IPNs Give Small Businesses a Competitive Edge
By: Lara C. Hartman
Economic growth and job creation remain the primary issues on the nation’s agenda, although it is small businesses—not large corporations—that are playing an increasingly important role in economic recovery. In order to compete against corporate CEOs, small business owners must be aware of industry trends and maintain an agenda that promotes collaboration.
Working with external groups, such as mentors, advisory boards, and trade associations, has been useful in the past; however, today’s highly competitive marketplace demands new ways of thinking and strong collaborative structures, represented by industry peer networks (IPNs).
Dr. Ada Leung, Assistant Professor of Marketing at Penn State Berks, has investigated the processes and effectiveness of an IPN whose member firms are located in the United States, Canada, the United Kingdom, and Australia. A typical IPN peer group has twelve small business owners. The research team gathered survey data about social interactions among members in the peer group and company performance data, so as to investigate the relationship between peer member behavior and the company performance.
The findings suggest that the more socially embedded IPN members are within their respective peer groups, the higher the perceived level of learning in marketing and management practices. For example, IPN members who are socially embedded might organize IPN-related activities, partner with peers for business endeavors, discuss and advise each other about business issues, or participate in social activities. These social activities might include anything from playing golf or sharing a meal, to inviting a peer to a company site visit to “shadow” daily activities.
Leung began her research with IPNs while she was Assistant Professor of Marketing at the University of Nebraska. Dan Shundoff, a business owner in the Information Technology (IT) field, had expressed an interest in learning more about the value of participating in an IPN. He had met Leung two years prior, when he was seeking college students taking marketing courses to help him conduct his research.
Shundoff became the first peer network member for the nonprofit industry peer network known as the Heartland Technology Group (HTG), the same network Leung studied. Shundoff is CEO of a central Nebraska company known as Intellicom, a leader in business-class technology solutions.
The peer network known as Heartland Technology Group was founded by Arlin Sorensen, who is CEO of an IT company called Heartland Technology Solutions. Sorensen has worked in the IT industry for twenty-six years, and set up this IPN to help others benefit from his experience. Leung says that over the past four years that she has been researching industry peer networks, HTG has grown from one to twenty-two peer groups.
Many vendors sponsor peer networks. Large companies typically sponsor the conference location and meals, and provide free training. Peer networks are also common in the service industry, frequently those that have geographical boundaries.
As members of an IPN, entrepreneurs feel they have the opportunity to grow and connect with each other. Companies in the business sector usually meet four times a year to address quarterly performance.
For the HTG peer network, two meetings were hosted in the towns of members of the peer group, and the other two were larger conference-type events. At these meetings, members present subject material related to their company, and participants have the opportunity to share business goals. Additionally, between these meetings, peers talk and occasionally ask one another for advice.
“Sometimes as an owner of a small business, you are less motivated to do better because you are your own boss. Peer networks ensure there is a sense of accountability and motivation,” explains Leung.
Within each group, members act as a board of directors, mentoring each other. A greater number of members represents an increased business potential. It is not uncommon for members to work together to achieve a common goal, such as submitting business proposals.
“You need to cooperate in order to compete,” emphasizes Leung. “In order for business owners to compete in the local marketplace, they must cooperate with peers across the nation by sharing information, knowledge, and company performance data.”
Face-to-face meetings and electronic communications in between the meetings allow IPN members to stay current with industry changes. Members learn vicariously from the experiences of their peers, while collaborating on mutually beneficial projects. The motivational force of membership is embodied in the members’ desire to avoid inferior ranking in the group, while instilling peer pressure to meet collective performance standards.
“In order to make it work, each member needs to trust the other members of the peer network,” says Leung.
Network members are able to provide concrete examples, by sharing company numbers—something that can only be achieved in a trusting environment.
Leung reflects that one network participant summed up the experience saying: “Sharing my books (company’s performance data) with my peers is just like ‘running naked’ with them. Yet by doing so, I have learned so much from them. I completely trust them and we have a lot of fun together.”
Leung explains the term “running naked” is perhaps meant to capture the ambivalent feelings of the participants in the industry peer group. It is hard to do in the beginning, but only by doing so, are members able to develop trusting relationships with their peers in a relatively short time. They also learn quickly how to interpret accounting and financial data, in addition to methods for growing their businesses.
Peer networks have become an international phenomenon. There appears to be more growth in English-speaking countries, as they are especially prevalent in the United Kingdom, Australia, and Canada.
Although industry peer networks have not yet received much attention in the business press, thousands of U.S. companies in dozens of industries participate in them. Leung’s theory, proven over years of research, holds true: The more embedded and involved members of these IPNs become, the greater the chances they have of achieving a higher level of learning. This extensive sharing of information helps small businesses maintain a big-picture orientation and keeps them informed of industry trends.
“You don’t want to operate your business alone. You should have someone, a mentor, to talk to and give you feedback—someone to share your frustrations and concerns,” Leung summarizes.