DEVELOPING SOCIAL CAPITAL FOR BUSINESS GROWTH - How to Ignite Your Networks for Business Impact
Several professionals have considered the entrepreneurship option at one time or the other. For some, the risk involved is just too high. Some even ventured into entrepreneurship and failed. While some of the business failures are attributable to the harsh business environment, poor infrastructure, wrong business model, inadequate access to funding, regulatory somersault, and extreme competition from the large players, one silent business “killer” is the absence of a strong social capital (key contacts and networks) by the entrepreneurs or business leaders, or what people generally refer to as the ‘who you know” strategy.
Research studies in the social capital arena have confirmed that entrepreneurs with higher social capital do achieve better business financial performance. Such studies support the need for entrepreneurs to focus on developing their social capital base to enhance their business success. Entrepreneurs often place reliance on narrow scope of networks, such as relatives or friends or neighbors. This can be disastrous as the any little disagreement with the key contact can easily lead to a negative business impact, especially due to the African cultural issues.
Social capital is usually acquired through networking since networking is about the development and nurturing of relationships. However, the social capital concept is not limited to “networking” with other professionals or business leaders. It involves the entire process of identifying key people that can provide access to resources (financial, people, knowledge and experience) with a focus on developing a strong relationship with them. Hence, the concept of social capital includes the resources available through an entrepreneur’s personal and business networks, including ideas validation, business advisory, leads generation, financial management, operational risk management and business transactions and opportunities.
Business leaders need to move beyond trade and professional networks and evaluate which groups they need to nurture to achieve a strong social capital base. For example, entrepreneurs in the road transportation or haulage business might require a good network of senior officers in the local government councils and police commands around the communities where they operate. Sometimes, business leaders overlook the strength of their alumni networks (from their secondary schools, military schools, and including post-graduate schools), neighborhood and community networks, networks on social media platforms, investment and entrepreneurship clubs, and the various business groups including those being hosted by religious organizations.
In order to determine the appropriate networking group to join, business leaders are expected to identify their strengths and weaknesses as regards the required skills for leading their type of business. Consider both formal and informal networking groups. While you may need that professional association or trade group, don’t neglect that town’s union. Ensure that you aim to connect with people from diversified backgrounds and experiences, even on social media platforms. You can’t imagine what you’ll probably need in the nearest future.
Once you have developed the necessary networks and connections, maintain regular contacts without the expectation of always benefitting from the relationship. Remember, it should be a symbiotic relationship. Do you remember the birthday or wedding anniversary of that special mentor that has been supporting you? When last did you also invest in him or her? Your social capital requires a strong investment of time and resources for you to nurture it adequately.
While the entrepreneur needs to have a mastery of his or her business model, market structure and competition dynamics, a strong network of contacts will definitely enhance the business. Start building and nurturing your social capital from day one. Don’t wait until you actually need something before attempting to build or nurture your social capital. If you build the right networks, then you’ll have a pool of resources to draw from whenever you need it. Entrepreneurs or business leaders who aspire for business success without social capital are like camels trying to pass through the proverbial “eye of the needle”.
About the Author: Wole Oluyemi is a chartered accountant and business advisor, with special interests in SME businesses, strategy, finance and tax. He is also a doctoral researcher at Cranfield University (UK) with research focus on corporate political strategy. He can be reached at @WoleOluyemiCo on Instagram, Twitter and Facebook.