Winning teams share a clear vision of what their business is all about
An entrepreneurial team needs a lot of resources to launch a successful business—money, ideas, employees, infrastructure, customers and so on. Most of these are acquired with the help of other people, so perhaps the most important resource on which all others depend is your human relationships.
Who will help you? Who will make introductions for you? Who will share with you useful information that you didn’t already know? Answers to questions like this help you figure out how much social capital you can use in order to grow your enterprise.
Few of us start businesses alone, so what matters is the total social capital of a venture’s top management team.
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| Philip Anderson |
INSEAD entrepreneurship professor, Bala Vissa, has spent years studying how successful teams use their social networks to leverage a young business, mostly using data gathered in India. In this month’s column I will share his key findings with you and his advice on how to get the most out of your team’s web of social connections.
Professor Vissa started off asking under what conditions a team’s networks were, as a whole, worth more than the sum of the individual networks. To address this question, he studied 85 top management teams of young software companies from various regions in India, identified with the help of NASSCOM and The Indus Entrepreneurs (TIE). He focused on one industry at first, because the way people network often depends on the nature of the industry they occupy.
Professor Vissa was somewhat surprised to find that different teams had very different patterns of social ties. In many teams, all the members were connected only to people who were very similar to themselves in terms of age, occupation, and social background. This is not uncommon, he says, because people tend to be most comfortable getting to know others who are like themselves. But the teams with the highest revenue growth were different: their members reached out to a very diverse web of people, many of whom were quite different from anyone on the team. Professor Vissa’s first lesson for entrepreneurs: make the effort to build relationships with people who aren’t like you or anyone else in your venture’s top management. Look for people who are different in terms of age, area of expertise, and geographic location, and get to know people at companies with different positions in the supply chain, e.g. vendors, partners and customers.
Delving more deeply, he found that the teams who made the most effective use of their networks shared one thing in common: they shared a clear vision of what their business was all about and what were their key priorities going forward. That helped them agree on who to connect with, what data to share with outsiders, and what was worth learning from them. If each member of the management team explains in a different way to outsiders what the company does and what kind of help or information it needs, the team ends up with jigsaw puzzle pieces that don’t fit together into a bigger picture. Only when they agree on their future direction and what kind of business they want to become can they pool ideas from many different sources and derive sensible insights. If they don’t agree, then data from different sources conflict too much, creating confusion.
Is camaraderie and esprit de corps a good thing for a venture team to build up? Professor Vissa’s research suggests that the answer is “maybe.” If a team contains a complete set of skills, such cohesion helps them get more from their relationships. But when there isn’t much diverse expertise in a team—for example, when everyone on the team has a technical background—they all tend to reach out to the same set of people. It’s easy to build cohesion in such cases, but different team members tend to keep reaching out to the same people, hearing the same stories, and reaching the same conclusions. They end up in too much of a comfort zone and never seem to build the diverse set of relationships they need in order to be exposed to new ideas, new people, and new opportunities. Instead, the same advice and the same information keeps re-circulating, and people fool themselves into believing that what they are learning from the outside world is consistent and logical, when actually it only seems coherent because it comes from a narrow range of sources.
Diverse teams tend to have diverse social networks, but they also tend to have more conflict because different people have different points of view, steeped in their different functional backgrounds. That’s why the best entrepreneurial teams combine people who have dissimilar expertise and backgrounds, but who pull together because they are truly committed in spirit to one another and to their shared enterprise.
Professor Vissa then turned to examining how successful entrepreneurial team members manage to build useful networks. Even if you know that you should build a diverse set of relationships, it’s not clear how to do it or why some people are better than others at creating effective social relationships. In-depth interviews suggested that most people adopt one of two different networking styles: relational and transactional. Entrepreneurs who have a relational style typically reach out to a lot of new people and find out a lot about the new people they meet, because they are interested in establishing a relationship. They are very good at converting professional relationships to personal relationships, and they are also very good at culling relationships, reducing their investment of time and energy in connections that are not mutually beneficial. Those who have a relational style make a point of staying in touch with their contacts periodically, whether or not they need anything specific, to see what is new and to refresh the connection.
Entrepreneurs who have a transactional style differ in every one of these aspects. They typically reach out to a much smaller number of new people, preferring to spend time with those already familiar to them. They typically don’t find out very much about new people they meet, because they are focused on learning how those people can be useful to them. They tend to keep professional and personal relationships separate, and seldom thin down the number of ties they are maintaining. They typically get in touch with the people they know only when they have a specific reason to do so.
Because these two styles are so different, they affect the way entrepreneurs search for new customers, partners, vendors, or investors. When members of an entrepreneurial team have a transactional style, they gain new customers or alliance partners by relying heavily on referrals from people they know. In contrast, people with a relational style are much more willing and able to strike up relationships when they encounter strangers. They have learned over time to be confident in their success forming new relationships, so referrals are less important to them. Understanding your own style and that of your partners in an entrepreneurial venture as well as the style of people you encounter, is key to ensuring that a team ends up with a diverse and helpful web of social ties, Professor Vissa suggests.
What should you do to get the most out of your team’s network? INSEAD’s Vissa offers four concrete pieces of advice.
1. Reach out to people who have similar (or better) experiences and accomplishments as you, not people who have the same social background you have. Networking with other successful entrepreneurs as opposed to other people from the same region that you hail from, usually produces better results.
2. Use a long time horizon; make sure you stay in touch with people whose help you might not need until well in the future. Don’t drop out of touch with people just because you don’t need their assistance or advice in the next 90 days.
3. Reach out to people who are both younger and older than you. Most people spend the great majority of their time with others who are about the same age. Older people are sources of sound advice while younger people are more attuned to what’s new and are better sources of really novel ideas.
4. Finally, delegate enough of your operational tasks so you have time to reach out to new people to develop your business. Remember, your personal network today will likely become your venture’s network six months down the road.
When an entrepreneurial team comes together to grow a business, it’s easy to spend so much time thinking about products, markets, competitors, financing, and other concerns that one neglects the resource that underpins all other resources: people. It’s a good idea to assess how the networks of your team members overlap so that you can get more resources from your overall web of connections than you would if every member of your team pursued the same relationships using the same style.
INSEAD Alumni Fund Professor of Entrepreneurship, Director, Rudolf and Valeria Maag International Center for Entrepreneurship and Director, 3i Venturelab.
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