Small Business Labs

ABC News on Any Time, Any Place Management

One of the topics of our last "Future of Small Business" report was anytime, anyplace small business management.  ABC News did a story on this topic this week, but focused moslty on bigger businesses.  The story says 42% of IBM employees rarely visit an IBM office, and at Accenture even the CEO doesn't have a permanent office. Key quote:

"Imagine a work world with no commute, no corporate headquarters and perhaps not even an office in the physical world at all.  For Bob Flavin, a computer scientist at IBM; Janet Hoffman, an executive at a management consulting firm; and Joseph Jaffe, a marketing entrepreneur, the future is already here. "

They do profile one small business - a small consulting firm called Crayon run by author and advertising guru Joseph Jaffe.  Crayon is totally distributed and virtual company.

UC Berkeley as "Start-Up U"

Interesting article on clean technology in the most recent UC Berkeley magazine.  It's called "Start-Up U", although the article is focused more on clean tech research than business.  The title reflects the growing interest by the University of California Berkeley to become an incubator of small businesses and a source of innovation - and a campus that attracts corporate funding. 

This is quite a shift for Berkeley, and many members of Berkeley community are not happy about it.  The article chronicles the ongoing debates around pure research versus applied research, and the role of corporations on campus and in the labs. 

From a trend perspective, Berkeley moving to brand itself as a "Start-Up U" is a clear signal of how universities are increasingly moving to support entreprenership and small business.

Most Small Business Owners Want to Stay Small

Living in the SF bay area I often meet with tech entrepreneurs that want to build the next Apple, eBay or Google.  I also meet with venture capitalists that want to fund these types of firms.  It is easy to forgot that the vast majority of small businesses are not capable of, or even want to be high growth businesses. 

According to this month's Discover Small Business Watch (a survey of small business owners with 5 or fewer employees) "69 percent of small business owners said that they prefer to have their business remain small." 

We see the same thing in our research.  Small business owners often use words like "freedom, independence, balance, flexibility" when describing why they like being a small business person.  They use the same words when describing why they want to remain small.

 

Super Crunchers, Analytics and Small Business

Alex Pang at IFTF's Future Now blog has a post on a new book called "Super Crunchers"  by Yale econometrician and law professor Ian Ayers.  From the book's Amazon description:

"the recent creation of huge data sets allows knowledgeable individuals to make previously impossible predictions. He calls the data set analysts super crunchers and discusses the changes they're making to industries like medical diagnostics, air travel pricing, screenwriting and online dating services."

Yesterday's Wall Street Journal had several articles on the use of search engine optimization and other techniques by small businesses for raising online awareness.  Yet another example of data and analytics becoming important for small business.

The 4-Hour Workweek

Recently read "The 4-Hour Workweek" by Timothy Ferris.  It has been a best seller for some time, but I just got around to it in my pile of unread books.  The book describes a concept Ferris calls "lifestyle design", which is used by the "New Rich" to minimize work and maximize fun.  The book is enjoyable and easy to read, and the story about how Ferris wins the Chinese kick boxing championship more than covers the cost of the book.

Ferris describes "the new rich" as a group that has abandoned the traditional workforce and instead have designed a lifestyle based on flexibility and mobility.  These folks spend most of their time traveling and having fun.  To become part of the "New Rich" Ferris advises readers to create a small business (most likely an Internet based business), outsource all the work, and spend most of their time traveling the world and/or doing  other fun things.

Since the book became a best seller I'm often asked if this is realistic.  Interestingly enough, in our research on small business we've met a surprising number of people who have been able to create the kinds of businesses and lifestyles described by Ferris.  Having said that, our research also indicates doing this is not easy - and the number people who have successfully done this is very small.  So the "New Rich" do exist, but just like the old rich there aren't very many of them. 

I like the book and the concepts.  He stresses taking "mini-retirements" on regular basis, which I agree with.  I spent 3 months in Africa 20 years ago on my first "mini-retirement", and I've taken 2-6 month breaks every couple of years since.   I also think his advice on simplifying and outsourcing are very good, and I plan to incorporate some of his ideas into my work life.

I think the book is so popular because work is not working for a lot of people.  Statistics show Americans are working more and enjoying it less.  This book presents an easy out - quit your job, start a small business, have someone else do the work, make a lot of money, have fun. 

While this is clearly not a realistic alternative for most people, I think Ferris has done a service by pointing out there are alternatives to the traditional 9-5 - now roughly 8-6:15 for the average American - job and approach to work.

Cleantech Collective

There is a new online forum on clean technology called the Cleantech Collective.  According to the blog it is:

"a moderated online business community for clean tech investors, entreprenuers, policymakes and concerned citizens."

They have what looks like about 20 bloggers contributing to the effort.  Clean Tech is clearly going to be a growing source of new small businesses over the next decade, so I plan on adding this to my feed list.

Lack of Integrity in Hearst Magazine Marketing

I got an interesting letter from the subscription services department of Hearst Magazines.  It opens with:

"Your delinquent account with us has been brought to my attention for collection.  "Subscription Suspended for Non-Payment", that's what our records reflect."

The letter then asks me to send them money in an enclosed envelop that requires a stamp.  The letter is signed by someone from their "Credit and Collections" department.

I assume the letter relates to Smart Money, a publication that I did not renew when my subscription ran out.   The letter has no information on my account such as what magazine, why I am deliquent, when I became deliquent, etc.   Also, they did't provide any contact information beyond a post office box in Iowa. 

It is common industry practice to use "automatic renewal".   In small print on their subscription cards magazines state by subscribing you will be automatically renewed and billed for the magazine until you cancel.  Most people don't realize it, but they are signing up forever when they subscribe to a magazine.  I actually don't object to this - it cuts down on my paperwork and ensures continuous delivery of the magazines I want.   

What I object to is sending a marketing renewal letter that strongly hints that it is part of a collections process.  This is clearly meant to intimidate people into renewing magazines they don't want.  Simply put, they are using misrepresentations in hopes they can bully people into buying their product.  This is unethical marketing. 

I've posted on the growing importance of marketing integrity, and how social media, word of mouth, and the Internet will "out" companies that behave in unethical ways.  This is a good example of that trend.  I may not have the reach of Hearst, but between my blogs, presentations and speeches thousands of people in Smart Money's target demographic will hear this story over the next few months.  That is the power of social media and word of mouth, and why business integrity will increasingly matter.

*** I did an update on this topic on April 26th, 2008.***

Small Business Exporters and Globalization

We've been looking at small business globalization and have been following Laurel Delaney's Global Small Business Blog.  She recently posted on the the National Export Strategy report produced by the US international Trade Administration.  Some interesting data from the report:

• Only about 4% of US companies are exporters and the US has the lowest level of exports as a % of GNP of the G7 countries  - roughly 10%.  The highest is Germany at almost 45% and the 2nd lowest is Japan at a bit over 15%
• SME's (defined as less than 500 employees) accounted for 29% of US export value in 2005.
• While the number of exporting businesses in the US grew rapidly in 90's, it has stayed relatively flat since 2000.  In 2005 there were roughly 239,000 exporting companies, 97% of which are SMEs. 
• 58% of exporting companies traded in only one export market.

With 95% of world's consumers and 80% of world's economic activity (2006 purchasing power parity - source CIA Fact Book) are located outside of the US.  Clearly there are huge export opportunities for US small businesses, and these numbers show that we are just at beginning stages of small business globalization. 

Small US Manufacturing Growing??

Entrepreneur magazine has an article called "Bring It Home" about the growth of small manufacturing in the US.  Key quote on why an Oregon manufacturing company is thriving:

"Competitors that manufacture overseas can't match his turnaround, his ability to customize or the speed with which he can introduce new designs, Jones says."

What makes this interesting is how close this description is to a similar story on a Baltimore based manufacturer in last weekend's Washington Post.  Key quote on why the specialized manufacturer Marlin is thriving:

"He (Marlin's CEO) began to notice there were some customers, such as Boeing, who wanted small orders turned around quickly and accurately and didn't haggle over price.....Unlike Marlin, Chinese manufacturers require large minimum orders and long lead times. "China can't get a custom single hook or single basket in less than a week, or in less than three weeks," he says. "They can't do it."

What really makes this interesting is how close both these are to what I've heard from several small electronics manufacturing companies over the last couple of months.  They have decided to move some of their manufacturing operations back to the US to improve their ability to customize products and speed time to market. 

I said in a prior post on manufacturing returning to the US that it is too early to call this a trend.  Entrepreneur agrees saying:

"Is manufacturing coming back in the U.S.? The answer at best is "perhaps." "

I now think the "perhaps" is probably a "probably".

Scott Boras - Analytical Small Businessman

For those who aren't baseball fans, Scott Boras is an uber baseball agent who gets such great deals for his players that clubs sometimes choose not to draft players who are represented by him.  Great quote on this from a Boston Globe (registration required) article called "Why Scott Boras is the Best (and Worst) Thing to Happen to Baseball":

"Boras is as controversial as he is influential. While one of baseball's great urban legends is that there are teams that will never negotiate with his clients – baseball executives would have negotiated with Hitler if Goering could have hit a three-two curveball – there is no question that teams consider very carefully drafting a young player whom Boras represents."

One of reasons Boras is so successful is his analytical approach to his negotiations.  The Orange County Register has an article on the new office complex Boras has built in Newport Beach.  His new offices are "part offices, part museum, part restaurant, part clubhouse and part technology hub for Boras’ staff, which includes 40 data analysts."  Key quote on his computer and data system:

"Behind all the decor is the heart of the business: the computer center. While Boras came up with most of the building’s design features himself, the one he’s most proud of may be that multimillion-dollar computer system. It occupies an entire room of the lower floor complete with its own cooling system. Access is key-coded. It’s the room that’s most likely a source of many Advil moments for team owners negotiating with Boras.

The computer system contains baseball statistics from the current season back to 1870. That’s not a typo. Early stats were entered by hand. It took a long time, Boras said."

Boras and Oakland A's GM Billy Beane are often credited for popularizing the use of analytical analysis - called Sabermetrics - in baseball.  Boras is still considered to be well ahead of his competition (both other agents and baseball clubs) in his use of analytics, and has leveraged this position to build a hugely successful small business. 

While Boras's business is unusual, small business use of advanced analytics is becoming more common.  We recently met with a small business that uses sophisticated routing software - linked to data estimating potential client profitability -  to decide whether or not to bid on business.  This type of analysis was the domain of large corporations as recently as a few years ago. 

Driven by cheap computing power and the growth of the Internet, analytics are becoming increasingly important to small businesses - and often a major source of competitive advantage.

Thanks to Glenn Peterson for pointing me to the Orange County Register article.