The Laws of Relationship Capital, Part 9: The Ninth Law

by Adam J. Kovitz, CEO, Founder & Publisher

Adam's section is brought to you by Salesconx.com

So far in our discussion of Relationship Capital, we looked at who can and cannot possess Relationship Capital, some of the mathematical theory behind Relationship Capital and its relationship to Intellectual Capital. But what about the kind of capital we all know and love -Financial Capital? Hang on to your seats because the last two Laws of Relationship Capital do just that. If you’re intrigued by money and controversy, then you’re in for quite a treat.

The Ninth Law

The Ninth Law of Relationship Capital states that:

Financial Capital is merely a reflection of and cannot exist without some combination of Relationship and Intellectual Capital.

The implications of this are staggering and, if indeed true, changes the way we might perceive Financial Capital in the future. The Ninth Law suggests that Financial Capital is illusory at best!

Money Talks

We use money (Financial Capital) to pay our debtors, buy goods and services, invest in education for our children, save for retirement and fund projects and causes that we believe are worthwhile. We also use it to determine associated risk of an investment, which is a way by which we establish a ranking system to make a more informed decision as to whether or not an investment is worthwhile. Financial Capital also allows us to establish a ranking system to determine status; those with more Financial Capital are considered “rich” in the eyes of others and can afford more conveniences and luxuries. But where does this money come from?

When we think about all the ways one can earn Financial Capital, we come up with the following list:

1.) Working– the traditional job and/or career path

2.) Saving/Investing – utilization of a financial vehicle

3.) Inheriting – family and/or really good friends leaving it to you

4.) Winning – gambling, lotteries, contests

5.) Discovering – inventions, new revenue streams from brand new opportunities

6.) Gifting – donations or handouts

I have looked at each of these scenarios via thought experiments, ran these by several colleagues and have been able to reduce each of these down to Relationship and/or Intellectual Capital as the true source of wealth. In each case, I have not been able to prove the Ninth Law wrong, and I welcome anyone to try! In the meantime, let’s take a look at the following examples:

Working

Having a job is having an agreement to exchange your hard work and devotion to completing pre-defined (at least, usually pre-defined) tasks given by your employer in return for financial compensation usually paid out in salaries, wages, commissions and/or bonuses. But how do we get the job in the first place? If we were the “best candidate” for the position, it is because our resume clearly demonstrated our knowledge and experience. If we happened to have prior experience with the particular company or a few individuals within it from a prior job, our previous relationship with them has worked in our favor. The same holds true if we are in sales – often times the decision to select one sales professional over another is because of who they know. Of course in a family-owned business that is passed from generation to generation, preference (and job security) is given to those with last names the same as the owners (or those married in).

How about bonuses and commissions? They come from doing our jobs more effectively. How do we do our jobs more effectively? By building our own networks and increasing our own Relationship Capital or by applying our knowledge (building Intellectual Capital) in ways that go above and beyond traditional thinking that lead to higher profitability, lowered costs and/or improved efficiency. Getting a pay raise or even a better position is often attained the same way – it never hurts to have an exceptional working relationship with someone in a position of authority.

Conclusion: Financial Capital attained through employment is accomplished through other peoples’ assessments of your RC and IC.

Saving/Investing

Utilizing financial vehicles as a means if wealth is quite popular, with a bit of knowledge (IC) of time value of money and compounding interest rates, one can put their money in a savings account, money market, etc. When it comes to evaluating which is the right vehicle from which to choose, we use our IC to evaluate rates, return on investment, percent yield, expected time frame of the investment, etc.

In the case of real estate transactions, we must know the above plus have a sufficient amount of IC when it comes to location, local economy, benefits/consequences of other nearby development projects or land preservation initiatives. We also need to apply our RC to build our IC in this particular area as well. We need to build and further develop relationships with potential buyers, sellers, partners, local authorities and property managers as well. Their degree of helpfulness will be based upon your RC with them.

When investing in any major financial vehicle such as a bond fund, mutual fund, hedge fund, REIT or business venture, our decision whether or not to invest is often based upon the resumes of the management team. Are they competent enough to see this investment through fruition? Are they experienced enough to handle unforeseen issues that may threaten the stability of the project?

Conclusion: Financial Capital attained through investments is accomplished though investors’ assessments of RC and IC.

Inheriting

Leaving a legacy is important to many people. While the example of traditional inheritance is easy to see that Financial Capital is typically attained due to a prior relationship, there is another example we can explore as well. Life insurance, although it might also be seen as an investment, is also a form of inheritance in that our beneficiaries receive Financial Capital in the event of our own demise. Choosing such beneficiaries are, too, the result of prior relationships with others.

Conclusion: Financial Capital attained through inheritance is accomplished through others’ assessments of RC.

Winning

Winning Financial Capital may seem like sheer “luck”, but is it? Games of chance, require IC in their design. Intimate knowledge of such games and the odds require even more so. Those gamblers and gamers who seem to make a career out of it tend to have systems (IC) or have read or have been told about others’ systems (IC & RC). Even the act of willingly engaging in a game, lottery or contest means engaging in an inadvertent relationship with those who created it, worked on it, run it, etc.

Conclusion: Financial Capital attained though winning is accomplished via a hidden and often complex series of interactions involving RC and IC

Discovering

What about a person who discovers a sum of money (bill or note) left on the ground with no one else in sight? Simply put, as the money did not get there by itself, it must have been left there by someone, inadvertently or otherwise. Therefore, the finder now has an inadvertent connection with the loser of the money and therefore an interaction of RC.

Another example would be the classic case of inventors who discover something that has not yet been seen by others; new technology, new concepts. Based upon these discoveries, new revenue streams can be realized thanks to the building of IC as well as interactions with others (RC) who can help take the invention or concepts to market.

Conclusion: Financial Capital attained through discover is accomplished by inadvertent interactions of RC as well as the sharing of concepts (IC) and connections (RC) to achieve a common goal.

Gifting

Similar to inheritance, when we choose to give money to a friend, family member, house of worship or other cause in which we believe. It is because we share a bond of friendship, a feeling of love and/or respect or we simply relate to the cause. Because the RC and/or IC is so strong, we feel responsible, passionate and compelled to show our support via Financial Capital.

Conclusion: Financial Capital attained through gifting is accomplished via others’ assessments of the RC of the individual and/or the IC of the concept or cause.

The True Currency

So if all financial transactions can be “boiled down” to the complex interactions of RC & IC-possessing entities and their own relative assessments of other RC & IC-possessing entities, why do we need Financial Capital? The simplest answer is that we need to pay our bills! Unfortunately, my mortgage company does not yet accept RC or IC. Looking deeper, however, we, as the human race, must have some means to properly understand, measure and valuate such complex interactions, and so far our current economic system of Financial Capital, which got their start in post-feudal Europe of the 1600s, has been the best model to follow.

But is it still the best model?

As we look at our current economic issues in the U.S. as well as other parts of the world, one has to wonder. Fortunately, the Tenth and final Law of Relationship Capital discusses the advantage RC & IC have and their key role further development of both might play in the dramatic improvement in the way Financial Capital is viewed. Stay tuned for our last and final chapter in this series.

The Emergence of the Relationship Economy

Relationship Capital is the cornerstone of the Relationship Economy, which RNIA defines as an “economic system in which Relationship Capital influences the production, distribution, exchange, and consumption of goods and services.” I am proud to have contributed discussion of the Ten Laws of Relationships Capital to the upcoming book The Emergence of the Relationship Economy, now out as an eBook and in hardcopy. With a forward written by Doc Searls (of Cluetrain Manifesto fame), it is being considered a “must read” for anyone responsible for the strategic direction of their business. If you would like to purchase your own copy of The Emergence of the Relationship Economy, please click here.

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The Laws of Relationship Capital, Part 9: The Ninth Law

Could Social Media be a Measure of Business Performance?

Strategy: What Say You?

By Jay Deragon, Contributing Writer

The historical measure of business success has been centric to financial results. Today markets are driven by feelings of the quarterly financial results accompanied by news and market spin.

The “system” on Wall Street has operated on a certain set of financial variables for years and these variables determine a company’s performance within the investment community.

Is The Old System About to Shift?

“Business” has historically been measured in a narrow economic sense rather than relational one. The variations caused by economic measures are built into the markets sentiment about a particular company’s performance.

The ecosystem of any business is what ultimately produces the end results. Yet little has been done to measure, monitor and report the elements of a company’s ecosystem as a primary influence on end results, financial performance. This idea emerged from James F. Moore’s The Death of Competition (1996) Moore examined the importance of the company’s context – its ecosystem. Moore defined the business ecosystem as follows:

“An economic community supported by a foundation of interacting organizations and individuals – the organisms of the business world. The economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organisms also include suppliers, lead producers, competitors, and other stakeholders. Over time, they coevolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies” (p. 26)

One wonders when the sentiment of people, (suppliers, employees and customers), will play a significant role in the overall markets perception of a company’s performance.

Could Social Media be a Measure of Business Performance?

Social media is building momentum as an influence over markets. Comcast, Southwest Airlines and Marriott, to name a few, have just begun to recognize the influence of people expressing opinions on experiences with brands, products and services.

Soon these collective voices will be organized into a new measure of business performance. The measure will be correlated with a company’s financial performance and subsequently influence the old markets perception of value. The old market has been driven by Wall Street and now traders will begin to consider the “peoples” experience and opinions as a measure of performance, past, present and future.

The impact of this measure will be significant, disruptive and create massive shifts in capital, the ultimate market influence. If you think this is another prediction of the future think again. We just witnessed a company who has built the statistical database and the subsequent indexes for reporting these measures. The new business measures will hit the “markets” this fall.

As Doc Searls says, “Markets are conversations”

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Better Marketing in a Tougher Economy

By Bill Doerr
Sales and Marketing Editor

Bill's section is brought to you by qAlias

The ‘doom and gloom’ media hype notwithstanding, the consumer’s perception of just how things are – good or otherwise – always affects your business. But planning and implementation of marketing always benefits your business in any kind of economy.

Business Marketing Success, Inc., headed by Joe Costantino, was interviewed for his thoughts on how to do this simply, effectively and affordably by small business owners.

THE BACKGROUND

I recently attended the Connecticut Business XPO in Hartford, CT. While there, I met a number of small-to-medium sized business owners. The common chant was, “The economy is softening and I’m struggling”. Can you relate?

Later, on a podcast with Joe Costantino, I brought up what I’d been hearing. I wanted to see what ‘words of wisdom’ Joe might have. Why? Because Joe’s been working with small-to-medium sized businesses for a number of years. Joe’s based in Abington, MA and heads up Business Marketing Success, Inc. – a marketing consulting and coaching firm. What I like about Joe is his ability to bring a perspective to a business that is often unavailable to the owner who’s working inside of it. Working with Joe, his clients get a handle on why they’re not where they want to be and they discover how to get there . . . simply, effectively and very affordably.

THE INTERVIEW

On the podcast, I asked Joe for his insights gained from working with a number of clients over the years. Joe obliged. He shared four (4) common causes of markeing malaise as well as some good thoughts on what to do if they’re happening to you.

THE ISSUES

#1: “You Don’t See Yourself as a Marketer”

“This is often the result of either a lack of training or experience in this critical business

function . . .” Although Joe’s an MBA, making marketing make sense on the ‘micro’ vs.

the ‘macro’ level isn’t something he feels you can learn in school. “But that’s no excuse.

No matter what you ‘are’, you had better also be a ‘marketer’ or you’ll be hurting!”

#2: “You Have No System for Marketing”

“The famous Michael Gerber (The E-Myth) was renowned for arguing the importance of systems – for everything a business needs to operate effectively and profitably. Well, marketing is something every business needs and that requires a system, as well. But most small firms don’t have a marketing system. And their sales suffer because of it.”

I wasn’t arguing. But I wanted to learn why Joe felt this is so common.

“Bill, small business owners are independent by nature. They take advice quickly but implement it slowly. So while most will tell me that a ‘system’ would be nice, most don’t have one or use one. In a robust economy, you can get by without systematizing your marketing. But in an economy like the one we’re settling into now, it could be devastating”. I asked Joe to elaborate. “Look, it’s simple. If you don’t know why something is (or, isn’t!) happening how can you address the underlying cause of that? You can’t! You may know what’s wrong – the symptom that ‘sales are off’, but unless you also know WHY . . . unless you know the cause behind an effect . . . you’re not in control. That’s true of marketing as much as anything. So having a marketing system gives you that level of control that not only improves your revenues and profits but it drives your competitors crazy!”

#3: “Your Message Isn’t Attracting Your Target Market”

“I love business conferences like the one in CT because I get to meet a lot of small business owners in a fairly short time. And you know what I find is painfully obvious? MOST . . . and I’m cutting a big check here but I can cash it . . . most can’t tell me what the heck it is they do for a customer or client or patient! Specifically, they can’t describe the impact they cause in someone’s life that would make them want to invest money to get that valuable benefit. Usually, it’s because they haven’t made the effort or taken the time to understand how their ideal clients perceive them and describe what they do for them to a friend or colleague. That’s an eye-opener! And, until they do, they won’t ‘stand out’ to the market they want to attract and they’ll be even more likely to suffer stagnant sales in a slow economy.”

#4: “You’re Seduced By The Latest and Greatest Marketing Opportunity or Idea”

“When I first meet with a new client, I ask to see what they’re doing now to market their business – assuming, of course, that they are actually doing some marketing already. Often, they tell me, “Joe, we did this for awhile, then we tried this.” And on and on it goes. Bill, it’s scary. It’s also inconsistent. That’s a symptom that they’re working without a coherent, coordinated and consistent approach to marketing. Again, in a good economy, you might get by with such an approach. But not in an economy like today. Rather than jump on some tactic that just pops up – e.g. “Hey Charlie, this guy’s got a deal on a half-page ad if we’ll agree to run it for six (6) issues . . . whaddya say . . . y’wanna do it?” it makes more sense – dollars and cents! – to do your marketing with a strategic gameplan in mind. Just the simple act of creating a marketing plan forces you to think about your options when you can best evaluate – and choose -- them . . . and that’s always better to do before you ‘have’ to make a decision about your marketing options.”

As we were wrapping up, Joe offered some final thoughts . . .

“Take an Obstacle Course and Get Over Yourself”

“You must assume responsibility for your own marketing. Embrace this truth: If it’s going to be . . . it’s going to be . . . up to ME! If you don’t see yourself in this role now . . . change how you see yourself and what you’re really responsible for doing in your business.”

“Get a SYSTEM for Marketing”

“Cash in a business is like blood in your body. If it’s not flowing, you ain’t going to go on for long! Don’t allow such a critical business function as your marketing to be done by chance. Marketing is always done better . . . by design than by accident.”

“Get Clear About What You Do FOR Your Customer”

“If you’re not clear on this . . . do something about it. If you’re too close to your business to see the impact you have to offer a qualified prospect, seek some insights from your best clients. Ask them, “What did you want from a company like mine?” Then ask, “Why did you pick my company?” The first answer reveals WHAT people really want to buy. The second answer reveals WHY you’re a preferred provider of that valuable outcome. Both your ‘mission’ and ‘position’ are key insights you’ll want to communicate with your marketplace to attract interested and qualified prospects to your business in this economy”

“Plan!”

“Unless you plan to do things by design, you’ll do them by accident. And, you’ll probably do them sporadically, erratically and far less effectively than you’ll like. So, have a marketing PLAN!! Or, hire a marketing consultant or coach to help you do this.

As I was driving back to my office, I thought . . . “Joe’s right on. Marketing is more important than ever . . . and, done properly, it’s just as simple, effective and affordable to do, too.” Joe makes some good points here. I hope you heed them and put them to good use in your business or practice . . . NOW!

About Business Marketing Success, Inc.
Headed up by Joe Costantino since 2002, this firm helps small-to-medium size businesses grow revenues by defining clear goals, choosing affordable marketing strategies and implementing effective marketing tactics. As a result, their clients grow their businesses by design, not accident

. . . in any kind of economy . . . hot or, not. To learn more go to: www.businessmarketinsuccess.com or call: (781) 727-0656.

Bill Doerr, CCO of SellMore Marketing, LLC is the creator of The Preferral Prospecting System™,

The Expert Directory™, The Client Machine™ and The Ultimate Client Development System™.

Bill uses these services to 
help service providers build their business by leveraging relationships and generating more introductions to new business. You can reach Bill by phone at: 860-798-6964, online: www.sellmoremarketing.com or www.getnewclientsnow.com by 
email: billd@sellmoremarketing.com or through the TNNW Blog: http://thenationalnetworker.blogspot.com

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