Strategy

Make your business the center of the universe

Let's talk about understanding networks.

Photo by TanMan/Moment/Getty Images

Depending on how much you identify as a narcissist (which can be a good thing, it turns out), the phrase “center of the universe” may not be terribly appealing. But that mantra may prove incredibly useful, especially if you’ve got a great idea you’d like to make into a business.

Scientists are starting to find out just how important networking is for small companies. One of these scientists is Lucas Lacasa, a researcher in applied mathematics at Queen Mary University of London. In a paper published in June 2019, he and his team created a model showing that the position a company holds within a network is predictive of how successful it will be.

Lacasa tells Inverse that the most successful businesses occupy central positions in their networks, and that being at the center of the business universe (or near to it) is hugely powerful.

“We found that the centrality of a startup in the present was considerably correlated with its future success a few years down the road,” Lacasa says. “The mechanism is similar to the old-school Google page rank algorithm: If your friends are important, then it is likely that you are important as well.”

That’s why this newsletter is about understanding networks, what they actually measure, and the different strategies that companies can use to gain influence, knowledge, and prestige. Here’s how to become the Sun (or get as close to it as possible) in your own startup solar system.

A version of this article first appeared as the Strategy newsletter. Sign up for free to receive it weekly.

Knowledge spillover

As part of Lacasa’s paper, the team created a map called the “World Wide Startup Network” that shows how 41,380 companies in the world are connected to one another, and how well they perform based off of their positions in that network. Again, the more central they were, the higher the chance the business became successful within seven years.

In Lacasa’s model, “centrality” was defined by how many connections one firm has with another through the people that work there. In that sense, hiring adequately connected people is one way that businesses fast-track their chances of success.

“Startups attain more central positions, for instance, if the employees working in the startup have previously worked in other companies which were already central,” he explains.

That’s not particularly groundbreaking, but it does help illuminate why networks are so important. They’re conduits for “knowledge spillover.” If someone moves from Airbnb to Firefox or Twitter, for example, they take that knowledge with them.

“Startups that are able to capitalize and ‘suck up’ all this potential knowledge are more likely to succeed in the long run than more isolated startups, and our analysis suggests that the more central the startup is in this network, the more likely this will happen,” says Lacasa.

Centrality is useful because it is just a way to measure how much of the available intel a business is primed to absorb. The more connections a startup has (made through employees), the more straws it theoretically has in the punch bowl, and in turn it’s more likely to succeed according to that model.

That said, hiring connected people isn’t the only way to make sure your startup’s network grows. There are a number of ways to look at how to network to determine where your business may fit in.

The more employee connections, the more likely a startup will succeed.Thomas Barwick/Getty Images

Other strategic positions within a network

Ekaternia Turkina is an associate professor at HEC Montréal’s Entrepreneurship and Innovation Department. She explains that there are actually three different ways companies hold power within their networks.

She calls them closeness centrality, “eigenvector,” and “betweenness” centrality. At their heart, these are three ways researchers measure whether a business has attained centrality.

Degree/closeness centrality is about the number of connections a startup has, direct or indirect. This is directly measured in Lacasa’s explanation of his model, through employees who bring their know-how with them.

Turkina says this can be built through “engaging in partnerships, collaboration projects, and extending their buyer-supplier networks.”

This is about casting a wide net and developing many useful connections.

Eigenvector: This is a mathematical term, but in practice it boils down to prestige and influence. In other words, if you don’t have many connections but tend to be connected to other highly central networks, you too can benefit from their powerful position.

This type of connectivity is typically seen in “highly performing and well-connected companies that have extensive supply chains and participate in different alliances,” she says. This position is occupied by big dogs that people are trying to get close to (not something that most startups can depend on).

Betweenness centrality: Finally, betweenness centrality is about how far your reach is, and how crucial you are as a communicator between two companies in a network. Achieving this type of centrality means becoming a “broker” — in other words, you convey information between two nodes that otherwise wouldn’t communicate and become invaluable in that way.

Although breaking down networks this way may seem semantic, Turkina explains that these different types of network positions come with different types of advantages.

“Some scholars argue that betweenness centrality gives better advantages for innovation, as by brokering, companies tap into complementary pools of knowledge and control the flow of information,” she says.

“At the same time, other scholars believe that connections among your connections (reflected in degree/closeness centrality) matter positively, because it gives rise to collective approaches to problem solving.”

These positions are all different ways of making your business feel like an essential part of the network. Ideally, you would be able to hit all three of those factors, but even pursuing one may be more useful than chasing all three, warns Turkina.

Finding the place where you’re playing to your strengths may help you find your way to the center of the universe.

A version of this article first appeared as the Strategy newsletter. Sign up for free to receive it weekly.

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