For my money, David Weinberger is one of the sharpest thinkers around on the topic of the impact of the internet on business. All three of his books are worth reading (see my brief thoughts on Small Pieces, Loosely Joined). Today on his blog he posted the transcript from a speech he gave to the Canadian Marketers Association called Markets are Networks.

It’s an outstanding talk, and Weinberger succinctly summarises a number of ideas that I’ve been giving a lot of thought to over the past few years. He opens by saying:

As Doc Searls said, markets are conversations. But, Doc said something else that I think is just as brilliant: “There’s no market for messages.” That’s harder for marketers to hear, since it points to the essential fact of traditional marketing: The people marketers are talking to generally don’t want to hear from them. And I want to add one more thought to this mix: Markets are also networks.

I strongly agree with this. Thinking about markets as networks is useful in two ways. The first is metaphorical – if you view markets as networks then you interact with them differently than you do if you view them as a mass of standard utility-maximising agents, or differentiated demographic groups. The way that you build a market for an innovation is quite different when you think this way.

The second difference is that you have access to different analytical tools when you look at markets as networks. This view lets you use complex (social) network analysis, which give you new analytical insights into the management of your markets. Both of these changes in viewpoint can be quite powerful.

Weinberger also says:

Companies are hierarchical because hierarchies scale up to the size of an army (= the number of Ashton Kutcher’s Twitter followers). But hierarchies don’t interact with networks very comfortably. E.g., who speaks for the company?

This is an interesting issue at a couple of levels. One is that of the hierarchy interacting with the external (market) network, which is the point that Weinberger is making. When the firm interacts with a network, there are multiple points of contact, so managing a consistent message is a lot harder. Our research has also shown that this is also an issue within firms. The interactions between the official hierarchy and the informal networks within the firm are not always smooth. Managers that are aware of the networks that they are dealing with are often better at getting things done than those that simply rely on hierarchy. This is something that even the army has realised recently.

The economy really is a network – and it’s time that we start managing it like one.