Leveraging strong and weak networks for corporate success
By Achim Schmitt, Associate Dean and Professor at Ecole hôtelière de Lausanne and Stefano Borzillo, Associate Professor at EHL
Successful business strategies require two critical and complementary functions: exploitation and exploration. Businesses that successfully deploy both of these functions are said to be 'ambidextrous', since they make the best of their existing situation (that is, exploiting their opportunities), while simultaneously developing their future prospects (through exploration).
Strong network connections are those that are frequent and intentional, while weak network activities involve more occasional but purpose-driven contacts. Despite the terminology of strong and weak, both types of network connections are essential.
We studied three business units at Gamma Chemicals, a large, global supplier of industrial gases. Through a series of 33 intensive personal interviews, we explored how this firm uses both strong and weak network connections to exploit its current position through first-rate customer service, as well as to explore possibilities for serving new clients.
The firm maintains strong ties with key clients at several organizational levels, including sales (as one might expect), but also for technical functions and accounting (which is less common). This is an intentional strategy, as a team comprising an accountant, a technician, and a salesperson is assigned to each key account. These team members are in constant touch with clients to ensure their current needs are met and future needs are anticipated. Study participants explained to us that these daily contacts occur, even when Gamma and its clients have no particular issue to examine. The conversations allow Gamma's staff to build trust and confidence in their ability to support those clients.
Almost all of Gamma's employees maintain infrequent, "weak" network connections which supplement the frequent, "strong" ties as needed. In contrast to the strong connections, the weak connections are activated when specific issues are involved, such as when technical expertise is needed or a problem arises. These infrequent contacts can help cement an already strong connection, and they also can help turn a weak network into a strong network, if the interaction with a particular client becomes regular rather than sporadic. The fact that additional staff are brought in as needed underscores Gamma's commitment to its clients. Overall, the existence of both types of network connections encourage employees to view themselves and their firm as a client-centered enterprise.
Let's return now to the issue of ambidexterity, and look at how both strong and weak network connections support Gamma's exploitation of existing markets and exploration of new markets. The key finding here is that the two types of network connections work together to build Gamma's ambidextrous approach to operations.
It's important to keep in mind that Gamma's core products could be considered to be a commodity. For this reason, the firm is constantly innovating with regard to client services to add value. Gamma also uses its network connections to ensure repeat business and identify new customers – thereby activating the two aspects of an ambidextrous business, exploiting existing opportunities and exploring new opportunities.
Here's just one way that strong network ties build value-added service, when combined with weak ties. One of Gamma's technicians and a client were discussing how to monitor existing stock, and they hit on the idea of remote monitoring. At this point, the technician brought in the firm's engineers, who developed a system that worked for the key account so well, that it eventually spread to many other accounts. This is a classic example of how weak ties supplement strong network ties to allow a firm to make the most of its existing opportunities, but also expand its reach. This strong client orientation moves the firm far beyond being a commodity purveyor.
Gamma makes this approach work by granting its employees considerable autonomy at all levels to respond to clients' needs. We found that autonomy of this type allows the employees to form ad-hoc teams, as in the case of the remote bottle monitoring. The company's culture of open communication also contributes to the success of its twin efforts to exploit existing markets and explore new opportunities.
The constant flow of information – from the company to its clients, from the clients to the company, and within the company itself – is key to a customer-oriented approach. One final note: we also found that the numerous network links allowed problems to be solved quickly in the rare situations when something went wrong. Management could quickly step in as needed, both to address any problems and enhance existing solid connections.
Achim Schmitt holds a PhD from the University of Geneva, obtained his Habilitation at the University of Paris-Dauphine in France, and is a Visiting Professor at the University of Geneva as well as an Associated Researcher at the University of St. Gallen in Switzerland. Before joining the academic world, Achim has been a strategy consultant for 4 years in Germany, Austria and Switzerland.More from Achim Schmitt
Dr Stefano Borzillo is Associate Dean of Undergraduate Programs at EHL and an Associate Professor in Human Resources and Organizational Behavior. He will also teach on the school’s new online MBA in Hospitality program.More from Stefano Borzillo