Small Business Labs

In Silicon Valley it is The Best of Times, it is the Worst of Times

There is a growing view that Silicon Valley is in a steep decline.  The Valley's unemployment rate is well above the national level.  Salaries are down. VC investments are in a slump.  Manufacturing is moving to cheaper locations, and other regions - both in the U.S. and overseas - are increasingly competitive. 

The New York Times even recently described Silicon Valley as in "what a latter-day Wagner might call the Techiedämmerung."  I have no idea what this means, but it sure sounds bad. 

But at the same time many Silicon Valley companies are thriving.  Apple just reported blockbuster earnings. Google's profitability and growth is staggering, and the next 18 months will see a raft of new Silicon Vally tech millionaires as companies like Facebook, LinkedIn, Zynga and others go public. 

Even Valley companies declared dead or severely wounded, liked Yahoo and eBay, are showing signs of life.   

Silicon Valley, and the broader Bay Area, is also the home of many thriving tech companies outside of traditional IT spaces.  Biotech and health related companies are rapidly expanding.  A wide range of clean tech and clean energy companies call Silicon Valley home, and Silicon Valley is becoming a growing power in the increasingly tech-driven advertising, entertainment and publishing industries. 

Silicon Valley may be in decline.  But it seems more likely to us Silicon Valley is moving through a period of Shumpeterian creative destruction, with new technologies, companies, industries and business models emerging. 

Knowledge@Wharton's Innovation Tournament

Knowledge@Wharton is holding a global "Innovation Tournament"to find and select innovative management "tools."  They are defining "tools" as methods, approaches, templates, processes or software "that organizations can use to increase efficiencies, cut costs and/or streamline operations."

It is a crowdsource tournament and anyone can enter.  It is interesting how fast competitions like this have become popular. 

They seem open to any type of tool focused on any area, but they provide the following as suggested categories:

• Supply Chain Optimization
• Customer Experience
• Social Computing
• Sustainable IT (Green IT)
• Cloud Computing
• Information Management & Business Analytics
• Unified Communications
• Compliance and Risk Management

Entries need to be in by November 6th.  See the site for rules and regulations. 

Intuit Looking to "Speed Date" Potential Small Business Partners

If you are a small business, you know how hard and painful it is to develop a business partnership with a large corporation.  Even if you can find the right person to talk to, the path to creating a business relationship is long and cumbersome. 

Intuit Corporation is looking to turbocharge this process.  They are holding an Entrepreneur Day on October 5th where selected small businesses will be given the opportunity to meet with and discuss business partnership opportunities with Intuit senior executives.

The day is being positioned as a "speed dating" event.  It will combine brief presentations by Intuit execs (they promise no death by powerpoint) followed by interactive round tables and private one on one business partnering meetings. 

      

A limited number of companies will chosen from the pool of applicants.  To apply to participate or learn more, click here.   The application deadline is September 10th. 

I'm personally excited about this event because Emergent Research is an Intuit business partner.  We work with Intuit on the Future of Small Business research and report series.  And one of the trends we are tracking and forecasting is increased collaboration between large corporations and small businesses. 

We describe this trend in more detail in Intuit Future of Small Business research report The New Artisan Economy.  If you want a shorter version, the New York Times covered this trend in an article last spring.

Oh by the way, Intuit is an excellent business partner.  So if your business is a good fit make sure you apply for the opportunity to work with them. 

Using Innovation to Extend and Expand Product Lines

Each week as part of their America's Most Promising Companies program Forbes magazine sends out a topic for bloggers in their network to comment on.  This week's topic comes from Brett Nelson, Entrepreneurs Editor at Forbes:

Small companies must get creative to survive the recession - even going so far as to branch into new lines of business (assuming they have the cash to do it).  But mission creep comes with serious risk.  What are some tangible do's and don'ts about expanding your product line?

A major focus of our research this year has been on how small businesses innovate, so we have seen a lot of examples of companies expanding their product lines and getting into new businesses.  The successful firms tend to:

1.  Use low cost experimentation and improvisation to try new products out.  Small businesses are resource constrained and that can be an advantage.  Successful small business innovators run low cost experiments and quickly decide whether or not they are successful.  Failures are tolerated but stopped when it is clear they are not working.  Costs and risks are contained and multiple experiments provides more opportunities for success.

2.  Use incremental innovation to improve and extend their products.  Many small businesses are natural, continuous innovators who constantly tweak, adapt and adjust their product lines.  Small, incremental improvements can have big payoffs.  They also are less costly and risky than larger innovation efforts.

3.  Design new products that help their customers better accomplish their jobs.  Small business have strong customer connections and knowledge.  Successful innovators use that knowledge to extend their product lines to provide greater customer value and help their customers accomplish their tasks. 

An example is a pool service company we interviewed.  They added a new leasing option for an advanced piece of pool monitoring equipment.  Their customers, who were cash constrained, jumped at the opportunity to lease the equipment rather than buy it.  The pool service company understood their job was not just to clean pools, but to provide services that helped their customers provide a clean and safe swimming experience within their financial constraints.  The program was a huge success for the company.

4.  Use business model innovation to enter adjacent markets.  We saw many examples of small businesses that successfully entered new, adjacent markets through business model innovation.  Often they simply extended their business model to another product area of interest to their existing customers that uses a different business model.

An example is a rent-to-buy retail store chain that moved into used auto sales.  The combination of their existing customer relationships, credit skills and rent-to-buy sales model allowed them to provide their customers much lower monthly costs relative to buying a used car.  Their car business quickly became their most profitable product line.

5.  Use technology to provide new products and services or to add value.   We saw many examples of technology being used to design and build new products or extend existing products.  A professional quilter we interviewed purchased a computer controlled quilting machine that allowed her to ramp her production by over 500%.  And, of course, the Internet, social media and other online technologies have provided many small businesses with new opportunities to extend existing products or create new ones.

One of the most exciting parts of our work this year has been the opportunity to see how innovative America's small businesses are.  We were continually impressed by the ability of small businesses to embrace new ideas and have the courage to pursue them in this tough economic climate. 

The Importance of Incremental innovation

A recent academic research paper, The Curse of the First Mover; When Incremental Innovation Leads to Radical Change, argues that incremental technological innovations can sometimes have more influence than radical ones.

The paper defines incremental innovation as "refinements and extensions of established designs that result in substantial price or functional benefits to users."  The paper uses case studies from Apple and Google to illustrate their point.  Key quote on Google:

"Google...has never produced any radical innovation, but owes its success to incremental improvement of existing products (search engines, web mail, maps, etc.). 

Our research on small business innovation shows that many small businesses are continuous incremental innovators.  It has been suggested to us that incremental innovation is not "real" innovation and because of this most small businesses do not innovate.

We disagree and believe incremental innovation is extremely important.  It is nice to be able to point to academic researchers who agree. 

Great Artists (and Innovators) Adapt and Adopt

Intuit's Cassie Divine has an excellent post on adapting and adopting technology and best practicess from others.  Her post, Great Artists Steal, is on Intuit's new Small Business United Blog. 

The post features a short video with Steve Jobs talking about innovation and saying that Picasso said "Good artists borrow, great artists steal."

This is one of my favorite quotes.  Here's why: 

1.  Picasso didn't say this, or at least there is no verifiable record of him saying this.

2.  It may have come from T.S. Elliot's famous quote "good poets borrow, great poets steal."  Of course, T.S. Elliot never said that either.  What Elliot did say was:

Immature poets imitate; mature poets steal; bad poets deface what they take, and good poets make it into something better...

This is not a good sound bit at all.  And at some point, someone adapted this quote to the much better "good poets/artists borrow, great poets/artists steal."  It then spread to other areas.  I've heard it used with engineers, entrepreneurs, scientists and others. 

Like a good poet (or innovator), whoever did this made Elliot's quote into something better...

Open Science

Scientific American has an article on web 2.0 tools and methods starting to spread to scientific research.  All academic research areas have been slow to adopt open and collaborative approaches to research.  Researchers worry that their work and ideas will be stolen, and others will get either the financial or academic credit. 

These concerns have led academic researchers - who by nature are not highly collaborative on average - to avoid Web 2.0 informaton sharing.  But that is changing as many scientists and researchers discover the benefits of collaboration.  Two key passages from the article:

"Science 2.0 generally refers to new practices of scientists who post raw experimental results, nascent theories, claims of discovery and draft papers on the Web for others to see and comment on.

Critiquing, suggesting, sharing ideas and data—this communication is the heart of science, the most powerful tool ever invented for correcting errors, building on colleagues’ work and fashioning new knowledge."

As science opens up, innovation will increase.  Also, as more research becomes more easily available potential commercial applications will be recognized earlier.  Open science will speed the already rapid pace of innovation - and lead to new business opportunities for companies and entrepreneurs. 

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.