adding value to its members (especially in comparison to belonging to other networks?

If you were looking for some possible metrics, here’s a few you might consider.

First of all, some metrics which attempt to judge the outcomes or results:

1. Amount of referred work (as a percent of all revenues)
2. Joint work (how many client projects involve teams simultaneously from more than one group or unit)
3. Percent of clients served by more than one group / unit
4. Percentage of joint proposals won
5. Take top X clients and ask what percentage of the markets they operate in does the network do work for them (penetration percentage)
6. Average rate (fee level) on joint work (network is adding value if joint work produces higher-than-average fee levels. If it produces less than average fee-levels, then more joint work by itself does not prove that network adds value)
7. Average rate (fee level) on referred work (network is adding value if referred work produces higher-than-average fee levels. If it produces less than average fee-levels, then more referred work by itself does not prove that network adds value)
8. Exchange of methodologies. (How many “tools” developed in one place are being used elsewhere?)

In addition to these measures of outcomes, you could also attempt to measure network effectiveness through metrics which judge “effort”

1. Exchange of peopele among different groups
2. Amount of joint proposals
3. Amount of shared market research
4. Amount of assistance on domestic proposals
5. Amount of joint training
6. How often is network expertise tapped into?

As I indicated at the beginning of this blogpost, this is an important topic even for single firms. Measures like these might allow the firm to judge its “cohesion” – the degree to which it is truly acting like one organization, rtahre than a bunch of separate operators trading under the same brand name.

Anyone got some additional and, especially, BETTER ideas?