It has taken the business world a long time to figure out the value of each individual point of interaction throughout the business ecosystem. But, not everyone is catching on – at least, not yet.

woman accesses business networkOne great example is Procter & Gamble (P&G). During one of its first experiments in extending supply chain collaboration beyond the enterprise, P&G decided to pilot an automated continuous product replenishment program with one of its larger retailers. By sharing information about inventory and demand, P&G found that both their suppliers and retailers could reduce the cost and boost the efficiency of the entire supply chain.

Sounds great, right? However, when the pilot was finished, the retailer decided that this process was not worth the time and effort needed to support the network.

Meanwhile, knowing that the process is so effective, P&G approached a smaller retailer – Walmart. Needless to say, Walmart is no longer regarded as a small business by anyone’s measure.

Why staying within your four walls can hurt

In the Center for Business Insight inquiry Business Networks: The Platform for Future Innovation, Quentin Fisher, lead partner in big data and analytics at CCS, observes, “Ants aren’t smart, but ant colonies are.” By itself, an ant cannot survive. However, a whole community of ants can exchange findings and ideas with each other, connect the information, and then form a solution that helps ensure survival.

Isn’t that also true in the business world?

With increasingly fickle customers and shorter product lifecycles, companies are searching for ways to keep up while freeing up resources to innovate, collaborate, grow, and evolve. For some companies, that approach is using collaborative technology to connect internal processes to their customers, suppliers, and partners. In fact, according to a recent McKinsey & Company study, these companies tend to outpace their peers in nearly every category of business performance, from market leadership to increased sales and profitability.

The best idea wins – you just need to know where to find it

According to Gartner, 50 percent of large organizations will have internal Facebook-like social networks by next year. In addition, 30 percent of these businesses will regard these tools just as essential as e-mail and telephones. But first, companies need to know how to use these tools to engage with the right partners at the right time and know when they have struck innovation gold.

There are four steps companies should take to unlock the full potential of their business network:

Step #1: Source with knowledge sharing

For a while now, the procurement process has been highly transactional and primarily focused on driving down costs. A request for proposal (RFP) is sent out. Proposals are reviewed. A winner is picked. The deal is negotiated, and the contract is signed.

Pretty simple, right? But it’s far from optimal.

Through knowledge-based sourcing, businesses and their suppliers can share much more information up front to jointly identify opportunities that can deliver benefits for both parties – whether it’s three months from today or five years from now.

Step #2: View your supply chain as a business network

To be successful, business networks must give companies the ability to transact quickly, collaborate in real time, and access information anytime and anywhere. As a result, companies are defining their supply chain as a much broader network that starts with their supplier’s supplier and ending with their customer’s customers.

By extending the value chain to this degree, decision makers can get the full picture of an operational impacts (see Step #4).

Step #3: Create your own intelligence

Rather than rely on e-mails and surveys, decision makers can tap into the built-in intelligence of business networks to support the discovery of new people and interests and the ability to filter the data received. Although this kind of data collection appears to be passive, it actually an intelligent source of third-party information – such as ratings, reviews, traffic, weather, GPS, market data, and social media sentiment.

And once that information is incorporated into the company’s network of integrated data sources, decision makers benefit from greater insight.

Step #4: Mitigate risks proactively

With more information sharing and greater access to third parties, additional risk is always a possibility. For example, an integrated supply chain with leaner inventories can become more vulnerable to market dynamics, natural disasters, and regulatory changes.

Yet, no one can argue with the heightened visibility business networks offer. They serve as a warning system that enables decision makers to see the threats looming ahead and determine how to best insulate the entire business network from any operational interruptions. Even if a disruption is inevitable, business networks could help companies respond and get back up and running as quickly as possible.

Want to learn more about business networks? Take a look at how some of today’s industry leaders are gaining significant advantage in the Center for Business Insight inquiry “Business Networks: The Platform for Future Innovation.”