Ancestry research for family trees is wildly popular—30 million individuals took at-home ancestry tests by 2020— but have you ever considered your business family tree?
In human ancestry, lineage refers to the generations that branch from a family tree, and the term kinship refers to the relationships and connections that make people who they are. The notion of ancestry can help us understand not only ourselves but also businesses—especially born-digital ones.
Before born-digital companies took root, it could – and often did – take over 20 years for a company to see its annual revenue surpass $1 billion. Today, companies can reach that number in just a fraction of that time. These unicorns get a lot of media attention, but how do these companies grow so fast, and what challenges do they face when scaling so rapidly?
For a real-world example of a wide-spanning, deep-rooted born-digital family tree, we can look to Zillow, which branched out from two tech giants and gave root to other startups – career and salary website Glassdoor, property technology startups Divvy Homes and Pacaso, and healthcare and financial wellness company Amino, just to name a few.
So, what drives these overlapping roots and ancestries? Simply put, people like to work with people that they enjoyed working with in the past. Some of Silicon Valley’s most well-known investors were early employees of startups, and they later invested in former colleagues’ new ventures. So, not only do they know these founders, but they trust that underwriting their ventures will be a solid investment.
The family tree below illustrates the inter-connectedness of companies started by Microsoft employees.
But- beware of the dangers
There is also risk in too close a family tree. The elements of a born-digital company’s ancestry, DNA, and lineage can create vital advantages if a business manages them correctly—but it can present dangerous weaknesses if mismanaged.
If born-digital founders focus too closely on working with only people they have known in the past, they may miss out on new ideas and lack diversity. Closely similar lineages within the top team creates weaknesses in the form of gaps in knowledge and expertise, leaving the company vulnerable to new threats and competitors.
When all founders have similar circles and knowledge bases, it can also impact the company’s ability to scale quickly and effectively compared with a company with a broad group of external relationships. Not having a robust enough kinship among your group of advisors, investors, and partners outside those companies brings about risks of group think and narrow-minded views.
So how can you learn from your family tree?
Map out your business family tree; examine the story that emerges around lineage, DNA, and kinship. Take steps to strengthen any experience gaps in the leadership team—especially in the areas of strategy, industry knowledge, customer insights, talent management, and business operations.
Candidly assess all aspects of diversity, and determine whether there’s enough genetic variety or perhaps too much inbreeding within the team. If your executive committee is made up only of people you’ve worked with in the past, evaluate the pros and cons of having that tried-and-true tribe at your company’s helm. If the cons seem serious, consider ways you might bring less-familiar people with fresh perspectives into the leadership picture.
Take stock of the business ecosystem – kinships your company participates in–and ask yourself whether the relationships are helping the company grow, or holding it back. Make changes as needed to add to your network and thereby get more business value from your kinships.
If you are not examining your business family tree, you are likely leaving many of the benefits of your company’s ancestry on the table – and missing the crucial risk factors. Read more about the three elements of business family trees and what you can do to build diversity from the roots up here, and more about Zillow's family tree in Crunchbase.