What’s Behind The Rise In Small Business Interest?
Not an hour of the day goes by when someone doesn’t come up with another take on Uber and its disruptive effect on the market for everything from taxis to messenger and logistics services – a concept that is built entirely on the fragmented and somewhat diminutive (pardon the pun) chassis of good old fashioned cab drivers.
For 36 years Tom’s of Maine was a small stand alone brand that fought major consumer goods conglomerates until it was finally bought by Colgate-Palmolive in 2006 (more on that in a future post) & more recently another TOM(S) has emerged as a small “do-gooder” brand that is scaling up its fashion business by selling comfortable shoes and simultaneously donating pairs to children in need. AirBnB is rocking the hotel industry by parlaying small, fragmented accommodations into what will amount to the world’s largest hotel business. And there are a lot more examples popping up by the hour. There are two things about this trend that I find really interesting:
- Unlike the old days when a company like Ben & Jerry’s was more of an anomaly or a fluke, today a clear cut market preference has emerged to do things the “small way” or in “artisanal” fashion without accepting the trade offs that can come from limited infrastructure.
- The power of small business (or even the “soloprenuer”) is being harnessed in an unprecedented fashion to achieve what used to require large scale capital expenditure and investment.
Technology The Enabler
So about this catalyst – well, we know what it is: technology. More specifically, it’s the internet and if you wanted to rephrase things a little bit you could attribute the phenomenon to widespread, inexpensive communication. But here’s the thing – technology is doing what it’s always done. Combustion engines, automatic transmissions, digital calculators, commercial aircraft and other such inventions deemed “routine” today were the leading edge high tech inventions of their time. That is, technology is enabling better, faster, higher productivity at a continuously decreasing cost.
Rise of Small Businesses
The other phenomenon, and the one that I really am intrigued and impressed by is the rise of small business enabled by the internet and how this preference is almost inherent to the human condition or the business condition. It’s almost as if the whole world was waiting for the chance to root for small business or work with small business or incorporate small business into their supply chains and that moment appears to have arrived.
What’s behind this rise in small business interest? Are we at heart a society of secret owner operators? Is there some greater myth that inspires us? Or do we believe that small businesses somehow “do it better”?
Service and Process
The answer may just be: all of the above. But more realistically, I think it boils down to service and process. That sounds incredibly unexciting doesn’t it? I am a huge believer in the power of myth and its connection to all things in the world (including data, revenue, business cycles, and other “quant” stuff) so I’d like to tell you that our fascination with small business lies in some myth centered around a Skywalker-esque hero perhaps. However, the reality is that small businesses just “get” service better than anyone.
Why Not Break Up Every Conglomerate Or Large Business?
So, why not break up every conglomerate or large business and offer the world a “service utopia”? Well, here’s the catch with service: it’s not easily scalable. You can empower managers to make decisions, reward employees for great customer service, and give training seminars all day long, but you cannot truly scale service. Here’s the paradox then – if a large business runs itself like a small business, it will collapse under the weight of it’s own transaction volume. This is frequently referred to as micro-managing. Meanwhile, if a small business tries to run itself like a bigger business it will either collapse under the weight of the overhead that such a structure requires, or, more likely (and especially relevant for the purposes of this blog post), it would never be able to satisfy any of its customers in terms of price or service offerings.
Is there a middle ground? Is there a magical intersection of the scale curve and the service curve that can yield a superior customer service experience which doesn’t force customers to overpay nor sacrifice quality in favor of price? Let us know what you think.
By: CoLoadX on Sept. 20, 2016, 6:07 a.m.