A new competitor suddenly appears in your area that threatens the very existence of your business, your labour of love that you have worked so very hard to build.  You feel scared, unsettled, angry, worried for your employees, frustrated you didn’t spot the opportunity or block the competition. You want to fight, and to give in all at the same time.  What do you do?  Who do you turn to and why? 

The above is just one scenario that might happen to a small business, there are many others.  In all cases the network we have around us is crucial to our success.  Let’s explore your network as an SME owner and entrepreneur through our work on SME networks.

Over the last year, through Smartline, we explored SME networks in our research with the aim of finding out what SME networks look like, how they are used - not least in times of difficulty - and whether ‘place’ matters. 

Our research – what did we do?

First, we interviewed 14 enterprises based in Cornwall.  These were in-depth interviews with some amazing organisations across different parts of Cornwall, ranging from micro to small enterprises.  We also then conducted a survey with 240 entrepreneurs and SMEs both within and outside of Cornwall. We asked people about their networks, who they call on for support, who calls on them, how they seek out, build and maintain relationships. 

What did we find?

First, let’s cover a little bit of theory: What do we mean by ‘network’ and ‘ties’?  We mean your connections – who you know that you call on for, amongst other things: support, resources, knowledge and insights, sales - and who you offer support and resource to.  These connections or ‘ ties’ make up your ‘network’, your web of connections.  These networks can be open - where not everyone knows each other, or closed where most people know the same people.  The strength of these relationships lie on a spectrum from ‘close ties’ – where one has a particularly strong bond with someone or ‘weak ties’ – more of acquaintances.  Equally, ties can be high or low value, positive or negative in their impact on the network and you.  In addition, in many instances connections can have multiple elements to them e.g., friendship and work support – network theory refers to these as ‘multiplex ties’. 

For all SME owners we spoke to the multiple roles their relationships play was critical.  Family and close friends often play multiple roles – they are multiplex ties.  They may start as business connections that over time also become deep friendships. Or family members may become key sources of support as often have involved throughout the entrepreneurial process, from the conception of the business idea, through the painful and joyful times of growing the business.  Family members, in particular, often know you inside out and that can, on the one hand, offer great support, and on the other hand, there is the danger that they only give blinded positivity.  In addition, close multiplex family ties can make the boundaries of maintaining separation between work and a personal life tricky, especially when there is the need  to switch off from work. 

For SME owners where family members are directly involved in the business, considering the nature of these multiplex ties and the impact on the business and its governance is important.  One husband and wife team, where both are directors, said that the positive was that there was a “close communication channel”, but with that carried a risk, " that's not good governance".  To balance this, the couple have other directors to enable appropriate governance.

Let’s consider our earlier scenario of a competitor appearing on the scene and the feelings this might cause. It would be beneficial to have a close confident to talk to without fear of judgement before one had structured one’s thoughts, and here we see the benefit of close family ties.  But it is also crucial to know one’s network well enough to recognise where different skillsets are available to tackle the situation.  In such a scenario one of our interviewees turned to her husband who was not part of the business:

“So, I think the first port of call was my husband, just as someone who's there to pick me up. But he's also very biased and blinded, and I’m aware of that…[He’s my] biggest fan and biggest critic at the same point. He was just the closest and first person and I could …say everything [to].” 

Yet, here our business owner recognised that while she was able to turn to her husband to pick her up, his view of the business may not be so objective, having seen the impact of so many of the businesses’ ups and downs on his wife: “When he says, I think it's time to give up, only foolish people keep going. I'm like, okay, I'll make a decision about whether I keep going based on more than just that decision.”

For others, the family tie, and the intimate knowledge of each other’s characters works the other way, as the person to turn to as an overall sounding board: "My sister is a social entrepreneur, which I would probably class myself as, so we’re similar in that way. With some very broad and quite polymath kind of thinking styles. So, we have really good conversations. She’s an important part of my sounding board. I’d probably have the most detailed conversations with her…Friends, I’ll talk at a more top, high level about it, and not necessarily get into so much analytical detail. It’s nice for me to know that they know what I’m thinking about, really. It’s just a positioning with them."

So, the value of multiplex ties with family and friends for SMEs and entrepreneurs, in a way that perhaps those working in larger organisations don’t experience, is that those individuals understand the lived experience of the enterprise journey and are able to offer emotional support with an understanding of the overall picture.  Family and friends are accessible and able to engage in frank discussions and idea generation, act as sounding boards and sense checking, helping people to concisely articulate ideas and give advice. 

The flip side can be that family and friends are biased in their assessments, offer their advice from the personal impact on you and not just a business perspective and where both members of a connection are directly involved in the business represent governance risks.

Who else can you draw on when family and friends aren’t enough?

As we discussed in our workshop on mapping your network – get to know your network and consider the importance of diversity.  Let’s return to our surprise competitor scenario:

“I’ll tell you my thinking process to who I reached out for…, I went, okay, who here has been in the situation that I'm in right now and can give me some really good wisdom? Who here will tell me or ask me questions that I know I need to be asking right now, that will help me give honest answers rather than just what I want to hear right now? Who here will pick me up and tell me everything's going to be alright as well? And who here can help me figure out what are the options right now? So, those were probably…[people that ] had similar values and understanding and experiences, but at a higher level.”

Reaching out beyond family and friends can help ensure you are open to innovation and collecting different experiences to draw on, as well as being able to be offer help to others.

What don’t we know yet?

How important is place?  Is there something special about Cornwall?  Well, you only need to visit once, or talk to anyone from Cornwall to know the answer is, yes!  We specifically wanted to know whether there is something particular about Cornwall that lends itself to entrepreneurs and SMEs to facilitate innovation.  While the interview data we collected didn’t allow us to draw specific conclusions around this question and we can’t compare to other parts of the country, evidence across the interviews suggests that Cornwall, with its geography and culture, lends itself particularly well to opportunities to create and maintain what network theory would call ‘high value ties’ – deep, quality connections - outside of the office.   High value ties characteristically share similar values and sharing in a recognition and appreciation of the beauty of the landscape through walking (with or without a dog) offers a way to spend quality time with others, to share in a way that doesn’t happen within an office environment.

Let’s hear from one of our interviewees: “What I like about my networks here is that it’s a bit lower pressure and probably better listening… There’s something of the essence of the networking groups though, here, which I find really positive… I’ve been in Newquay only five years, so I’m only just really discovering. I’ve got one friend that I’ve known now, for four years, that we can go for a good walk along the beach and really go deep into some really good conversations. I think those relationships probably just take time to build up… in terms of, really, deeper, the sorts of conversations that you can really settle into as you go for a long walk …” 

What’s next?

We will now be focusing our attention on analysing the quantitative data from the SME survey which gives us a wealth of insight into the shape and size of the networks of entrepreneurs and SME owners.  By size and shape of the network we think about how many connections people have and how strong those ties are.   We want to find out more about whether the characteristics of SME networks have an influence on approach to risk, innovation and of course financial outcomes.

We will also look at whether the data can give us more insights about how place and networks give rise to innovation. 

How can our research apply to you? Action points:

-        Who to turn to?  When you turn to someone, think about whether you need a supportive challenge or just a listening ear.  Friends and family absolutely have a place in the network of small businesses, they can be precious resources.  Use them wisely. 

-        Who else is in your network?  Do you have the best mix of people?  Consider whether you have enough diversity in your contacts.

-        Are you using your environment to the best of its advantage? How can you use the geography of your where you work to build and maintain your network?

-        What can help you?  Map and build your network, for more tips see the top tips from our networking workshop. As an SME owner or entrepreneur, you need to understand and clearly map out what you get and give between each of the key people you connect and interact with about your business. 

Final food for thought:

Let’s think back to our scenario at the outset of this blog, of a competitor suddenly appearing that could be a threat to your business.  What do you need in that initial moment and in the subsequent days and weeks?  Someone you can turn to and express all your unfiltered thoughts, someone who can give you unbiased advice, someone who can help you spot the opportunity in the disaster and someone who can even help you to connect with your competitor.  Can these all be from one person?  Perhaps, but most likely you need to draw on a variety of people in your network. 

Networking isn’t therefore just about how many business cards you can exchange at an event – it’s about the rich connections you can build with people about your business so that you can be resilient to change and help others do the same.  Think about who you know and what you exchange with them, both obvious things you can count like sales and physical resources and those harder to explain things around emotional support, critical friendship and connectivity to others.

View the background to this work here

Prof Andrew Parker, Durham University

Dr Tim Walker, University of Exeter

Dr Gengyang Tu,  University of Exeter

Dr Michelle Mahdon, University of Exeter

Dr Ruth Cherrington, University of Exeter