More than any force in small business, the relationships you build and have are paramount. The concept of relationship capital, what it is, what it is not, and how it is emerging as a valuable, measurable asset on the proverbial smallbiz balance sheet has been put on my radar, thanks to a couple of Smallbiz Brain interviews recently conducted on the subject.
The majority of people endaged in small business endeavors are human (at least most of us) which means we have a set of needs emotionally, professionally and otherwise; natural cuases of nature that cannot be denied. What I'm observing is that for many years business people and professionals have sensed, known or intuitive performed professionally with the matter of relationships a natural extension and presumption of the sales or networking process.
Now, seem to be finding a language for the connectiveness to our contacts, associates, friends and ths like. Web 2.0 social networking platforms like Linked In, Facebook and so forth have helped to identfiy such relationships as capital--a currency that is not on the balance sheet, but very real, and very important to success.
My interview with Dr. Ivan Misner unpacks who his simple quest for new contacts some 20 years ago ultimately created a word-of-mouth business networking industry with his innovation that began as a simple networking group and ultimately transformed itself into a multi-million dollar international organizaion called BNI.
http://www.bni.com/
For an insight as to how this leader thinks about relationship capital, here are some excerpts from my interview with Dr. Ivan Misner on the Smallbiz Brain Podcast Series:
Dr. Ivan Misner:
I think BNI is really a
classic example of necessity being the mother of invention. I put together friends of mine, people I knew
and trusted and they knew and trusted me and we agreed to refer each
other. And we started doing that and
someone came who couldn’t join, because at BNI we take only one person per
flavor – so there’s one lawyer, one banker, one chiropractor, one travel agent
– and someone came who couldn’t join and she asked if I’d help her open up a
second group. And I said, “Yeah sure, I
can do two of these plus my consulting practice.”
We opened up a second group
and we had two people come to that group who couldn’t join, right at the very
first meeting and they asked me if I’d help them open up their own group. I said okay and then we had three people come
to those two groups that couldn’t join and it just snowballed.
In a year we had twenty
groups and I realized that I had struck a chord in the business community that
I hadn’t expected. I kind of thought
everybody had this networking thing and referral marketing thing worked out and
I discovered that they really didn’t. This
helped business people generate business through referrals.
David Wolf:
Now, along the journey, were
there any particular surprises you encountered or things along the way that you
didn’t expect?
Ivan Misner:
Wow, there’s so many it’s
hard to narrow it down to just a few. I
think one would be it’s really funny how everyone thinks they are so
different. And forget about other countries;
let’s start with the United
States.
I opened up in Southern California. The first chapter was in Arcadia
and the fourth chapter was in the San Fernando Valley. If you don’t know Southern
California, that’s 30 minutes apart. Maybe two days if you’re driving during rush
hour traffic. It’s really only 30 miles
or so apart. And to have people say, “Oh
no, no Ivan, something like that wouldn’t work here in the San
Fernando Valley” was a real eye opener to me. To be so close and have people saying, “No,
no, we’re different here.”
And then of course, as you
start to open up in different states, you really get that we’re different mentality.
And what I had to work through and what I didn’t fully understand then
was that our similarities are far greater than our dissimilarities and that oftentimes,
people use the weird-different answer or comment as a way of just saying, “I
don’t want to do the hard work necessary to do what you want.”
David Wolf:
Now the BNI model itself, it
took some time and some trial and error to sort of hone in on and bracket so
that it was working. Can you speak a
little about what that process was like and what you finally ended up with in
what we’ll call the mature version of the BNI model?
Ivan Misner:
You know, I really think in
a lot of ways we created an industry. We
really practiced a lot of different things to see what would work or what
wouldn’t work – simple things like, you know, just the structure of the meeting
and what should go first and what should go second.
For example, we used to have
visitors be the first people to stand because we thought we were being
gracious, you know, they’re a visitor of the meeting, so let’s let them stand
and do a sixty second introduction.
Well, we found out pretty quickly that it was like deer in the
headlights. They had no idea of what
they were supposed to do. Networking
groups back in the mid 80’s were pretty new and a lot of people didn’t
understand how they worked and were really uncomfortable having to stand and do
a sixty second introduction.
With a lot of our groups, we
tried meeting every other week instead of every week and we discovered early on
that groups that met every other week passed exactly 52% less referrals than
the group that were meeting every week.
Having regular meetings substantially increased the amount of referrals
that one gets. It’s kind of like getting
a haircut over the phone – it doesn’t quite work. In referrals, you’ve got to be there to build
the relationship and get the referrals.
David Wolf:
I know this is somewhat of
an obvious question, but if you don’t mind – why does word of mouth work?
Ivan Misner:
Word of mouth works because
it’s all about the third party testimonial, the third party endorsement. Just take a look at advertising – radio
advertising. Some of the most powerful
radio ads are ads where somebody’s standing up and saying, “I use Joe’s
Autobody – he was great and he was inexpensive and I can trust Joe and you can
trust Joe.” That kind of third party
testimonial is powerful.
It’s also dangerous and
that’s why referrals really have to be based on relationships. It’s dangerous because when you give a
referral, you give a little bit of your reputation away. If you give a bad referral, it hurts your
reputation. If you give a good referral,
it helps your reputation. So when you’re
giving referrals and the people do a good job, it’s great for business because
people are more inclined to accept that referral than they are anything else.
David Wolf--Closing this entry...
I'll continue more from Ivan's interview in future blog postings. Plus, I have discussed this subject with Adam Kovitz, the founder of the international publication, the National Networker. ADam has become an expert on the subject of relationship capital, and I'll include segments from his interview in future postings as well.
Till then...