Tuesday, January 18, 2005

Structural Holes, part One

I recently wrote a longer piece than my usual post. It is simultaneously about Ron Burt's work on structural holes and the intersection of business and academic interests in SNA. I am going to share the column here in two biggish installments. Enjoy!

Structural Holes: The Source of Good Ideas

What does it take to lead a successful company? Corporate executives today face a growing array of challenges fed by revolutions in technology and globalization. It’s enough to make an executive wonder if leading a successful company is more than a one person job. Actually, in most cases it is. As Tom Malone recently put it in The Future of Work, “As managers, we need to shift our thinking from command and control to coordinate and cultivate -- the best way to gain power is sometimes to give it away.” Coordination, cultivation, and collaboration are increasingly the mode of work at every level.

Thankfully, the very same Internet technology that is helping power the rise of collaboration has also provided a powerful way of studying it. Everyday use of digital communication networks has created a historical database of communication that was unimaginable just a few years ago. This double-whammy of the increasing importance of collaboration and the rapidly growing capability to study it has sparked an explosion of research in the new science of “Social Networks.” Formerly distinct disciplines such as sociology and physics have joined forces with business management, psychology, and computer science, among others, in this burgeoning new field.

Ronald S. Burt, a leading researcher in the field of social networks, has studied creativity, competition, and the flow of ideas for decades. As Hobart W. Williams Professor of Sociology and Strategy at the University Of Chicago School Of Business, he has conducted research with enormous implications for the business of collaborative innovation. This article will explore Burt’s surprising answer to the question, “Where do good ideas come from?” And it will show how to apply Burt’s findings to promote the business of collaborative innovation.

Where Do Good Ideas Come From?

One of the most enduring myths of innovation is that of the “creative person.” (For example, see Amabile.) The truth is that everyone has the capacity to be creative and to join in collaborative innovation. To succeed as an innovative force, any organization must nurture this capacity and not inhibit it. But how?

Not surprisingly, tapping employees’ intrinsic motivation is critical to driving innovation. But that’s not enough, especially if those employees are striving too hard to be “creative.” Burt has shown that more often than not, the key to innovation is not creating a good idea but recognizing the opportunity to re-use an ordinary idea from another group. Or as Burt puts it, “Can you get an idea which is mundane and well known in one place to another place where people would get value out of it?”

Burt coined the term “structural hole” to refer to the social gap between two groups. Structural holes are everywhere. When they occur in business then executives commonly speak of the groups as “silos.” Sales and engineering are a classic example of two groups whose members traditionally interact with their peers rather than across groups.

Burt conducted his latest study at Raytheon, a large US electronics company and military contractor. Burt studied several hundred managers within the supply chain group at Raytheon. As part of the study, he asked each manager to write down ideas to improve Raytheon’s supply chain management. Then he had two Raytheon executives rate the ideas. The best suggestions consistently came from managers who discussed ideas outside their regular work group.

Burt found Raytheon managers good at thinking of ideas but bad at developing them. Too often, Burt said, the managers discussed their ideas with colleagues already in their informal discussion network. Instead, he said, they should have had discussions outside their typical contacts, particularly with an informal boss, or someone with enough power to be an ally but not an actual supervisor.

Next time -- How Structural Holes Can Help Managers Improve Collaborative Innovation

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