INTRODUCTION

The article highlights the relationship between the state of a business and the influence of its social networks. Primarily social networks have been described in three types of relational interactions. One are the exchange networks- which comprise of associated vendors and customers, who form commercial relationships and affect the decision making procedure. Another is the communication network which consists of consulting firms, financial advisors, etc. from whom support can be expected in terms of business contacts and strategic decisions. The third and the final one is the personal network that mainly includes communications between family, friends and relatives. While the first two form an external network, family communications belong to the internal network. The major assessment is thus about how a network relationship affects an entrepreneur’s decision making process and what impact does it have on the business performance. The Commonwealth Bank is chosen as the real business example for discussion in this report.

The Commonwealth Bank of Australia (CBA) is an Australian multinational bank with businesses spanning the US, New Zealand, Asia, Fiji, and the UK. It delivers an array of financial services including retail, business and institutional banking, funds management, insurance, investment and other such services. Started in 1911 as a savings and general bank business, it expanded its services 1920 onwards. It went through a lot of diversifications, deregulations and then privatization over a period of 40 years till 2000. Gradually, they established a focus on customer service. They restructured internally and centralized the back office processing to a single central processing site in all states. Business banking centers were established and customer service centers were opened in capital cities. The Customer Relationship Model was introduced into branches which enabled new ways of interacting with customers (CBA website). CBA also introduced a Relationship Management Program that offered customized services to the Bank’s high value clients (CBA website). Primarily, they had aligned themselves to serve their goal of “great customer service, engagement of people and simplified process”. CBA picked Facebook as their primary social network and started using App Cloud to float conversations and make the customers’ experiences personal, fast and pertinent (Sales Force website). Identifying customer service as a strategic priority, the leaders had clearly defined their strategy of being customer-centric. Following this, there were advances in technology after which came the automated banking services. Also, with restructuring, CBA provided some niche services to address more complex needs and strengthen their customer base.

MAJOR ISSUES IDENTIFIED IN THE ARTICLE

The Peltier & Naidu (2012) article closely identifies the creation, modification and elimination of social networks over time and how closely does a business depend on these at each stage of its progression. As the general pattern goes, during the initial stages of the organizational lifestyle, it might rely more on the personal network gradually shifting towards the external one as the stage progresses. With the dependency on personal relationships declining in favor of more external relationships, there would be a mix of both as the firm evolves.

But, the issue lies in the change in social identity of the business. Keeping in line with the dynamic world, as the organization changes, the social identity of the entrepreneur might also undergo a change. But, contrary to this, there is some expectation that entrepreneurs with a greater family-based orientation will utilize more of personal networks throughout the organizational life cycle irrespective of any change in the organization’s identity.

Also, as the general assumption goes that with a change in surroundings, there will be a gradual shift from one type of interaction to the another. What is missing here is the entrepreneur’s social identity. Being the ultimate decision maker, his role majorly impacts discovering opportunities and resource mobilization.  And based on the characteristics of the entrepreneur, the social setting in which the interactions take place also matter. Thus the organizational upgrades and market changes cannot be considered as silos, and major factors like the temperament of the entrepreneur also needs to be taken into account.

The nature of business also plays a major role as it will define the kind of data and information required for the business to proceed. Suppose the accessibility of information is favored towards a particular group, then value addition from that connection would be higher. And there would be no transformation observed from one relation to another. Thus the business owners first define their social identity, which in turn influences the type of social network they choose to put themselves in.

There are different schools of thought when it comes to examining the relationship between economic performance and the social identity of an entrepreneur. Although there are very few empirical studies to justify any conclusion, both views have strong results to examine. As Granovetter (1992) argues that social relations are more closely related to economic performance as compared to the ability to take decisions. Another argument lies in the fact that entrepreneurs with at least some social affiliations will definitely outdo the non-social ones as it would definitely give them an edge of better information access of industry, competitions, best practices followed, etc. Fuller-Love & Thomas (2004) note that businesses co-operate to share resources and add value to their projects. And thus, by exchange of information, networks can be an important instrument for entrepreneurs to enhance their businesses.

CRITICAL REVIEW OF ARTICLE

As the issues form certain hypotheses which have been tested by collecting responses and running a K-Means cluster analysis, some interesting insights have come across.  It was seen that in the start-up phase, the organizations definitely depended on the personal network more both in terms of frequency and value. This was definitely an expected result as during the initial phases, this is the source which is most reliable and easily accessible as well. And as few businesses are passed on within the family generations, this social network becomes even more essential. Also, apart from the customers, no other source was as high as the value provided by the personal circle. However, in terms of just frequency, as time progresses, family/friends, customers, financial consultants and suppliers was more or less the same. And if we consider the value advantage of the strategic advice received, the contribution from family dips over time. This is taken over by the current/potential customer base of the organization.

Critically analyzing, this is the best route an organization should typically take. As it sets its foot into business and gets even with its competitors, it’s time to take advantage. It helps to be customer-centric in this case. By accepting valuable feedbacks and insights from customers, they can align their strategy to enhance the products and services and thereby, build loyal customer base. Incorporating suggestions from potential customers, they can even acquire new customers or steal a few from their competition. This not only helps in increasing the consumer base and market share, but will also prepare the foundation for future expansions. In this case, although there was an increase in information from the suppliers’ end and of competitors, it did not add much value because of the alignment of the organization.

Throughout the organizational lifecycle, the frequency of competing business increased, but much change in value addition was not observed. This was strange as with the volatile markets and its changing dynamics, taking competition into account is very important to sustain. Probably the market knowledge was very high for these firms because of which information from competitors did not add much value as such. Also, the value from non- competing business was really low which was expected after all.

As individually the hypotheses were validated from the cluster analysis, put together, it does prove that social networks evolve with time. But now comes the question of individual social identity of the entrepreneur. As the usual personal networkers prefer to stay more inclined towards this network, the external networkers put more value on the non-family side of the network. While both give due attention to information received from current and potential customers, the shift from personal network to external and vice versa does take time. And considering the weights they put on the value additions to their respective networks, their decisions are primarily guided through these insights.

The final hypothesis made was that the entrepreneurs with an internal or external social identity will outperform those with weaker social identities. And the tests, taking important performance parameters like market share, profitability growth, etc. into account also supported the above hypothesis. This is, in a way, justifiable as people with some information (that too relevant information), will any day fare better than those with lesser or no information at all. Because, no matter how good strategies you build or how efficient your workforce is, until and unless you have the right data to work with, you will never get a proper direction to fire your aims at. This will result in losing out to competition just because they had access to certain information which you did not. Therefore, the social networking sites do play an important role in the overall business performance in the industry. Therefore, Casson & Della Giusta’s (2007) contention of terming social networks as organizational assets is completely justified.

As the paper by Peltier & Naidu (2012) cites, not just the frequency but also the value addition of each of the network plays a role in determining the effects on an organization. But there is not a static or standard point for an organization to be or adopt in any circumstance. It is a completely dynamic process and thus the decision making should depend on the volatile market conditions and as and when new challenges appear. As Aldrich, et al. (1987) observe, there will be more perspectives associated with entrepreneurship than fewer and there is much to be gained from tolerating such differences. The concept of social networks and social identities are both evolutionary and play a role simultaneously to affect any organization’s growth structure.