Cristian Mitreanu's Blog

The Future of Small Business

In January, Sillicon Valley's Institute for the Future released the first installment of an interesting study on the future of small business. Sponsored by Intuit, the study is fittingly entitled the Intuit Future of Small Business Report™. Here is an excerpt from the press release that summarizes their findings:

"The report identifies three major trends: the changing face of small business, the rise of personal business and the emergence of entrepreneurial education. Those trends led to five major findings:

• Entrepreneurs will no longer come predominantly from the middle of the age spectrum, but instead from the edges. People nearing retirement and their children just entering the job market will set the bar as the most entrepreneurial generation ever.
• American entrepreneurship will reflect a huge upswing in the number of women. The glass ceiling that has limited women's growth in traditional corporate career paths will send a rich talent pool to the small business sector.
• Immigrant entrepreneurs will drive a new wave of globalization. U.S. immigration policy and the outcome of the current immigration debates will affect how this segment performs over the next decade.
• Contract workers, accidental and social entrepreneurs will fuel a proliferation of personal businesses. Economic, social and technological change -- and an increased interest in flexible work schedules -- will produce a more independent workforce seeking a better work-life balance.
• Entrepreneurship will be a widely adopted curriculum at educational, trade and vocational institutions. As a result, artists, musicians and others not traditionally exposed to business education will learn not just their trade but small-business management skills as well."

The other, upcoming two installments will examine the technologies that will propel the small business sector and how small businesses will affect society and the economy through 2017. More information is available at http://www.intuit.com/futureofsmallbusiness/. It’s worth a look.

Does the Long Term Matter?

In his post "The Long Term," David Maister notes that "our biggest barrier, as individuals and as organizations, is the difficulty in doing what is in our long-term best interest, not just what provides immediate gratification." Then he asks, "how DO you help people actually get on the program for what is their best interests?" Because I believe that his question touches a very important subject, I took the opportunity to comment. Here is a copy of my post:

"As it transpires from the post and from the previous comments, this is a big discussion. And, I think, that we need to narrow it down to what is relevant here: Assuming that a business leader's long-term personal success is directly dependent on her or his company's long-term success, why does she or he make business decisions that seem to go against the company's long-term success (and implicitly her or his own)?

In this case, the problem is a matter of perspective.  I am not referring to people's mental capabilities, but rather to the business' body of knowledge. The most popular and heavily employed business concepts are decades old. And, as is the case with any discipline in its infancy, they are based on assumptions that today do not hold true anymore. As a result, many of them have become obsolete and unfit to generate a realistic big picture of the business environment.

Every individual strives for a successful existence, whatever the meaning. Typically, as she or he grows older, this successful existence covers more space (impact on other humans) and time (impact over time). So, my view is that all people care about the long term. It is just that, if not provided with a compelling big picture, an individual will develop one on her or his own.

Now, there are many problems with the big pictures provided by the popular, mainstream business concepts.  Among the most important is the lack of a dynamic perspective. That is why most pictures of the future presented to business leaders are single-frame, still pictures. So, if the consultant's picture doesn't fit in the big picture (movie?) that the business leader already sees, it will be simply put aside. But, if the consultant's picture is dynamic, presenting an evolution that can be tested (read felt) as it unfolds, it will be much more readily accepted, even though it was not part of the leader's initial big picture.

In conclusion, people are not the problem; the discipline (body of knowledge) is. The world of business desperately needs new theoretical insight that would more accurately reflect reality, pushing the discipline forward in its transition from art to science."

UPDATE 6/7/2007: Also read "Feels Like 1871."

What Is To Become of the Business Book?

In the press release (PDF format here and HTML format here) announcing my book "Spointra and the Secret of Business Success," I identify some major developments in the business book space.

"We are an increasingly busy global society, and finding time to read a book can be difficult. Book reviews and executive summaries have become the norm. However, the lack of time is not the only culprit. This trend is also encouraged by a few negative developments in the business book space. First, the most obvious problem is that many business books simply repackage old ideas without bringing anything new. Second, not only can many books be distilled to a few pages, but they are built upon an initial article or paper without providing significant improvements. Third, many books use cherry-picked business cases or examples in order to hide flaws or limitations in the presented concepts. Finally, the most important problem is the generalized neglect of what I call 'executive serendipity,' which refers to seemingly-ingenious business decisions that actually occurred accidentally. Although this phenomenon plays a major role in business, many books tend to ignore it because most theories are rational, which means that they are based on the assumption that every result has intent behind it."

Obviously, I see these developments as problems and, therefore, opportunities. The choice of format for my book was a direct response to them. So, what is to become of the business book? Here are some of my thoughts, which I expressed in the same press release:

"Our book requires slightly more time to read than a review or an executive summary, however it provides ten times more fun... assuming that the fun associated with the review or summary is greater than zero," continues Mitreanu. "Its layout allows the reader to make her or his own judgment with regard to the validity and practicality of the theoretical concepts. And speaking of fun, another reason for using the graphic novel format is the fact that books as the sole vehicles for disseminating ideas are increasingly irrelevant in our highly networked world. A successful business book must do more than just deliver an idea... which, if valuable, will spread over the Internet anyway. 'Spointra and the Secret of Business Success' is a high-quality hardcover that can also serve as a coffee table book, allowing for easy access and brief, thought-stimulating immersions in its storyline."

An Innovation Model for the Media Business

Few business areas, if any, have been more affected by the Internet than the media. And by media I mean businesses whose activity consists of processing, managing, and distributing information (i.e., text, photo, video, music). This broader definition includes all of the traditional media and many web-based businesses. So, I thought that it would be appropriate to start my take on the business big picture by introducing an innovation model for the media business.

As you know, most media companies are businesses whose offerings are commoditized, or become commoditized very fast. And here is a way to prove this. Technology plays a major role in these companies' operations, which is a clear indication that a significant part of the operating processes are standardized. This occurs only when most of a company's offerings are delivered through the same, limited number of processes. Further, this means that these businesses thrive through the volume of transactions, as opposed to diversity. In other words, they sell or provide high volumes of only a few types of offerings, which indicates commoditized offerings (I will discuss commoditization in more detail in a future post).

Because, in media, it is rather impossible to innovate at the offering level, companies must innovate at the whole-offering level. And by whole-offering I mean all of a company's offerings plus the mechanism with which they are managed and delivered to the customers. (Although, in many cases, it is the main revenue generator, the advertising side of the media business is fully dependent on the information side of the business. More so, it addresses a different set of customers. Therefore, the whole-offering does not include advertising offerings; just information offerings.) Most media companies have just one whole-offering. In these cases, the whole-offering can be identified with the business. Some examples of whole-offerings include book distribution (Amazon.com), search engine (Google), encyclopedia (Wikipedia), video distribution (YouTube), and photo distribution (Flickr).

The logic behind the innovation model is relatively simple. On one side, there are the customers, who need information to better their existence. Fundamentally, humans follow three steps when employing information: search through the available information, gather relevant information, and then aggregate the relevant information according to a particular knowledge or algorithm in order to address an issue (i.e., entertainment, education). On the other side, there is the media business, which needs to process high quantities of a few types of information offerings, and then deliver them through one or more mechanisms (one type of offering may require a unique mechanism) to the customers. All I had to do was find a way to bring these two sides together. So, here's the result:

 

Whole-Offering = all of a media company's information offerings (i.e., text, photo, video, music) plus the mechanism (i.e., web-based application) used to process, manage, and distribute them to the customers.

Whole-Offering Functionality = a whole-offering's hierarchical levels of functionality (range >>> range+relevance >>> range+relevance+recipe), determined by the fundamental way in which customers employ information. Note: This hierarchy is a unique characteristic of the media business.

Range = the amount of information offerings that the whole-offering is capable of reaching.

Relevance = the actual relevance (to the customer) of the relevant information generated by the whole-offering.

Recipe = the degree to which the whole-offering's algorithm for aggregating the relevant information comes close to the algorithm that the customer would use in order to generate a solution to one of its issues (i.e., entertainment, education).

Whole-Offering Value = the level of importance of the customer issue that the whole-offering addresses.

Whole-Offering Innovation = an improvement of the whole-offering's value, achieved through the improvement of its functionality along the hierarchy mentioned above. Note: While small, incremental improvements may occur with a higher frequency, more significant improvements tend to move slowly up the functionality hierarchy following the advancement of the major technological era that unfolds at the time (see the Internet era examples below).

Operational Efficiency = a media company's capacity to generate and deliver its whole-offering(s) in the best possible manner with the least waste of resources. Note: While the lack of innovation endangers a business over time, the lack of operational efficiency poses an immediate threat. Therefore, operational efficiency must be a constant effort for any company (I will discuss this subject in more detail in a future post).

So, what is this model telling us?

Well, for primers, it explains the past. Of course, we can go back to various major technological eras like the printing press and the telegraph. However, as I mentioned above, it is useful to focus on one era and see how the innovation cycle gradually advances up the functionality hierarchy. So, if we look at the Internet-dominated recent past, it is clear that since its introduction, the Internet has rapidly increased the range of the (existent and new) whole-offerings to incredible levels. This explains the meteoric rise of companies like Amazon.com and Google.

The model also explains the present. Recent technological developments have allowed media businesses to significantly increase the relevance of their services (in addition to their range). The success of Wikipedia, MySpace, and other "web 2.0" whole-offerings/businesses is a result of these advancements.

And, finally, the model also indicates what will probably happen in the future. In this Internet era, the innovation cycle gradually advances to reach the recipe level. This suggests that the future is bright for the specialized communities, which can reach the recipe level with enough range and relevance that will ensure the critical mass of customers necessary for success. However, that's not to say that the successful whole-offerings of today will disappear. They will most likely find a way to thrive in the new environment. For example, Google will probably continue to excel at the range and relevance level. The acquisition of YouTube and other initiatives, like book-scanning, point in that direction. And, if nothing else, this can make Google a strong platform candidate for other whole-offerings. Amazon.com may run into difficulties because they sell mainly packaged information (i.e., books, CDs, DVDs), and customers most often want to access the pieces of information inside those packages. As a result, Amazon.com must, at a minimum, keep the pace with other companies' "un-packaging" initiatives (i.e., Google’s book scanning, Apple’s iTunes digital music store). Wikipedia too may have troubles advancing their whole-offering/business at the recipe level because of the heavy reliance on unpaid volunteers.

UPDATE 5/22/2007: Also read "How to Innovate Your Online Venture."

UPDATE 12/21/2009: See a refined framework "The Value of an Internet Business."

Hello...

…and welcome! As you already know, my book "Spointra and the Secret of Business Success" is now available at Spointra.com. It is based on the fundamental theory of business launched at BizBigPic.com in August 2006. However, the book presents the theory in a highly simplified and entertaining manner -- you should check it out.

In addition to the book, I wanted to launch a blog that will provide additional value to the BizBigPic community. So, here’s Picture001. Guided by the fundamental theory of business (we are still open for name suggestions), which can be discussed on the main site at BizBigPic.com, Picture001 will provide a more detailed take on the business big picture. Some of the topics that will be covered include concepts, semantics, and trends. I hope you will enjoy it.

Note: This blog is a reincarnation of the section called "Bits of Thought" that appeared on RedefiningStrategy.com in 2004-2005. Unfortunately, at the time, there were other priorities topping our agenda. So, after months of "under construction" status, the section was finally taken down.