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Monday, October 26, 2009

KARL SMITH: Are You Ready For The Network Economy?

by Karl Smith

Early this year I received an eBook entitled “Winning By Sharing” authored by Léon Benjamin. It was brought to my attention by Owen Cloete from Performance Strategies & Technologies, company based in Boksburg – Johannesburg (South Africa). Owen felt I might enjoy Benjamin’s views on the subject “Wining By Sharing” as the author’s views are similar to my approach in building mutually beneficial business relationship. As a life-long learner I found Benjamin’s views about the power of social networking through collaboration invaluable. However, I am also a keen business environmental scanner and I believe all of us involved in networking at all levels (government, large corporations, entrepreneurs, independent consultants, networking teachers, network forum co-odinators etc) must understand the environment in which we operate.

Benjamin points out that the arrival of the network economy is a natural progression from the Agricultural Economy characterised by Independent People, followed by the Industrial Economy (Corporations) which created Dependent People and now the Network Economy consisting of Inter-Dependent People.

Let me first capture the highlights of his works:

* Like it or not, power is shifting to the individual
* Brands preach while consumers connect
* Networks provide unsolicited benevolence which brands cannot understand
* Social software is revolutionising people’s behaviour
* Trust is emerging as the defining characteristic of that new behaviour, creating very different organisational forms

One of the better definitions of the characteristics and effects of network economy is summarised by the following table. It reflects the consensus and opinions of economics professionals and research institutes worldwide and particularly in the UK and USA. It was originally adapted from Atkinson's ‘The New Economy Index: Understanding America's Economic Transformation’, published by the Progressive Policy Institute.


Economy wide characteristics

Markets Stable vs. Dynamic

Scope of competition National vs. Global

Organisational form Hierarchical, bureaucratic vs. Networked

Structure Manufacturing core vs. Services core

Source of value Raw materials, physical capital vs. Human and social capital

Relations with other firms Go it alone vs. Alliances and collaboration or
‘winning by sharing’

Impose regulations vs Encourage growth opportunities

It is important to point out that "The Network Economy" is viewed from a number of perspectives. For instance, one commentator suggests that if we understood a network not as a type of formal organisation, but as social capital, we will have much better insight into what a network's economic function is. By this view, a network is a moral relationship of trust: A network is a group of individual agents who share informal norms or values beyond those necessary for ordinary market transactions. Indeed, the network, rather than the individual firm, has become the most relevant and effective form of organisation in the modem economy. This highlights the fact that companies now need to manage whole networks, not just individual alliances, and that the days when firms operated in isolation are over. It further means that leaders and managers must review their current and future human capital resources strategies - and where necessary equip their leaders and staff with relationship building and people skills - if they want to have a competitive edge in The Network Economy.

Karl Smith a powerful self-improvement speaker, trainer, consultant, entrepreneur and the author of Beyond The Business Handshake: Dare To Build High-Trust Business Relationships: helping people to increase personal efficiency, productivity, performance and ultimately profitability.

Visit to see Karl in action, see what Karl’s clients says, book Karl to speak or to do in-company training, attend a public event, subscribe to his newsletter or to use the free networking resources. Karl acknowledge the expert advice of other commentators in drafting this article.

For more information, please visit Karl's TNNW Bio.

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The Emergence of The Relationship Economy
The Emergence of the Relationship Economy features TNNWC Founder, Adam J. Kovitz as a contributing author and contains some of his early work on The Laws of Relationship Capital. The book is available in hardcopy and e-book formats. With a forward written by Doc Searls (of Cluetrain Manifesto fame), it is considered a "must read" for anyone responsible for the strategic direction of their business. If you would like to purchase your own copy, please click the image above.


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