Small Business Labs

Smart Phone Sales Accelerating

Smart Phone sales continue to grow at a brisk pace.  According to the research firm NPD Group:

"The percentage of smartphones sold during the third quarter increased from 4 percent of all phone sales in the third quarter of 2006 to 11 percent during the same timeframe in 2007 – an increase of 163 percent year over year."

According to Silicon Ally Insider Apple sold 1.1 million iPhones in the third quarter grabbing 27% of the Smart Phone market and 3% of the overall US cell phone market. 

We expect Smart Phone sales to continue to rapidly gain share and Internet access via cell phones to become common over the next 3-4 years.  This trend and its impacts on small business is covered in our Connected World of Entrepreneurs research report.

McKinsey on Aging Baby Boomers and Unretirement

Excellent article on the McKinsey Quarterly website (registration required) on aging baby boomers.  For folks that have been following demographic trends and aging boomers there really is nothing new in the article, but it does a great job of summarizing a wide range of business issues related to aging boomers.  Also, as is always the case with McKinsey Quarterly articles there is a whole lot of interesting data and analysis. 

While the article covers a lot of ground, I focused on their assessment of boomers work and retirement plans. Key quote:

"Eighty-four percent of those we surveyed expected to work after they formally retired, and 63 percent said they couldn’t see themselves ever retiring completely. Our analysis also indicates that 60 percent of boomers will need to work just to maintain 80 percent of their current consumption and that more than 40 percent (29 million) will be working at age 65. That is twice the number of people from the silent generation who were working at the same age (14 million, or 30 percent). By 2015 more than one-third of the labor force will be over the age of 50."

The substantial increase in aging baby boomer workforce participation echos our research and forecasts (see The Changing Face of Entrepreneurs).  While the McKinsey article focuses on what this means for employment at large corporations, our research indicates that many aging boomers will choose to form or work for small or personal businesses as they age. 

IBM Buys Cognos; Software Industry Dominated by Giants

Businessweek has an article covering IBM's recent acquisition of business intelligence software company Cognos.  The article points out that IBM has made 23 software acquisitions since 2006 and points out that the software industry is is now dominated "by a handfull of giants".  Key quote:

"The software industry, once populated by hundreds of so-called best-of-breed companies, is now dominated by a handful of giants, including Microsoft (MSFT), IBM, SAP, and Oracle, with vast portfolios of products. It's very difficult for midsize companies to compete against the giants because large corporations prefer to buy their technology from a few strategic suppliers rather than a lot of smaller companies."

While mid-sized software companies are becoming rare, there are thousands of small software companies - many based on Web 2.0 technologies.  As with other industries, the software industry is developing a barbell structure with a few very large companies, lots of small companies and very few mid-sized companies.  We will covering this trend in more detail in our next Future of Small Business forecast report.

Conscious Consumers and Small Business

Integrated marketing firm BBMG has an interesting report on what they term "conscious consumers".  According to the report summary:

"While consumers continue to prioritize personal and practical concerns like health, safety, price and quality, they are also looking to make a difference in the world," said David Lubensky, founder of Bagatto, a San Francisco based ethnographic research firm. "We see a trend toward 'self-centered consciousness,' whereby consumers want companies to meet their personal needs and postively impact society."

While BBMG and the study focus on large international brands, their research results are very relevant to small businesses serving consumers.  Consumers are looking for companies that have products that meet their personal needs and small businesses are very well positioned to provide customized or specialized products.  Also, according to the report conscious consumers are interested in supporting local businesses and buying products made in America. Small businesses easily can meet these requirements.

The Credit Crunch, Entrepreneurship and Unemployment

The Entrepreneur Blog has a post about a survey done by PartnerUp that shows that "many professionals in the residential real estate and financial sectors are leaving their jobs to take a stab at entrepreneurship."  I couldn't find information on the survey on PartnerUp's site, but according to Entrepreneur:

"The survey, conducted by PartnerUp.com, found that of those professionals who left in the last three months, about 56 percent are considering starting their own business and 13 percent are already on their way."

This is very similar to what happened in Silicon Valley during the the dot com melt down 6-7 years ago.  With jobs hard to find many in the Valley simply started their own businesses.  This is much easier today than in the past because the cost of starting a new business is much lower. 

I've posted in the past on small businesses contributing to economic stability.  The current credit crunch is another example.  Despite the layoffs and drop in residential construction related to the credit crunch, the overall US economy is holding up surprisingly well.  One reason for this is displaced workers no longer automatically add to the unemployment rate.  As this survey shows, many turn to entrepreneurship.  Many also find employment with small businesses.  Also with large company employment a smaller percentage of overall employment than in the past, big company layoffs have less of an impact on the overall economy.

The economic impacts of the credit crunch are not over and coupled with high energy costs the US economy may still fall into a recession.  But small business is cleary adding to the continued resiliency of the US economy.

Google Continues to Gain Search Share

Hitwise reported that Google gained search share yet again in October.  According to the press release:

"Google accounted for 64.49 percent of all U.S. Searches in the four weeks ending October 27, 2007. Yahoo! Search, MSN Search and Ask.com each received 21.65, 7.42 and 4.76 percent respectively. The remaining 49 search engines in the Hitwise Search Engine Analysis Tool accounted for 1.68 percent of U.S. searches."

Google's share is up roughly 4 points over the prior year with most of the gain appearing to come at the expense of Microsoft who was down 3 points. 

Two interesting things jump out from this data.  One is that Microsoft continues to lose share despite huge investments in search and a stated corporate strategy to gain share on Google.  The other is how many small search engines there are.  Despite the presence of several giant corporations, small businesses continue to find niche markets in search.

Innovation is Everywhere - Even in Charcoal

Innovation is rightfully getting a lot attention these days from companies of all sizes.  I recently saw a presentation that included work Clorox is doing to improve charcoal.  According to Clorox (the world's leader in Charcoal based on their Kingsford brand) the three keys to charcoal are ignition time, burn lenght and burn temperature. 

Their new and improved charcoal product has an innovative new brick shape.  According to Clorox this leads to a 38% improvement in ease of ignition, a 22% improvement in time to cooking readiness and a 13% improvement in cooking time spent above 380 degrees. 

Innovation is everywhere. 

TechShop - Manufacturing Coworking

TechShop is (from their website): "TechShop is a fully-equipped open-access workshop and creative environment that lets you drop in any time and work on your own projects at your own pace.  It is like a health club with tools and equipment instead of exercise equipment...or a Kinko's for geeks."

TechShop is located in Silicon Valley (Menlo Park) and offers members access to a wide range of tools and equipment for making things including milling machines, lathes, 3-D printers and cad/cam software.  They operate like a health club and sell memberships - $100 per month - and offer a wide range of classes. 

The target market is DIY hobbyists, inventors and others that want to play with serious toys.  It is another example of sophisticated manufacturing technology becoming increasingly available to hobbyists and small businesses.  They also look like a coworking facility for people needing manufacturing support.

  TechShop hopes to go national via franchising. 

YouTube is Mainstream

The rapid growth of online video continues to be amazing.  We first started looking in-depth at the growth of online video about 5 years ago.  The driver, of course, is broadband which is now available in over half of US Internet households and the vast majority of Internet places of business.

I was at a dinner party this week that was attended mostly by non-tech industry baby boomers.  There were multiple conversations about YouTube videos and it was clear that most everyone at the party had at been to YouTube several times in the last few months. 

This more than any data set or market research shows how mainstream online video has become.

Clorox Buys Burt's Bees

Clorox recently acquired natural personal care products company Burt's Bees.  This is yet another example of a mid-sized company being acquired by larger corporation.   Like most large corporations, acquistions of mid-sized firms is a major part of their growth plan.  They emphasized this in their presentation to investors.  Here is one of their acquisition criteria:

"Must be economic profit accretive within a reasonable period of time and most transactions will  likely be $500 mm or smaller"

Burt's Bees was a bit bigger than this (near $1 billion), but Clorox's intent is to buy small and mid-sized companies, cut their costs through synergy and supply chain scale, and grow revenues using distribution and marketing scale. 

This is now a common pattern in most industries.  A relatively few global giant corporations grow in part by acquiring mid-sized companies.  We expect this trend to continue with very large corporations continuing to dominate most industries.