Small Business Labs

The Etsy Economy

Craft marketplace Etsy recently released a new report called Building an Etsy Economy: The New Face of Creative Entrepreneurship.

The report is based on a survey of 4000 Etsy sellers. The key findings include:

The vast majority of Etsy sellers, 86%, are women. This is much higher share of women ownership than either employer businesses (about 33% women owned) or independent workers (about 50% are women). According to the report the sellers also skew young with many below the age of 35.

Most Etsy shops are real businesses. Most sellers (76%) call their Etsy shop a business and 9 out of 10 say they are planning on increasing their sales. While only 30% report it's their full-time job, almost all consider their Etsy earnings to be an important source of income.

Key quote from the report:

For 30% of Etsy sellers, their creative business—both on and off Etsy—is their sole occupation. For the rest, their creative business supplements other jobs, contributing an average of 15% to total household income overall. This money makes a difference—44% use this income for necessary household expenses.

Etsy is a great example of how the Internet and online marketplaces are making it easier to create new businesses. It's also allowing people to pursue their creative passions while providing income.

This report also comes at a good time.

With Uber and the on-demand economy getting so much attention, it's important to remember that the on-demand economy is a small segment of the overall independent worker sector. 

The Etsy report nicely reminds us that independent work and micro businesses continue to thrive and expand outside of the on-demand economy.

The Shoe That Grows - Small Business Innovation in Action

The Shoe That Grows is a simple and clever solution to a massive problem - providing children in the developing world with inexpensive, long lasting shoes.

Ill-fitting or the lack of shoes is a big problem. 

Over 2 billion people in the world suffer from soil-transmitted parasites and diseases. 

Add in injuries and other issues that come from not wearing shoes or wearing shoes that don't fit and it's clear there's a need for this kind of product.

The Shoe That Grows addresses this problem by providing inexpensive footwear that expand through a simple system of buckles, snaps, and pegs.

It adjusts across five sizes and last five years – providing better protection and better health for children.

The reason we are covering this product is it's a really interesting example of small business innovation. 

The inventor is a guy named Kenton Lee (pictured). He came up with this idea while working in an orphanage in Kenya.

He pitched it to a number of shoe companies, but none were interested.

So he created his own non-profit to produce the shoes.

We've long been fascinated by how small businesses innovate. Our 2009 study - Defining Small Business Innovation - defined 6 attributes that enable small businesses to innovate.

These are:

• Personal passion: Personally invested, most small business owners are willing to try new approaches to make their business more successful.
• Customer connection: A deep and direct relationship with the market and customers helps small businesses understand customer needs, identify new opportunities, and fix problems quickly and efficiently.
• Agility and adaptation: Unlike large corporations, small businesses can quickly adapt to changing market conditions and implement new business practices.
• Experimentation and improvisation: When pursuing new opportunities, many small business owners and managers aren't afraid to experiment and improvise, accepting failure as part of the path to success.
• Resource limitations: Small businesses are adept at doing more with less. And these resource constraints lend to their innovative mindset. 
• Information sharing and collaboration: Small businesses traditionally rely on strong social networks to share information and inspire innovative thinking.

The Shoe That Grows is an excellent example of these enablers in action.  

By the way, the shoe is so popular they're sold out until July. 

Small Business Success in the Cloud

Small Business Success in the Cloud is the first in a new research series from Intuit. It focuses on how cloud computing is transforming small business.

New technologies, like cloud computing, tend to go through 3 broad generations.

 

During the first generation, which occurs after a technology is first commercialized, the impacts are mostly efficiency gains. The new technology makes things cheaper, easier and/or faster. 

A good example of a first generation cloud product is Amazon's Web Services, which is still heavily marketed as a way to reduce IT costs and increase the speed and ease of deployment. 

During the second generation, people and businesses have adapted enough to the new technology to create new ways of doing business as well as new business forms and structures.  

Based on our research, we think cloud computing has entered the 2nd generation. We also found 4 types of businesses - we call them faces or personas - that illustrate some of the new ways, forms and structures that cloud computing is enabling.

These are:

• Plug-in Players: Small businesses will increasingly adapt to the cloud by taking advantage of specialized services that can be seamlessly integrated into back-office operations. Instead of spending time and effort on the nuts-and-bolts of finance, marketing and human resources, cloud-adapted small businesses will plug into cloud-based providers who deliver comprehensive, tailored solutions, giving small business operators the ability to focus on mission-critical areas of business.

• Hives: Cloud-adapted small businesses will increasingly be made up of individuals who share talent to form a team. These businesses will operate virtually, with employees working in different locations, and staffing levels will be increasingly flexible, rising and falling to meet project needs. For example, independent contractors will use virtual spaces to connect and market themselves. On Main Street, small manufacturers and producers may share a commercial facility.

• Head-to-Headers: A growing number of cloud-adapted small businesses will compete head-to-head with major firms, using the growing number of platforms and plug-in services to reach markets once only accessible to large corporations. This is already being seen with platforms such as AirBnB, which provide individuals with the ability to reach a mass market through community infrastructure.

• Portfolioists : Successful cloud-adapted freelancers will bring together multiple income streams to create a career portfolio. These largely will be people who start with a passion, or specific skill, and are motivated primarily by the desire to live and work according to their values, passions, and convictions. They will increasingly build personal empires in the cloud, finding previously unseen opportunities for revenue generation.

Small Business Success in the Cloud is the first in a series of reports, presentations and videos - called Dispatches from the New Economy - Intuit will be releasing in the coming months.

The Dispatches are based on a comprehensive, year long project exploring the ways social, economic,demographic and technology shifts will shape the future of small business success. Emergent Research (that's us) partnered with Intuit on this work.  

We're excited by the findings of this work will be covering the Dispatches in detail.

The Infrastructure Behind the Rise of Crafters, Makers and Hobbypreneurs

Back in 2009 we released Today's Hobbyists are Tomorrow's Hobbypreneurs, a report on the Maker Movement with our partner Intuit. Our conclusion was:

"Makers increasingly create new products and build small businesses based on innovative use of technology, processes, and business models. They represent a growing force of hobbypreneurs contributing to the U.S. and global economy."

At the time we wrote this report,this was controversial.

Makers were considered hobbyists, amateur crafters, tinkerers and the heirs to the DIY consumer movement of the 1950s and 1960s. They weren't viewed as a source of new businesses. The folks from Maker Faire even told us we were wrong to think of Makers as potential entrepreneurs.  

Much has changed over the last 5 years. 

As the Reuters article Do-it-yourselfers inspire hardware renaissance in Silicon Valley explains:

"a proliferation of high-tech but affordable manufacturing tools and new sources of funding are empowering a generation of handy entrepreneurs and laying the foundation for a hardware renaissance."

The rise of Makers, crafters and others turning hobbies, passions and interests into small businesses is being enabled by a growing support infrastructure that allow these businesses to be started cheaply and easily.

Etsy, of course, is an obvious example of this growing infrastructure. It makes it inexpensive and easy for a crafter to open an online store with immediate reach to millions of potential customers.

In addition to their consumer site, they've also created a wholesale channel for their sellers. This makes product distribution into the retail channel much easier.  

They also recently acquired Grandst.com, which is an Etsy-like marketplace for "creative technology". This will likely greatly expand the customer base for all kinds of gadgets developed by Makers and small manufacturing companies.  

Other infrastructure services include shipping and logistics services targeted at small businesses, a growing array of cloud-based software systems designed to improve the operations and efficiency of small and micro-businesses and a number of new, cheaper, payment system options.

Financing has also gotten easier.  A range of companies are now offering various forms of loans and advances to small and micro businesses. Crowdfunding and more recently equity crowdfunding are also being increasingly used by these types of businesses.  

But although it's gotten cheaper and easier to turn a hobby, passion or interest into a business, for most hobbypreneurs it's still about their passions.  The chart below - from Etsy's Redefining Entrepreneurship report - shows starting these business is about much more than the money.

     

Book Review: The Manufacturer's Book of Lists

A powerful trend that gets little coverage is the growth of small manufacturing.

As we pointed out in our 2012 article The Rise of Small and Micro Manufacturing, of the 330,000 U.S. manufacturing firms 80% have fewer than 50 employees and about 36% have 4 or fewer employees.

And these numbers understate the number of small U.S. firms that make things.

This is because they are based on a traditional definition of manufacturing which excludes the vast majority of the growing number of artisans, professional Makers and others who build physical goods in non-traditional ways.

Because there are so many new and small manufacturing firms, I was very excited to read the The Manufacturer's Book of Lists by small business expert Gene Marks.

It provides - in a quick and easy to read format - advice from over 60 manufacturing experts on pretty much everything you need to know to own and operate a manufacturing firm.  

Also, because the book is organized in lists by functional area you can go directly to issues you are struggling with. For example, if a firm is having inventory issues Chapter 2 provides 9 lists of things you can do to improve your inventory operations.  

I found Chapter 3 on human resource issues to be one of the most important in the book. We interview a lot of small manufacturing firms and people issues - especially around labor law and safety - are consistently problems for small and new manufacturing firms.  

Many small or new manufacturing firm owners simply don't know the laws/rules due to their number and complexity.  Chapter 3 of this book nicely summarizes this very important area.

I recommend the Manufacturer's Book of Lists for anyone involved in manufacturing.  

But I think it will be especially useful for small and micro-manufacturing firms - and even more so for the growing number of small manufacturing/maker/artisan startups.   

Book Review: The Fifth Age of Work

The Fifth Age of Work describes how a broad mix of shifts and trends are transforming work and the workplace.

The author, Drew Jones, is well suited to take on this subject.  

He's a cultural anthropologist, partner in a coworking facility, business professor at Texas State and the co-author of one of the first books on coworking - I'm Outta Here. 

The book's premise is changes and shifts in technology, social trends, economics and demographics are leading to a new age of work, which he describes as:

The Fifth Age of Work is an emerging world of work broadly defined by the rise of cloud-based technology such as remote computing, file storage and retrieval (e.g., Evernote, Dropbox), and communication channels (e.g., Skype, Google Hangout), as well as the decentralization and de-localization of work characterized by distributed teams, remote work, flex work and telecommuting, contract and project-based work, and the rapid growth of the coworking movement. 

He goes on to say that a key driver of this shift is people want more "independence, trust and honesty in their working lives".  

A lot of ground is covered in this book.  It includes discussions on the importance of design and design thinking, activity based work, results oriented work environments (ROWE), coworking, innovation and various way companies and leaders can increase trust, openness and collaboration.  

The Fifth Age of Work does a great job of covering all these trends and tying them back into a understandable framework.  Anyone interested in the future of work - which is pretty much everyone reading this blog - would find value in reading this book.

And it's only $7.99 for the PDF or Kindle version. The paperback version is $15.95. 

I do have one required disclosure since I just suggested you read this book. Several of our studies are referenced and cited included our New Artisan Economy report and Intuit 2020 report.  

We are, of course, thrilled and honored to see this, but our recommendation would have been just as strong if we weren't cited.

The New Serfs and the End of the Middle Class

A growing theme across the Internet is that technology is driving income inequality and creating a "neo-feudal" economy.  This week alone there are two good examples of this point of view.

TechCrunch's Meet the New Serfs, Same as the Old Serfs is interesting because it provides a rare critical look at some parts of the Sharing Economy.

Normally the Sharing Economy is fawned over in the media, who treat it like it's a radical new approach to capitalism that's going to save the world.  

The TechCrunch article points out that many of the sharing economy's firms require the availability of a low wage work force.  Key quote:

"... let’s face it, “sharing economy” is mostly spin. It mostly consists of people who have excess disposable income hiring those who do not; it’s pretty rare to vacillate across that divide. Far more accurate to call it the “servant economy”"

New Geography's California's New Feudalism Benefits Few at the Expense of the Multitude greatly expands on the theme of a neo-feudalist economy, with a focus on California.  They even have a full description of its members:

The Oligarchs: The swelling number of billionaires in the state, particularly in Silicon Valley, has enhanced power that is emerging into something like the old aristocratic French second estate. 

The  Clerisy: In the Middle Ages, this role was played largely by the church; in today’s hyper-secular America, the job of shaping the masses has fallen to the government apparat, the professoriat, and the media, which together constitute our new Clerisy.

The New Serfs:  If current trends continue, the fastest growing class will be the permanently property-less. This group includes welfare recipients and other government dependents but also the far more numerous working poor.

The Yeomanry: In neo-feudalist California, the biggest losers tend to be the old private sector middle class. This includes largely small business owners, professionals, and skilled workers in traditional industries most targeted by regulatory shifts and higher taxes.

For those who want to dig deeper on this topic, noted economist Tyler Cowen recently released Average is Over, a book that also covers this theme.  

Cowen suggests in the not to distant future America's economic structure will consist of 10%-15% of the population living exciting, wealthy lives while the rest live on beans. And yes, the future Cowen describes does kinda sound like it's taken from the movie Soylent Green, except the masses eat beans.  

We're spending a lot of our time these days trying to understand what's going with the changing nature of work, income inequality and what all this means for independent workers and small businesses.

There's no way to look at the data behind these stories without being very concerned. It's clear we're entering a period where income inequality is likely going to continue to increase.  Our hope is self-employment and the rise of a new artisan economy will create opportunities for more people to have economic success.  

The Artisan Economy Continues to Expand

Several Artisan Economy articles caught my eye this week:

The Guardian's Toy Choice Gets Wider as Internet Inspires Playtime Revolution covers how the Internet and networked business models are enabling a growing number of artisan and boutique toy producers. Key quote:

"You may have noticed it, here and there: more smaller brands, more toys with an eco angle. More craft-oriented, or retro toys. Maybe more unusual toys, tech-enabled toys and toys that teach ... But why is this happening now? All roads lead to the Internt and its democratising ability: networked knowledge, networked contacts, networked marketing and even networked manufacturing."

PSFK's Artisanal Food Hall Brings Gourmet Food Vendors Under One Roof covers All Good Things, a restaurant and food hall in New York City.  The is yet another example of the growing influence artisan foods is having.

Artisans Spin Up a Good Time in Wren covers a fiber arts and spinning festival in Corvalis, Oregon.  Key quote:

Some came to sell their wool or finished products, but most came to share their joy of spinning with like-minded people.

Creative Conference Focuses on Southwest Virginia Assets covers an event focused on artisans in Virginia.  The state's Round The Mountain artisan network has over 400 members.  

We continue to be impressed and excited by the growth of the Artisan Economy.

The Personal Revolution

Legendary venture capitalist Michael Moritz gave an interesting presentation at a recent tech show titled The Personal Revolution.  His slide show in embedded below.

The theme of the presentation is the economy is moving to "data factories" that create tools and products that make it easier to start a small business.  Key quote from a Tech Crunch article on the talk:

The tools and platforms listed above have given way to a “personal revolution” that’s delivered unprecedented productivity and reach to small businesses and entrepreneurs. You don’t need nearly as much money to start a business anymore. Moritz gave a slew of examples of people who made small fortunes selling sleds on Amazon, becoming makeup spokeswomen on YouTube, becoming best-selling authors via Kindle, or earning huge real estate commissions through Trulia.

Moritz also covered the downsides of this shift.  Another quote on the outlook for people who aren't highly educated and/or highly skilled in ways attractive to data factory companies like Google and Facebook:

“It means that life is very tough for most everyone in America” says Moritz. That’s not just some ambiguous sense of hardship. The median American household has stagnated. The absolute minimum wage value has decreased significantly. “It’s tough if you’re poor, it’s tough if you’re middle class. It means you have to have the right education to work at [the tech giants]. If you’re not like us, it’s tough” said the highly successful venture capitalist.

Regular readers of this blog are familiar with these themes, but Moritz presents them with flair.

Rage Against the Machines

There's been a regular stream of articles about robots and automation taking jobs from humans of late. Techcrunch's Jobs, Robots, Capitalism, Inequality and You nicely sums up many of the negatives associated with the technology replacing jobs.  

This article focuses on growing income equality.  Key quote:

The strange present, we may conclude, is one in which the middle class is slowly being squeezed out of an economy that is gradually dividing into two camps, the few rich and the many poor. Furthermore, “rich” increasingly means “those working in technology.” 

A more balanced view of this issue is taken in Fast Company's Are Robots Going to Kill Your Next Job or Create It? It covers both sides of the argument and points out there will be "winners and losers" and doesn't come to a firm conclusion on the overall impact of automation on jobs.

A new study out of England (so new it's not yet available online) suggests that close to half of all current U.S. jobs will be automated over the next 20 years.

This is similar finding to a study that we covered last year in our article The Polarization of Jobs. The authors of that study also felt 40%-50% of U.S. will at risk of being replaced by automation.

A good example of the type of robots entering the market is Throwbot, a small robot being used for survelliance by SWAT teams.  Yahoo's Whoa: That Police Officer is a ... Robot does a nice job of describing how Throwbot is used.  

It has a good paragraph on the size of the robotics industry:

According to the International Federation of Robotics, 2012 was a banner year for sales. About 160,000 units were sold for $12 billion, the second highest number ever recorded. "All expectations are that the industrial robots market will continue to expand at around 9 percent to 14 percent per year for the rest of this decade," said Frank Tobe, owner and publisher of The Robot Report, which tracks the industry.

We're more optimistic than most about the ability of humans to compete with automation and robots. We were recently encouraged by what's going on in the accounting industry. When we did a series of forecast workshops 3 years with accountants they were very worried about automation hurting their business.

But as we learned in a recent workshop on the future of accounting, the industry now sees automation as an opportunity in addition to being a threat. They see automation as a way to increase productivity, creating more opportunities for the industry to add value through services.  

We also continue to believe the the New Artisan Economy will also lead to jobs for humans.

I think the Fast Company article closes with a good quote on this topic:

As we enter the Age of Robotics, the question for you may not be: “Will robots kill more jobs than they create?” But: “Am I the 2013 version of a buggy whip manufacturer?"