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Hornby has no contracts or any other formal arrangements in
place for these exchanges, and I have to say, I understand why
it makes sense. They just gure, “We could shield our innova-
tions from our competitors, but we’re all much better off if we
share them.” The size of the pie (the total size of the market) will
increase as a result of it, and they all benet, much more than
they would if they all kept their innovations to themselves.
It is a peculiar type of innovation network, if your customers and
even competitors become part of it and share their innovations
with you, purely on the basis of trust and reciprocity, but it is a
formula that works for Hornby. It has managed to quintuple (I
had to look up this word) its stock price over the past few years,
partly as a result of such innovations. Innovation is important to
many companies in many businesses, too important to (merely)
leave to your own devices.
Spinning clients – the McKinsey effect
If you’re really apt (or perhaps I should say shrewd), you can even
create your own network – and even a network of customers,
using your own employees. It is the McKinsey way.
Some time ago I had lunch with three McKinsey consultants and
they started talking about how different all the people in their
organization were. I was watching them during this conversation
and couldn’t help but notice that they even looked alike . . . They
spoke alike, dressed alike and, clearly, thought alike. What seem
like huge differences within a group may be miniscule (or even
non-existent) if you’re an outsider looking in.
It reminded me of a scene in Monty Python’s Life of Brian, in
which Brian looks out of his window and sees a huge crowd
gathered in front of his house waiting for him to speak. And
he shouts, “You are all different!” After which they dutifully
reply in chorus, “Yes, we are all different.” Brian: “You are all
individuals!” Chorus: “Yes! We are all individuals!”
(I particularly like the guy who subsequently says “I’m not” . . .)
Business Exposed192
Anyway, McKinsey, like many highly successful individuals and
organizations – my great colleague Professor Dominic Houlder
tends to call them the most successful religious order since the
Jesuits – attracts scorn and admiration in equal measure. But I
believe they do many things right. One of them is that although
the average person only stays with McKinsey for three years,
when you join, you pretty much become a McKinsey person for
life. If you “leave”, you become an alumnus.
And that is a great feeling to foster if you, as an organization, lose
most of your employees to your customers, because those people
become great advocates for The Firm. McKinsey, for instance,
proudly showcases them as alumni (although they have been
able to keep remarkably quiet the fact that Enron’s Jeff Skilling
was among their most promising offspring . . .). Importantly,
what do these alumni do, as soon as they start to work in the real
world? Yep, they hire McKinsey consultants . . .
And these type of benecial effects do not only accrue to
McKinsey; other organizations can reap them too. Professors
Deepak Somaya, Ian Williamson, and Natalia Lorinkova, for
example, examined the movement of patent attorneys between
123 US law rms and 109 Fortune 500 companies from a variety
of industries. They found that if one of those Fortune 500 rms
recruited a patent attorney from a law rm, subsequently that
law rm would start to get signicantly more business from that
company. And I am sure it works that way for many other types
of companies too.
In addition, Deepak, Ian, and Natalia also found the reverse: if
the law rm hired a person from one of the Fortune 500 rms,
the business it received from that company tended to go up too!
Moreover, if the law rm poached an attorney from one of its
competitors, it saw business go up from the companies that were
on the books of that attorney’s previous employer. Apparently,
customers often follow a job-hopping attorney to his new law
rm.
Therefore, like McKinsey, perhaps you shouldn’t be too frightened
of people moving. You want to hire people from your compet-
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Making far-reaching decisions
itors and your clients, but you may also want your clients to
hire yours. Rather than vilifying them for leaving and cutting all
strings, keep them on the books as alumni, and actively cultivate
relationships with them, in the form of clubs, Christmas cards,
and summer-evening barbecues if necessary! The only thing you
don’t want is for your people to move to your competitors . . .
They too may take business with them.
Hence, people will move: if they do, just make sure it is to a
(potential) client – that’s the McKinsey way. And, of course, make
sure to keep quiet if they mess it up over there (like alumnus
Skilling did at Enron) – that’s also the McKinsey way.
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