Thursday, February 10, 2005

Why Small Business Rocks

Today I delivered a speech to the annual conference of the Economic Developers Council of Ontario. They’re the people who try to attract new business to Ontario cities. Increasingly, however, they are spending more time helping local businesses grow.

Which is a new spin on the old business adage that it’s a lot cheaper to get more business from your existing customers than to try to find and attract new customers.

In my presentation, I talked about the changing role of small business, and why I think it is going to become even more significant in North America in coming years.

Here’s part of that speech.

“…As they say, small business is big business. And I think it’s going to get even bigger.

Back in the 1950s and 1960s, small business looked as old and outdated as the Edsel. Big new companies, based on new management sciences and concepts of command and control that helped win the Second World War, were emerging to push out smaller manufacturers and mom and pop businesses all over North America. Parents who grew up in the Great Depression urged their baby boomer kids to work for Canadian National and Procter & Gamble and Eaton’s and Simpsons.

Then reality intruded. The twin recessions of the early 1980s and 1990s proved that big businesses were having just as much trouble keeping up with changing markets as the smaller firms they’d supplanted. More demanding consumers gained an appetite for foods not produced by megafirms, and shopped in boutiques that understood their customers better than department stores. Suddenly, innovation was as important as economy of scale, and entrepreneurs were back in business – filling specialty needs faster than big companies could even identify them.

Then came the technology revolution, which put the power of desktop publishing, computer-controlled design and manufacturing, financial controls and instantaneous electronic communication into the hands of individuals. Suddenly, knowledge counted for more than size and market clout – and any Future Shop customer could enjoy more advanced technology than most employees in big companies. And don’t forget the cellphone, which enable single individuals to be on top of things and in charge in a way that wasn’t possible before.

Today, entrepreneurs are generally credited with being more creative than big business, more sensitive to opportunities, and more willing to gamble on new ideas. Today, small business is a primary source of innovation and R&D to big business. Look at the way IBM, Microsoft, Nortel, eBay, and most of the packaged goods manufacturers in North America hungrily stalk small business for acquisition opportunities. Canadian Tire bought Mark’s Work Wearhouse, Ralph Lauren bought Club Monaco; Estee Lauder bought MAC Cosmetics; Wendy’s bought Tim Horton’s.

By and large, big business has settled into a new role as the owners of assets, counting on small business to do the hard work of creating new ideas and market-testing them. Then big business buys out the entrepreneur. Which is great, because the entrepreneurs get well paid, and as soon as their non-compete clauses expire they are free to jump back into the market and work their magic all over again.”

Do you agree? Disagree? Leave a comment.

1 comment:

Shoestrings said...

...But doesn't the customer lose out? Wasn't the customer 'the focus' to begin with, by the innovating business owner, and not just a 'can't wait till the big-assed corporates salivate over my tasty morsal of a biz."

If the object is to just get the business to be an appetizer for the asset-collector corporations...then the stuff that got the innovating company there in the first place won't be there to serve the customer when it changes ownership. The customer loses and the business suffers, and that creates corporation bloat with stalled business success and the layoffs begin. So really, who wins?

If the enterprising entreprenuer's only goal was to get the business to the stage of being bought out, I question wether this focus alone could inspire unique innovation leading to company success. To talk of both: let's be cutting edge innovator's and get this baby fattened for market...I don't see this as a power lock of motivation. There would be a rift in focus, I think. Of course, venture capital knows this, if that is the way some companies choose to grow, as the first step is to take the reins from the cattle driver and drive the steer to market themselves.

I just figure it may not be good business sense to chart a course for success with the view of anti-up, innovate, and sell out. Sometimes it works- but I think most times it would fail do to a lack of heart or spirit, if I can say that. Afterall, it's not just about products. It's about people - customers and employees all needing to be inspired, right?