Small Business Labs

The Power of Professional Journalism

The San Francisco Chronicle has an article on the growth of blog based publishing companies.  I was interviewed by Chronicle reporter Sam Zuckerman several times and I'm quoted in this story.  Being part of the this process reminded me why I like the mainstream media and professional journalism.

Based on when Sam first contacted me, the story was developed over a period of a couple of weeks.  His research included talking to multiple sources with a variety of backgrounds.  The story includes several views on the growth of professional blogs and presents the information in a reasonably unbiased way.  The story is professionally written and reads that way.

Let's compare that with the average blog post - this post will work.  I've spent about 10 minutes on this.  I've done no research except for reading the article.  I'm in no way even considering being unbiased, and this post is written by a amateur who finds writing good hard. 

It's not difficult for me to decide which approach does a better job reporting news and information.

This is not to say all blogs should be written by professional journalists and/or held to professional journalistic standards.  Many blogs are fun to read because they aren't professionally done, or because of their biases.  But my personal hope is as the blog industry grows and matures more blogs - and especially blogs that focus on news and information - employ the methods of professional journalism.

Locally Grown Food Sales $5 Billion in 2007

Local farms producing and selling food products locally continues to be a growing market.  According to a recent Packaged Facts study, this market will reach $5 billion in sales this year.  Key quote from the study press release:

"Food safety issues and America’s awakening "green" culture are just a couple of the factors driving the surge in fresh and locally grown food sales, with locally grown foods expected to jump from approximately $4 billion in 2002 to $5 billion in 2007, according to Local and Fresh Foods in the U.S., a new report from market research publisher Packaged Facts."

Wegman's, the innovative northeast grocery store chain, is joining this effort.  They have begun selling produce grown on their own 50-acre organic farm to nearby grocery stores. Key quote from article in Greenbiz.com:

"...the company's CEO, Danny Wegman, said the goal is to use the land not just to grow fresh produce for sale, but to help grow the local food market in the area."

Most of the farms participating in the local foods industry are relatively small, and this is another example of niche small businesses thriving in industries considered the domain of larger enterprises. 

I first saw a reference to this on Iconoculture, which is a good source for trends.

Great Blog on the Future That Never Was

As someone who does forecasts I'm always interested in past forecasts and how they turned out.  Although reviewing past forecasts is very humbling - no one can predict the future and forecasts are often very wrong - it is a useful exercise. 

The Wall Street Journal recently had an article that mentioned the Paleo-Future blog, which tracks "The Future That Never Was."  The blog posts trend forecasts from the past.  It includes "futures" videos from the 80's and 90's which are very funny.  You can search by decade going back to 1880's. 

Very fun site for those interested in trends, forecasts and failed forecasts.

More on Boomers - Mediamark, Money Magazine, Wharton

Lots of new studies, reports and articles on aging baby boomers - actually too many to read much less post on.  Here are three of interest:

1. Mediamark Research just released another survey on boomers as consumers.  They have an ongoing project in this area.  Worth reading if you are interested in the boomer market.  The report is here.
2. Money Magazine has an article on boomers called "Forever Young".  Lots of information, including the now standard survey results saying 70% of boomers want to work in retirement.  Worth reading if you are are interested in general information on boomers.
3. Knowledge at Wharton has article on the the increasing work participation rate among older workers.  It also talks about companies adjusting their HR practices to retain and attract older workers.  Worth reading if you are interested in hiring aging boomers or are curious about their work plans. 

Industry Consolidation and Decentralization

One of the trends we are following is the continued consolidation of most industries.  Oracle's recent bid for BEA in enterprise software, and the SABMiller - Coors merger are two recent examples. 

We are also seeing a growing number of small businesses in most industries.  Seeing both consolidation and decentralization happening at the same time is somewhat counter intutitive.  The beer industry is a good example.  In 1980 there were only 44 commercial brewers in the US, and the top 5 brewers had about 70% of the market. Today there are roughly 1400 commercial brewers in the US, and the top 2 own roughly 78% of the market.  There are also many, many thousands of hobbyist brewers.  The industry is both consolidating and decentralizing.

This pattern is playing out in most industries, and we expect this to continue on a global scale.

Conversational Marketing Set to Surpass Traditional Marketing

The Society for New Communications Research (SNCR) released a study indicating that spending on social media and conversational marketing will exceed the spend on traditional media by 2012.  The study is a joint effort between SNCR and advertising guru Joseph Jaffe.  The study results are incorporated in Jaffe's new book Join the Conversation.  Driving the need for conversational marketing is the new prosumer.  From the book website:

"the “prosumer” (or producing consumer) comprise a small fraction of the people who buy your product but have a disproportionate ability to create, harvest and - electronically or otherwise - disseminate an enormous raft of uncensored messages about your brand to their “closest strangers”.

As part of the study, SNCR, assisted by TWI Surveys Inc., surveyed senior PR, marketing and marketing communications professionals.  Key findings:

• 70% of the respondents reported they are currently spending 2.5% or less of their communications budgets on conversational marketing
• Two-thirds of the respondents plan to increase their investment in conversational marketing within the next twelve months
• 81% of the respondents project that by 2012 spending on social media and conversational marketing will equal or exceed the spend on traditional media.

While Jaffe's book focuses on large corporations and major brands, the same shift towards conversational marketing is impacting small businesses. 

Disclosure:  I'm a board member and Senior Fellow at the Society for New Communications Research.  I was not actively involved in this study, but I did review the research plan and study methods.

The Shifting Career Blog and Corporate SOHO Hybrids

The NY Times has an interesting new blog called "Shifting Careers" that focuses on new career patterns.  The blog oftens discusses working at home and personal businesses.  A recent post called "How Do They Pay The Bills" talks about the financial issues and risks associated with becoming a "free agent". 

One of the comments to the post mentions dual career couples who use one of the partner's corporate job to provide benefits and income while the other partner starts a business.  We call this the corporate soho hybrid model, and discuss it in our forecast reports.  This model is very common in Silicon Valley and gets around many of the risks associated with starting a business or becoming a free agent.  It is also a model many mompreneurs used to start their businesses.  We've also seen many examples of the partner with the corporate job later joining the other partner's business once it is up and running. 

This approach is so logical it is bound to become more common.  Of course, this option is not available to single people.   

Patents and Small Business

The Up and Running blog has an interesting post on patents and small business.  Although it is still somewhat expensive to go through the entire process, patents have become much easier and cheaper to file.  They are also increasingly viewed as extremely important assets by investors and potential acquirers, so most venture backed businesses file a large number of patent applications.

Patent lawsuits are extremely expensive.  I recently met with a small tech company that had spent roughly $5 million over the last two years on a single patent infringement suit.  Obviously most small businesses cannot afford to do this (it was also not clear to me this suit was a good use of funds by the company I met with). 

While I'm no expert on intellectual property law, I agree that patents generally provide limited protection from competitors copying ideas and/or inventions.  Work arounds that avoid infringement are often easy to do, and beyond the cost of IP suits proving infringement is very hard.

So why should a small business bother with patents??  I see three reasons:

• The MAD defense - The US and the Soviet Union used the fear of mutually assured destruction to help avoid nuclear conflict during the cold war.  Filed patents provides a similar defense.  It is so expensive to sue over IP, and so hard to prove infringement, that having patents gives a small business the ability to threaten counter suits and/or the ability to make a lawsuit so expensive that others will choose not to sue.  I've seen this defense effectively used on multiple occassions.  Of course the MAD defense also works against a small business if they want to sue a competitor with patents.
• Becoming an attractive partnering/acquisition candidate - Many big companies prefer to acquire small companies with strong IP positions.  If a small business plans include possibly being acquired, then having patents is a major plus.  They also like to do partnering deals with companies that have strong IP positions.
• Fundamental patents - a fundamental patent covers technology that is so fundamental to the business or technology involved that there are no work arounds and others have to either respect or license the patent.  These patents are rare, but very powerful.  For example, Qualcomm has built a huge and highly profitable business by owning fundamental patents on various aspects of cell phone network operations.  If a small business has fundamental technology, then filing can be a huge win.

Intellectual property (IP) is going to become even more important and valuable over the next decade.  Global patent filings are growing very rapidly (see this report by the World Intellectual Property Organization for more information) and will continue to do so.  Small businesses with the ability to file patents should stongly consider filing, even if the direct protection relative to the competition is somewhat limited. 

While I'm no expert on intellectual property law, it seems clear that IP is going to become even more important and valuable over the next decade. 

Yahoo Finance on Anytime, Anyplace Work

One of the themes of our last "Future of Small Business" report was the trend towards anytime, anyplace work.  This has both good and bad.  Good that when and where you work is increasingly flexible.  Bad in that work can follow you regardless of time or location. 

Yahoo Finance has article on this topic called "Getting Freewheeling Employees to Work Anytime, Anywhere".  Good coverage of the broader trend.

Small Business Blog Saturation

Anita Campbell asked an interesting question a few weeks ago on her Selling to Small Businesses blog. The question is:

"Have we reached the point where the Internet-active small business population simply cannot support more small business sites and blogs?"

Since there are millions of active blogs online, this same question could be asked about almost any blog category.  You could also ask this about small online publishing in general. 

We've researched blog readers (the people who read blogs, not the software) and most people reach a blog watching/reading saturation point fairly quickly.  For most people who identify themselves as active readers of blogs, the saturation point appears to be 7 or fewer regular blogs.  The range is quite broad, with some uber readers watching hundreds of blogs and many just watching 1-2.  Other studies have similar results. 

When they reach their saturation point, people still read other blogs but don't follow them with any regularity.  When they find a new blog they want to follow on a regular basis, they tend to quit following one of their current blogs.  Our study was too short in duration to tell what the turnover rate is, but 20-25% per year would be my guess. 

Based on this, my answer to Anita's question is a qualified no.  Like any other media type, there is always room for a new small business blog (or any other kind of blog) if it is good enough.  Simply put, people will move if they find something they like better. 

However, it is also clear that the small business blog market (and the blog market in general) is very crowded and increasingly competitive.  Low entry costs ensures this will continue.  This means creating a new blog that is good enough to attract a broad audience is going to get harder and harder. 

The other trend we are seeing is that a relatively few blogs attract the majority of blog traffic.  This is true for the blogosphere overall as well as individual blog categories.  Generally speaking, 2-8 blogs tend to get the majority of the traffic in most niche categories (for example, 2 blogs in the consumer electronic gadget space get over half the space's traffic).  The good news is there are lots of categories big enough to support a blog, and clever people come up with new categories all the time. 

So I think there is room - if your blog is good enough.