Skip to 0 minutes and 7 secondsAfter you made a picture of your business network and described in more detail which partners control what resources and conduct what activities that are essential for your startup, it is time to evaluate your business network. Network evaluation can help you, as a small startup, to make effective and efficient use of your partners. In this video, I will introduce six ways to evaluate your network.

Skip to 0 minutes and 42 secondsThe first evaluation criterion is size. Do you have enough partners in your network? How many partners do you need? Let's think about the resources and activities you need to access and use through your partners. For acquiring financial capital, buying goods, or hiring production facilities, you probably need only a few partners, while you need much more partners to gain new knowledge. Avoiding overlap of partners makes your network more efficient.

Skip to 1 minute and 27 secondsThe second evaluation criterion is dependency. How dependent are you on your partners? It's good to consider, first, if your partner controls allocation, access, and use of resources and activities. Second, consider if alternative sources for the resources or activities are available to you. And third, in the case your startup controls the allocation, access, or use of resources and activities, consider how crucial this is to your partner. For example, it's always good to have a first or launching customer, but if it is the only one, it can have consequences for business development, especially if this partner is not equally dependent on you.

Skip to 2 minutes and 27 secondsThe third evaluation criterion is diversity, diversity in your business network. Are your network partners diverse enough? A high diversity of partner types is beneficial to the startup. For example, if you do not know how to develop your product or services, having customers from different industry backgrounds help you to explore solutions. Partner types you need our customers, suppliers, venture capitalist, government organisations, research centres, and incubators. The optimal number of partner types for startups is around six.

Skip to 3 minutes and 20 secondsThe fourth evaluation criterion is density. How weak or strong are your relationships? If all actors are connected in a network, you have a dense network of strong ties. That's what you see in the picture. Family and friends are examples of strong ties. In a less dense network, there are more weak and indirect ties. Both weak and strong ties are needed. Weak ties provide new information and are beneficial for innovation. Strong ties are needed to get the work done.

Skip to 4 minutes and 2 secondsThe fifth evaluation criterion is related to brokers. Do you have brokers in your business network? Third actors can have a role as matchmakers, bringing potential partners to your startup. For startups, these brokers not only fulfil the role of providing access. Brokers can, among others, fulfil the role of scouter, accelerator, and trust builder. Brokers increase your network reach and make your network more effective.

Skip to 4 minutes and 42 secondsThe sixth and final evaluation criterion is related to indirect relationships. How do the partners of your partners influence you? Knowing the partners of your partners can help you to identify the possibilities and limitations of larger networks. It helps you to identify important weak ties that provide new information and strong ties that support operations.

Skip to 5 minutes and 15 secondsIn this lecture, I described six criteria to evaluate your network-- first, size; second, dependency; third, diversity; fourth, density; fifth, brokers; and sixth, indirect relationships. Use these criteria to evaluate your network for better opportunity exploitation.

How do you evaluate your business network?

After you have visualized your business network and described in more detail which partners control what resources and conduct what activities that are essential for your start-up, it is time to evaluate your business network.

Network evaluation can help you as a start-up to make effective and efficient use of your partners. Investing time and energy in network extension might facilitate access to resources. But in a large network, maintaining partnerships takes time and investments. Making as many contacts as possible will probably not pay off. An entrepreneur has to decide about the trade-off between adding contacts and strengthening existing relationships. We present six criteria to evaluate your network and help you to decide to look for new contacts or invest more in an existing relationship:

  • Size,
  • dependency,
  • allocation,
  • density,
  • brokers, and
  • indirect relationships.

Reference

Semrau, T., & Werner, A. (2014). How exactly do network relationships pay off? The effects of network size and relationship quality on access to start‐up resources. Entrepreneurship Theory and Practice, 38(3), 501-525.

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Technology Entrepreneurship: How to Start a New Venture

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