Small Business Labs

Google's Eric Schmidt on Mobile Computing

Reuters has an article called "Google CEO Bullish on Mobile Web Advertising" covering Google CEO Eric Schmidt's remarks at the World Economic Forum.  Key quote:

"The arrival of a truly mobile Web, offering a new generation of location-based advertising, is set to unleash a "huge revolution", Google Inc Chief Executive Eric Schmidt said on Friday."

Obviously Schmidt has a vested interest in location-based mobile advertising happening, but we do agree with him and believe location based services and advertising will have a major impact on many small businesses.  Our research report on the Connected World of Entrepreneurs covers this in more detail. 

Waving Goodbye to Hegemony

Long piece (8 pages) called "Waving Goodby to Hegemony" in Sunday's NY Times.  It is on the changing global geopolitical situation.  The basic premise is the world is no longer dominated by the US and that there is now a geopolitical "Big Three."  Key quote:

So now, rather than bestriding the globe, we (the US) are competing — and losing — in a geopolitical marketplace alongside the world’s other superpowers: the European Union and China. This is geopolitics in the 21st century: the new Big Three.

While the focus of the article is on geopolitics, the same forces are impacting global economics.  The US share of global GNP continues to fall as other economies grow.  This is leading to huge increases in global trade.  One quote I really like from the article:

"Globalization apologizes to no one; we must stay on top of it or become its victim."

For US small businesses the growth of the rest of the world is creating many new export opportunities.  Our next forecast report will cover this in more detail. 

The Connection Between Mobile and Cloud Computing

Last week I spent a day at a large corporation's internal mobile marketing workshop.  At the workshop one of the topics was the future of mobile marketing and mobile commerce.  We spent a lot of time talking about mobile computing form factors, new display technologies, software standards, advertising formats and more powerful mobile chipsets.  We also talked a lot about the iPhone and its impact on mobile computing.

We didn't talk much about cloud computing, but thinking about the day we should have.  I agree that the iPhone fundamentally changed cell phone design for the better.  But I also think the fixed cost data plan, although expensive, is a key reason for the iPhone success.  Combined with the iPhone's very nice mobile browser and UI, the fixed cost data plan allows users full cloud access for zero marginal cost.  This is a major reason why iPhone users use the Internet so much. 

The NY Times also points to cloud access as one reason why Amazon's Kindle may be the first successful digital, portable electronic reader.  Key quote:

"books and other content can be loaded wirelessly, from just about anywhere in the United States, using the high-speed EVDO network from Sprint.

This may turn out to be a red-letter day in the history of convenience — our age’s equivalent of that magical moment FedEx introduced next-day delivery and people asked, “How was life possible before this?”"

Going forward other cell phone and mobile device makers will copy and even enhance many of Apple's design innovations.  This will definitely improve mobile computing.  But as the cloud gets more powerful, network bandwidth expands, and data access gets cheaper, the mobile form factor will be increasingly focused on UI and ease of use.  Local storage and processor power will become increasingly less important because data and computations will reside elsewhere. 

Apple's new Air seems to anticipate this world.  It is a mobile device that assumes your data and information are accessible through the cloud.  Making that assumption allowed Apple to create a really thin notebook and a really cool user experience. 

These are two self-reinforcing trends.  The better the cloud the better the mobile computing experience - and vice versa.  Google, Apple and Amazon seem to see this, and all are designing products for a combined mobile/cloud world.

Small businesses need to keep up with both mobile and cloud computing.  Important in their own right, together they will drive the adoption of location based services. 

Gen Y Social Entrepreneurs Get Some Positive Press

The New York Times has an interesting op-ed piece on Gen Y social entrepreneurs called "The Age of Ambition."  Key quote:

"Today the most remarkable young people are the social entrepreneurs, those who see a problem in society and roll up their sleeves to address it in new ways. Bill Drayton, the chief executive of an organization called Ashoka that supports social entrepreneurs, likes to say that such people neither hand out fish nor teach people to fish; their aim is to revolutionize the fishing industry."

One of the reasons I really like this pro-Gen Y article is that Gen Y has been getting a lot of bad - and I think very unfair - press.  There have been multiple articles in the popular accusing Gen Y of being narcisstic, shallow and and unable to fit into the work world.  Several articles call Gen Y the Entitlement Generation. 

We spend a lot of our research time with Gen Y and young adults, and because they are very entrepreneurial we post on them often.  What I posted on Gen Y last year still holds for me:

"I've had the opportunity to participate in a fair amount of research on Gen Y and young adults over the years.  I've also worked with quite a few young enterpreneurs and young adults in Silicon Valley.  Based on both my research and work experiences, I think the Entitlement Generation is a generation of enormous talent.  They are smart, aggressive, innovative and make things happen.  I wish I entered the workforce with their skills and abilities.  Yes they have big expectations - and yes they can be difficult to deal with - but they also have what it takes to deliver."

It's nice to see this generation starting to get credit for their efforts. 

 

New York Times to Provide News Via Text Messages

The New York Times is starting to deliver news via text messages.  Another example of the rapid growth of mobile computing.

Consumption Factors and Global Trade

UCLA professor and noted author Jared Diamond (Guns, Germs and Steel and Collapse) has a great    op-ed piece in the NY Times on consumption factors.  Diamond defines consumption factors as the average rate people in various countries consumer resources.  Key quote:

"The average rates at which people consume resources like oil and metals, and produce wastes like plastics and greenhouse gases, are about 32 times higher in North America, Western Europe, Japan and Australia than they are in the developing world."

Diamond explains that the developing world is on a path to greatly increase their consumption rates due to economic growth.  He points out this potentially a huge problem - the world simply can't support 6-9 billion people consuming at the rate people in developed countries (and especially Americans) do. 

Diamond suggests that the only solution is meeting in the middle with developed countries reducing their consumption rates.  He points out this can be done without negatively impacting living standards in developed countries if we move to more sustainable environmental practices.

While the point of the piece was to highlight the need to cut consumption in the developed world, I was also struck by the numbers and what they mean for global trade.  Diamond points out that most developing countries are working to increase their rates of consumption.  He says:

"People who consume little want to enjoy the high-consumption lifestyle. Governments of developing countries make an increase in living standards a primary goal of national policy."

Rising consumption factors in the developing means increased global trade.  There simply is no way for these countries to grow domestic consumption without cross border trade.  China is an a good example.  Their rapid economic growth has in large been part driven by cross border trade and has resulted in much higher consumption rates. 

The next decade will see dramatic increases in global trade driven by the growth of developing countries.  This will also lead to a wide range of new opportunities for US small businesses to participate in cross border trade.  Hopefully much of this trade will be done with sustainability in mind. 

The Big Switch, Utility Computing and Small Business

Nicolas Carr, who is probably best known for his controversial 2003 Harvard Business Review article "Does IT Matter", has written a book on utility computing called The Big Switch.  Also called cloud computing, on-demand computing and software as a service, utility computing exists when the user accesses software and/or data from computing resources located on the network.  Gmail from Google is an example of utility computing. 

Carr compares the rise of cloud computing to the impact electric power generation had.  Key quote from the book cover:

"A hundred years ago, companies stopped generating their own power with steam engines and dynamos and plugged into the newly built electric grid. The cheap power pumped out by electric utilities didn’t just change how businesses operate. It set off a chain reaction of economic and social transformations that brought the modern world into existence. Today, a similar revolution is under way. Hooked up to the Internet’s global computing grid, massive information-processing plants have begun pumping data and software code into our homes and businesses. This time, it’s computing that’s turning into a utility."

We've posted in the past on the impact of cloud computing on small business.  Carr's book does a great job of explaining this shift. 

Neuromarketing and Wine Pricing

The term neuromarketing generally refers to the use of brain scans using medical imaging equipment to develop marketing messages and advertising.  Basically, researchers hook people up to MRI machines and watch how their brains react to marketing pitches. 

Over the last decade MRI machines have gotten much smaller. This allows for much less intrusive scans.  People can now be scanned while sitting realtively comfortably in a chair.   This, coupled with lower costs, has created the opportunity for both academic researchers and marketing practioners to investigate neuromarketing. 

CNET has an article on a neuromarketing experiment done by researchers from CalTech and Stanford.  So does the London Times.  The research looked at the brain activity of research subjects as they drank wine.  They found as the price of the wine goes up, so the does the sensation of pleasantness.  Key quote:

"that the sensation of pleasantness that people experience when tasting wine is linked directly to its price. And that's true even when, unbeknownst to the test subjects, it's exactly the same Cabernet Sauvignon with a dramatically different price tag."

Other neuromarketing studies have also shown that price and image have a major impact on how consumers perceive a product.

Large corporations are starting to actively experiment with neuromarketing.  Expect to see many more neuromarketing studies over the next few years.

NY Times on Foreign Investment in the US

The NY Times as an article called "Overseas Investors Buy Aggresively in US".  The article discusses how the lower dollar has made US assets attractively priced for foreign buyers.  It also makes investment in the US cheaper, and US production and manufacturing costs cheaper.  Key quote on German steel company ThyssenKrupp's recently breaking ground on a $3.7 billion steel plant in Alabama:

"(ThyssenKrupp) executives spoke effusively about the low cost of production in the United States and the chance to reach many millions of customers — particularly because of the North American Free Trade Agreement, which allows goods to flow into Mexico and Canada free of duty."

The cheap dollar is accelerating a long term trend towards increased US cross border trade.  While the impacts on large corporations gets most of the press, the falling dollar is also increasing small business cross border trade as small exporters take advantage of the weak dollar. 

Crowd Funding and Small Business

PSFK has an interesting post about a start-up clothing company called nvohk (invoke) that claims to be (from their press release) "the first community-managed, eco-friendly, surf-inspired clothing company."

nvohk is looking for 20,000 to 40,000 members to contribute $50 each to the company.  nvohk calls this "crowdfunding" in their press release.  In exchange, the company will poll members on major business decisions, donate 10% of net profits to charity and give nvohk reward points equal to 35% of net profits to members.  These reward points will be redeemable in nvohk clothining.

The Internet now makes it possible to raise money via small amounts.  Examples include Donorschoose, a non-profit raising money for schools, and for-profit Prosper, which provides commercial money brokering services.   

nvohk is using this approach to raise $1-2 million to help start the business.  In exchange they are giving up no equity, nor do they have to pay interest or pay the money back. Instead they are committing to giving product discounts to their members.  As a source of capital, this deal cannot be beat.  Not only is the cost of capital effectively zero, there are no onerous investors or bankers to deal with. 

The members also immediately become product evangelists.  In other words, the members are paying nvohk to become product champions.  This is a very cool viral marketing campaign. 

It will be interesting to see if this works and they are able to attract 20,000 members.  I can see consumers agreeing to do this.  First, $50 is not a lot of money if you think you are going to like the clothes.  Second, it sounds like fun.  I'm thinking of signing up.