Small-to-Medium Enterprises (SMEs) often lack the sheer size they need to compete with much larger, international firms. Doing business in an environment where you’re one of the smaller fish is difficult, which is why smaller businesses often align their objectives with other, similar businesses to create business networks. These networks let SMEs work together to accomplish larger objectives, which increases their competitiveness with bigger companies, and as such, they’re very important for the businesses involved.
That being said, keeping a complex web of different businesses focused on the same objective isn’t always easy. While business networks provide many benefits to their participating firms, they also present a new set of challenges that need to be overcome. Let’s look at the biggest challenges facing business networks and what can be done to overcome them.
How to structure the network
Business networks all have similar objectives—to facilitate co-operation between their members towards a certain objective—but they can be structured in different ways. Generally, the main question is whether the network should have a central, governing body. Networks that do are called business associations. Members pay a membership fee to join the association and receive tailored services from this body that help them achieve certain goals. At the same time, members are free to collaborate with other members of the association but are not obligated to.
The benefits of joining a business association are mostly to do with the tailored and efficient services they provide. These include networking and marketing opportunities as well as market information and analytics.
Other businesses form networks without central administrating bodies known as business aggregations. Members of business aggregations all co-operate with each other towards certain objectives. They have more flexibility and often more specialised goals compared to business associations. Generally, both structures have had their place within business, but the modern business environment presents challenges specific to both these models that must be overcome.
Are business associations obsolete?
The ability to network and communicate between businesses remains as valuable as ever, but there are new challenges facing the specific way that business associations operate. In the past, the membership fee offered a guaranteed return on investment as the increased consumer exposure and networking opportunities afforded by the association couldn’t be found anywhere else.
Nowadays, the largest business network in the world is Facebook. With free, online services able to replicate many of the benefits of more formal business networks, it can be difficult for SMEs to justify paying a membership fee for services they could find for free online. For anyone involved in business networks, it’s difficult to ascertain whether a more formal structure could be to their benefit, or whether they could rather freely associate with other businesses using social media.
Associations are countering this trend by providing new kinds of value, such as providing more supportive networks or creating new, bespoke bartering systems that directly help members return value for excess capacity. Bartercard is one such system – members can exchange their excess stock between each other for a Bartercard-specific currency that continues to be traded among members.
More inter-connectivity than ever
In the past, membership to a strong business network could provide access to what was essentially a small monopoly over a certain market. However, with the advent of 24/7 inter-connectivity through the internet, fast international shipping, and online retailers, businesses have a more global reach than ever before. These factors decrease the value of business networks, and those who belong to traditional business associations or aggregations seek new ways to give value to their members.
Of course, challenges are also opportunities. Non-conventional business networks are on the rise, especially through social networks like Facebook. Additionally, networking opportunities on social media are non-guaranteed and can be competitive. The challenge here is how to stand out from a crowd of similar businesses to gain opportunities to network and associate with other companies. Having a strong point of difference is more important for networking than ever before.
Meanwhile, traditional business network structures are using technology to provide new value to members. Examples include barter systems such as Bartercard’s, as well as better data storage using distributed ledger technology (DLT). A major challenge to traditional business networks is how to continue providing value through technological and organisational innovation.
Ready to join a network that’s a cut above the rest?
We know the challenges facing business networks better than anyone. In our 28 years of operation, we’ve seen huge changes in the global business landscape. Through it all, we’ve continued pursuing our vision: to be the most valuable membership for the NZ business community. Part of that is through our innovative bartering system that adds value to your business by allowing you to move your excess capacity and trade with a network of tens of thousands of participants. So, if you’re looking to join a business community, stop your search. Contact us now to get started.