Mapping the Networks of Business

Through the years, I’ve seen more “value chains” than I care to remember. “Where do you see yourselves in the value chain?”, is a VC question ranking up there with “Are you burning enough?” and “Would you people consider yourselves to be a [fill in the blank: infrastructure, content-only, aggregator, consolidator, etc.] company?” in a series that look even more amusing in hindsight than they did at the time (BTW. the correct answer to the last question is “Yes” regardless of everything. You’ll just have to find a way to rationalize it later on in the conversation.)

But in reality, there are no value chains. Every single company in the world is a part of the same, huge, value web. And it’s not only money that makes such connections, so does the flow of information and ideas, staff recruitments and mutual board members or financers.

Network theories of this sort have been a hot topic for the past 2 years or so in the popular media. Among the literature are two of my favorite Wetware related books, Emergence by Steven Johnson and Linked by Albert-Lszl Barabsi. At least Barabsi pays some attention to the corporate ecosystem in his book, I don’t remember if Johnson does.

Despite my effort to find some serious research or gathering of info on this corporate web structure, it seems that nobody has taken on the task to map this interesting network. Various other networks such as webpages, (including blogsites), people’s social networks, email correspondance, cell interaction and Kevin Bacon’s acting relations have have been explored quite extensively. This lack of info on the corporate web structure amazes me for several reasons:

1. It’s relatively easy. Much of the information to build a map of these networks is easily and freely available on the web. For public US companies, SEC filings are a prime source. Almost all corporate web sites list things like management, board members, partners and sometimes customers. Press releases often hold clues. Making the first and already highly valuable network of this sort is far easier than e.g. mapping social networks in Canberra. Manually adding more information and keeping such a network up to date would mean you would have a hot product.

2. It has serious value. Being able to identify the primary connections for competitors or see the degree, strength and value of a company’s connections during any due-diligence process are examples of tools that could heavily impact corporate strategy or help identify the best venture capital opportunity since this guy was doing his presentations in Silicon Valley in the mid 90s.

3. The biz people would understand it. I’ve long held the view that the tech-sector is skewed towards applications for business people. This is e.g. the reason for “Where is the nearest restaurant?” and other business travelers’ guidance are favorite examples of location based services, forgetting that 99% of people spend 99% of their time close to home.

The type of links I would propose keeping track of include:

  • Cash flow: Direct business two companies are doing with each other. Quantifiable by $
  • Partnerships: Collaboration that does not involve direct business. Not easily quantifiable.
  • Mutual ownership: Are there any direct or indirect mutual owners. Quantifiable by percentages.
  • Mutual people: Board members, advisors etc. that companies share. Not easily quantifiable.
  • Staff exchange: Employees that formerly worked for the other company. Quantifiable by headcount, but other factors are involved such as positions etc. that are not as easily quantifiable.

There are more, but these are enough to give an idea of what I mean. Putting subjective numbers to the unquantifiable values (partners that are known to be working closely together could have partner value 10 while signing up to a standard partnership program could have a value of 1 for example) could further improve the value of such network.

With this info at hand one could start looking for patterns that identify successful companies, tweak the factors that indicate the relative values of each type of links or just spot quickly who is likely to be hurt in the latest corporate scandal: “SELL! – before others spot it.”

P.S. As the second example of “lazy programming” in just over a week, keep an eye out for my new book: “Lazy programming, made easy”