The Importance of Networking

Author: Colin

To the entrepreneur, networks help to develop relationships, make contacts, assemble resources and gain access to finance. Based on trust and respect networks can help entrepreneurs to gain credibility and establish a track record. (Burns, 2005) These are aspects that can prove invaluable when the entrepreneur is starting out, but how can larger organisations utilise networks to encourage intrapreneurial behaviour?

They must look the ways in which the entrepreneur utilise their networks, for example they may use them to make contact with venture capitalists. Larger organisations can mirror this by making sure that those responsible for funding are easily accessibly to employees with ideas or innovations.

Today entrepreneurs are often inventors and: “Gone are the days when lone inventors tinkering away in their attics and sheds could come up with path-breaking discoveries and innovations.” (Suarez-Villa, 2004, p80) It is often the case that entrepreneurs can turn to their peers or even their “rivals” for help and advice at the early stages of innovation. Larger organisations should bear this in mind if they want to encourage entrepreneurial behaviour in their staff. From an internal perspective; they should make sure different departments and divisions are networked, to allow for information and ideas to flow more easily throughout the organisation. They should discourage rivalry and promote understanding between different parts of the business, encouraging internal collaboration. Networks can make it easier for information to be shared more easily between different levels of the organisation; allowing for a better dialogue between the employees with ideas and other staff, after all: “Every intrapreneur needs colleagues to refine, repurpose, or just plain redraw his or her idea; marketing folks to help figure out exactly what the product is (or is not); and higher-ups who are willing to champion it, even if a return on investment is years in the making.” (Swearingen, 2008)

Organisations must also consider the importance of external networks. It is often a necessity for the entrepreneur to look out with their own organisations for assistance. It may be considered a “luxury” that larger organisations can often avoid this, but it would be unwise for them to totally discount working with external sources. Take the example of the Sony Playstation: “Ken Kutaragi was working in Sony’s sound labs when he bought his daughter a Nintendo game console. Watching her play, he was dismayed by the system’s primitive sound effects. He realized that a digital chip dedicated solely to sound would improve the quality of the games — and the product itself. Keeping his job at Sony, Kutaragi developed the SPC7000 for the next generation of Nintendo machines. Sony execs nearly fired him after discovering his sideline project, but then-CEO Norio Ohga realized the value of his innovation and encouraged Kutaragi’s efforts. With Sony’s blessing, Kutaragi worked with Nintendo to develop a CD-ROM-based Nintendo. But Nintendo decided not to go forward with it, so Kutaragi helped Sony develop its own gaming system, which became the PlayStation. The first PlayStation made Sony a major player in the games market, but the PlayStation 2 did even better, becoming the best-selling game console of all time. Kutaragi founded Sony Computer Entertainment, one of the Sony’s most profitable divisions.” (Swearingen, 2008) In this example we see an organisation allowing collaboration with an indirect competitor that gave them significant advantage when they came to be direct rivals.

Here are a few reasons why networks, both internal and external, can beneficial, but it is clear that organisations can learn from viewing networks from an entrepreneurial point of view.

References

Burns, P (2005) Corporate Entrepreneurship, Building an Entrepreneurial Organisation. 2nd ed (Palgrave MacMillan)

Suarez-Villa, L (2004) Technocapitalism and the New Ecology of Entrepreneurship, Rising Entrepreneurship in a Shrinking World: A Spatial Perspective, p78 – 103, p80

Swearingen J (2008) Great Intrapreneurs in Business History, Bnet [Online], http://www.bnet.com/2403-13070_23-196888.html Accessed 24 April 2008