Before the financial crisis of 2007-08, two Californian friends had an idea to rent out their mattress in their living room.
As the world descended into recession, Brian Chesky and Joe Gebbia realised this was an opportunity to expand the business to help people find affordable accommodation.
They saw that in a time of uncertainty, taking a risk could be beneficial — and Airbnb was born. Today, it’s worth more than $31bn and the pair’s relationship continues to flourish as they prepare to float the business.
In 1964, Harvard University Professor Dr John W Pratt released a study that looked at risk aversion. Along with Kenneth Arrow, they worked out a formula, which involves pages of equations that are far beyond my comprehension.
The summary is easier to understand: “Human tendency avoids uncertainty even if it means missing out on beneficial opportunities.”
Uncertainty has certainly become a byword of the past 8 months. The coronavirus pandemic’s continual dominance over the lives of everyone across the globe means that uncertainty will, unfortunately, continue.
It is a stark reminder in the middle of Mental Health Awareness Week in the US that Covid-19’s toll on people’s lives has and will continue to be devastating.
But even in such unpredictable times, one thing is certain within the uncertainty: relationships are all important. I would suggest they are more important than ever, especially within business.
As you look towards autumn and winter and wonder how your business will manage in the pandemic’s aftermath, is there anything you can do?
I believe that being committed to intentionally establishing and growing a relational ecosystem results in generating more business opportunities. Therefore, sowing, growing and nurturing yours should be a key part of your strategy.
During the technology crash in 2000, Yale University’s James N. Baron and Stanford’s Michael T. Hannan tracked tech companies that set up between 1989 and 1996 as part of a study of organisational blueprints.
What they found was businesses that were committed to their relationships were more likely to experience the most growth. And those tech companies that did were able to float on stock markets.
Being committed to building a world-class business must involve building business relationships. As I say in my book Grow Your Business, it is possible to do this one relationship at a time. But it must be intentional, you cannot leave it to chance.
The true currency of business
The immediate thought of many businesses right now is cash flow. This is, of course, essential for the continuation of a business as they need to meet their financial commitments.
I believe that many business owners miss out on a more secure future, however, because they haven’t invested in relationships. My mantra is that the true currency of business is trust-based relationships.
Trust is what makes business work and in such difficult times as we’re living in right now, you are likely to have walked away from untrustworthy relationships.
One SME I worked with in the past had built a very deep trust with its main client, which is a FTSE 250 hospitality company. As the sole supplier of a niche piece of equipment, the managing director believed his company invincible when it came to the contract between each business.
Rather than invest in the relationship and increase trust, he and his company became blasé. I recently learned that the large company was starting to lose trust in the SME business a few years ago. After 10 years as sole supplier, the company has since been told their equipment will be phased out for a new competitor.
If they had valued the currency of trust, the directors of the company would be facing the future with some certainty. As a result of failing to build that relationship effectively, the future for them is very different.
To be intentional is to be certain. So businesses that are looking to the future need to look to be intentional about their business relationships.
I would advise that they do not see the building of relationships as a risk, but as an essential investment into their business. While some relationships will grow organically, some within their ecosystem may require extra care.
My model for an ecosystem consists of 5 Circles of Relationships: Soulmate, Super Family, Speed Dial, Social Relationships and Social Media. I will explain how this works in a future blog. By having this model, I know that through the years of keeping my Circles of Relationships central to my business life, there are people I can contact and be certain of the response.
In fact, by reaching out to my circles during the pandemic, Relationology International has grown. I could not be certain of the outcome at the start, but I did not see this as a risk.
Even without those clever calculations in the study from the 1960s, I can say that by being intentional during uncertainty has meant not missing out on beneficial opportunities.
If you would like to know more about how relationships can help your business, contact me today.