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 / Autumn 2006 / Issue 44(originally published by Booz & Company)


The Craft of Connection

Organizational network analysis is helping companies share knowledge worldwide, one natural broker at a time.

Illustration by Lars Leetaru
Ask business executives about operations strategy and they will tend to discuss structural decisions: when to consider outsourcing, where to locate plants, and how to increase standardization through modular design. But if you query the same executives about their most pressing issues, their list will probably center on people: improving recruiting, investing in management development, increasing collaboration within organizations, and other challenges of managing the growing population of knowledge workers.

For help with their “hard” decisions about inanimate objects, executives have a range of techniques involving rigorous quantification: make/buy analysis, site selection studies, and engineering cost analysis. For decisions that involve the “soft stuff” about people, most managers are left to rely on more visceral techniques — judgment and habitual leadership style. Naturally, hard numbers don’t, in themselves, make a decision inherently more effective. But even though people are far more complex than the most complicated factory design, companies can still be more rigorous in their methods for managing human communication.

Consider the variety of informal “communities of practice” found in most companies (and often across company boundaries), formed by people who collaborate to share best practices around a common vocation (or passion). Six Sigma “black belts” reach out to one another for help with complex statistical analyses. Field technicians share experiences and help one another troubleshoot initially intractable problems. Researchers tap other experts across the globe for specialized knowledge in developing new products. IT specialists collaborate to make disparate systems robust and complementary.

These communities rarely show up on organization charts; in the past, few were formally recognized by executive leadership. But that is changing now, as a growing number of large companies recognize and invest in these nebulous entities. In recent years, communities of practice have flourished in companies as diverse as Whirlpool (appliance manufacturer), Sanofi-Aventis (health-care conglomerate), Chevron (oil company), Caterpillar (heavy equipment manufacturer), and Halliburton (engineering and oil-field services provider). Each of these companies deliberately designed and implemented a set of informal connections among people who were geographically or organizationally distant, but who had something in common to talk about.

The $21 billion Halliburton Company offers an interesting case study. Although currently a lightning rod for controversy because of its government contracting role in Iraq, historically the company has been better known for its Energy Services Group, one of the world’s largest providers of products and services to the petroleum and energy industries. To link its oil-field operations throughout the globe, Halliburton launched a focused network-building program in 2002 that eventually led to the formal recognition of 19 communities of practice. These in turn have been credited with delivering tens of millions of dollars in bottom-line results.

The Whirlpool Corporation launched a similar effort in 2000 to stimulate greater innovation. First, 400 employees from a wide variety of functions were trained in a new process of “ideation” (brainstorming, refining, and articulating ideas for new products and processes). Then a subset of this group, dubbed the “innovation mentors,” was set up as a community of practice, working with “attribute teams” around the company to identify consumer needs and use them to prioritize research and development goals. Since the initiative began, Whirlpool has gone from a handful of product introductions per year to dozens, including the highly successful Gladiator line of appliances, workbenches, and storage systems for the garage. Again, the community of practice is credited as an essential catalyst.

The pharmaceutical company Sanofi-Aventis formed an immunology community of practice in 1999, after noting that immunology expertise played a central role in developing more than half of its product portfolio. By 2001, the community had evolved from an informal group into a formally recognized network-building initiative involving more than 100 scientists in 12 research sites around the world, organized into “working groups” focused on specific topics. These working groups hold quarterly teleconferences and Web conferences, and they are credited with increasing project success rates and reducing cycle time — both mainstay drivers of pharmaceutical company profitability.

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