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Sunday, December 02, 2007

The Laws of Relationship Capital, Part 3: The Third Law

By Adam J. Kovitz, CEO, Editor-in-Chief

Over the past two months, I have introduced the first two Laws of Relationship Capital, which collectively focus upon the biological implications of Relationship Capital. Long story short: organic entities (following commonly-accepted biological taxonomy) possess Relationship Capital from birth through eternity, whereas non-organic entities only seemingly possess Relationship Capital because organic entities have “imbued” their Relationship Capital within them. Make sense? If not, feel free to check out Part 1 and Part 2. The next set of laws (third through sixth) focuses more upon the mechanics and evaluative side of Relationship Capital.

The Third Law

Back in the October, 2005 issue of TNNW, I discussed the “Quantity vs. Quality” factors when choosing the right networks. Since that time, this debate has sparked numerous posts on message boards and newsgroups by Relationship Networking thought-leaders worldwide. The Third Law of Relationship Capital takes the quantity side of the argument into account:

Relationship Capital is derived from
the collective relationships an individual has with other
Relationship Capital-possessing entities.

Therefore the mathematical equivalent states that an individual’s Relationship Capital is equal to the sum of their relationships. Therefore:

RCindividual = S(Rindividual)


RC = Relationship Capital (RNIA measures Relationship Capital using “Relationship Points”), and

R = Total Relationships

It should be acknowledged here that as stated, this law is incomplete on its own and in itself, implies the need for the Fourth Law, which we will discuss next month. Nonetheless, there are some interesting implications here.

The More, the Merrier

One immediate conclusion one draws from the Third Law is that Relationship Capital increases (potentially) when the number of relationships one has increases. This is certainly the basis for advertising, sales and marketing, which uses the laws of statistical probability. The more exposure to the market a product, service, person, company or brand has, the more relationships are developed, thereby increasing the attractiveness, credibility, etc., which are all components of Relationship Capital. When this happens, the probability of “closing a sale” is increased.

Mo’ Connections, Mo’ Complications

Of course, the more relationships one has, the more one must leverage and manage these relationships. This means a few interesting things including, but not limited to the fact that:

  1. We must know ourselves – Considering that all of us “little grasshoppers” are continually re-evaluating who we are in any given moment through trial and error, meditation, learning from others, etc., this all becomes relative as we journey through life. The ones who have a better handle on this (i.e., can be more decisive in this area) have a much better advantage.
  2. We must be able to effectively communicate our message – The sooner we master this skill (which helps us even more if we have #1 down as well), the more we can rally our relationships around our cause.
  3. We must continually develop and improve our interpersonal skills – Sure we might have the connections, but if we don’t know how to help them as they help us, we have to work even harder.
  4. We must continually develop better time strategies – As the number of relationships grows, the more we are susceptible to interruptions by our relationships looking for help from us. Sound familiar? How many online networks do you belong to?
  5. We must understand our network – Effective retail businesses know how to manage their inventory. Mapping out our own network is the same thing as taking an inventory of our relationships. Just like Judo masters know how to apply the least amount of force to get maximum results using the principle of leverage, we can do the same the more we know our own network.

Relationships are Forever

We stated earlier that according to the Third Law, Relationship Capital (potentially) increases as the number of relationships increase, but can the number of relationships decrease? The answer is that while Relationship Capital can decrease, the number of relationships one has cannot.

We often view events such as breaking up with a boyfriend/girlfriend, divorce, business partner split and death as “the end of a relationship”, but is it really gone? The answer is no. While out of sight may just be out of mind, it doesn’t mean that the relationship doesn’t still exist. It might be labeled as a “bad” relationship, but it is nonetheless a relationship. The First Law even states that relationships survive death – think of our relationships with historical figures from our past or relatives who are long gone.

This is HUGE.

This is why we have sayings like “the past coming back to haunt us”. It also adds much more gravity to the statement “we only have one chance to make a first impression”. It also changes our views of “playing in the same sandbox”, which implies that one can leave the “sandbox”. According to the Third Law, the sandbox only gets bigger and there is no escape!

This, of course, sets the stage for discussion of the Fourth Law, in which we talk about the quality side of relationships…stay tuned!

The Emergence of the Relationship Economy

Relationship Capital is the cornerstone of the Relationship Economy, which I have defined as “a business and social ecosystem in which one’s interconnectedness and integrity determine wealth, prosperity and success.” I am proud to have contributed discussion of the Ten Laws of Relationships Capital to the upcoming book The Emergence of the Relationship Economy, due out this month as an eBook and next month in hardcover. It is being considered a “must read” for anyone responsible for the strategic direction of their business. If you would like to place your advance order for The Emergence of the Relationship Economy, please send notification to Sales.

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The Emergence of The Relationship Economy

The Emergence of The Relationship Economy
The Emergence of the Relationship Economy features TNNWC Founder, Adam J. Kovitz as a contributing author and contains some of his early work on The Laws of Relationship Capital. The book is available in hardcopy and e-book formats. With a forward written by Doc Searls (of Cluetrain Manifesto fame), it is considered a "must read" for anyone responsible for the strategic direction of their business. If you would like to purchase your own copy, please click the image above.


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