We revere big hits and big ideas (this is Big Think, after all). Along come Linda Kaplan Thaler and Robin Koval with “The Power of Small,” a new book excerpted in Change This as The Small Revolution. Do not confuse this with E.F. Schumacher’s classic “Small Is Beautiful.” That was about people-focused economics. This book is about how small steps can mean big changes in a business or individual, or how small ideas can turn into big dollars.
To that end, they feature on page 8 of their essay a couple of examples of little things that yielded big rewards. One, the story of the person who decorated her children’s Crocs and wound up selling her company to Crocs itself, is really about happenstance - she happened to live near Crocs headquarters. A second one was better:
Million dollar ideas are everywhere. In fact, one just might be licking you in the face. At least that’s what happened to 52-year-old divorcee Carol Gardner. Broke, unemployed, and alone, Gardner entered her local pet store’s annual Christmas card contest in hopes of snagging the grand prize: a year’s supply of dog food. With this humble goal in mind, Gardner set forth on the photo shoot that would change her life. She plopped her 4-month-old English bulldog in the tub, fashioned a fluffy white beard out of bubble bath around her face, and pressed a button. After writing a cheeky caption, Gardner sent her entry off to the pet store, and to her surprise, she won. The card became a hit with all of her friends and family. Suddenly, the light bulb went on: she could create a greeting card business based on Zelda, her mutt of a muse. And so, Zelda Wisdom was born and shortly thereafter, Hallmark came calling, helping to turn her SMALL idea into an international line of greeting cards, gifts, clothing, jewelry, and even books.
Would this idea work in today’s economy, with small consumer spending and capital? It’s hard to say. The authors stress how small makes sense in this economy. And in theory, it does. What it means in practice may blunt the power of their book.
What do you think, BNET?
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Rod Brooks, the robotics guru who co-founded iRobot and now runs a startup called Heartland Robotics, is speaking at the Nantucket Conference. He thinks robotics has been stymied by a basic cost problem: it costs 10 times more to integrate robots into product lines than the robot itself.
That means it’s only cost-effective to use robots in high-volume, high-value product lines. He believes that he can create robots that trash this model and make it cost-effective to use robots in a wide variety of manufacturing environments, eliminating the cost advantages of countries with cheap labor.
Brooks is cagey about when this might happen. He says these are the main challenges that need to be overcome:
make robots as visually adept as a two-year old child.
give robots the language capabilities of a four-year old child.
give robots the manual dexterity of a 6 year old – (this may need the development of new materials).
give robots the social awareness of an 9-year old child.
He does not believe in humanoid robots, by the way.
Update: Brooks told me after his talk that his company does not need to solve the four challenges outlined above to be a success. He put those out as the Holy Grails of robotics. He also said he didn’t think U.S. manufacturing needed saving.
Can this vision become reality?
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Well, it took a quarter of the year, but McKinsey has three tips for strategic planners. Then again, with the ugliness of the first quarter receding — the Dow just had its best four weeks since 1933 — it’s time to crawl out from under those desks and take stock. Here’s McKinsey’s advice (registration required):
1) Be realistic; it’s still ugly out there: “since the heart of scenario planning—crafting a number of strategies for different outcomes—has become significantly more complex, strategists should prepare for a more demanding process of gathering information, exploring possibilities, and plain old hard thinking.”
2) Monitor, monitor, monitor: “The company’s strategy, in short, must account for many more contingencies than it has until recently. Since the effectiveness of such a strategy depends on an organization’s ability to adjust rapidly as the fog starts to lift, managers must identify and intensively monitor key indicators suggesting which scenario might unfold.”
In particular, scenario planners must factor in such unusual things as
delinquent accounts payable
downgraded debt ratings
large share price declines
late inventory deliveries
lower-quality goods or materials.
3) Look to the future: As bad as the econmy is, “it cannot roll back fundamental market trends—such as the aging of consumers in Europe and North America or the continued economic development of Brazil, China, India, and Russia—which will continue to create strategic opportunities and threats.”
As McKinsey acknowledges, much of this sounds like common sense. But common sense is hard to come by in uncommon times.
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Does the downturn herald a shift to the way people lived at the turn of the last century, in the wake of the panics of 1893 and 1907? In The Future Is the Past? writer Jonathan Salem Baskin poses three points in favor of the idea: (more…)
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The venture capitalist Bill Gurley has an insightful post on why virtual goods will emerge as the economic engine for many kinds of online companies, especially those with a community aspect, like gaming, and social networks. In How to Monetize a Social Network, he points out the success of companies like China’s TenCent, which generates nearly $900 million in sales from virtual goods, and argues that if self-expression drives people to spend money on consumer brands in the real world, they’ll have the same drive in the virtual world.
Of course, Gurley’s firm, Benchmark Capital, has funded Second Life and Gaia, two worlds heavily dependent on virtual goods. But his arguments are intriguing. Do you have a virtual goods strategy for your company? Should you?
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McKinsey is now conceding that this is not just another recession. Ian Davis, McKinsey’s global managing director, just wrote about The New Normal and called it “a restructuring of the economic order,” with less leverage and more government regulation.
For the U.S., that’s going to mean the end of Pimp My McMansion economics. Davis writes that
“it was clear before the crisis began that US consumption could not continue to be the engine for global growth. Consumption depends on income growth, and US income growth since 1985 had been boosted by a series of one-time factors—such as the entry of women into the workforce, an increase in the number of college graduates—that have now played themselves out.”
Barring a rise in protectionism, he expects that Asia will become the globe’s high-growth consumer region.
He also says three most important areas of future innovation are: (more…)
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Sprawl has distorted our economy, argues economic geographer Richard Florida in his essay How the Crash Will Reshape America. Florida says moving to suburbs and then exurbs was the right answer to industrialization. But they’re exactly the wrong answer to what a knowledge economy needs.
(The economy) no longer revolves around simply making and moving things. Instead, it depends on generating and transporting ideas. The places that thrive today are those with the highest velocity of ideas, the highest density of talented and creative people, the highest rate of metabolism. Velocity and density are not words that many people use when describing the suburbs. The economy is driven by key urban areas; a different geography is required.
You heard it straight from investment guru Jim Rogers: the next big growth market is agriculture. He’s not being punny, either. In this interview in Business Week with Maria Bartiromo, Rogers ends by saying:
I really think agriculture is going to be the best place to be. Agriculture’s been a horrible business for 30 years. For decades the money shufflers, the paper shufflers, have been the captains of the universe. That is now changing. The people who produce real things [will be on top]. You’re going to see stockbrokers driving taxis. The smart ones will learn to drive tractors, because they’ll be working for the farmers. It’s going to be the 29-year-old farmers who have the Lamborghinis. So you should find yourself a nice farmer and hook up with him or her, because that’s where the money’s going to be in the next couple of decades.
There you have it: farming, the new way to dig for gold.
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One fast-developing feature of the global economy is what you might call trickle-up innovation — the flow of new ideas, products and processes from the developing world to the developed world. My essay in the new Fast Company, As the World Turns, looks at some of the reasons why this phenomenon is emerging:
Companies in developing markets know how to operate profitably in cash-poor markets with tight credit;
Doing business in emerging markets yields ideas for previously ignored markets in the West;
It’s cheaper to fail in emerging markets, and also cheaper to succeed;
Huge markets with limited competition mean successes can scale quickly.
While this article focuses on big companies, there are facets of trickle-up innovation that will matter to small Western firms, too. In particular, the lack of entrenched ways of doing things means the developing world really will beat a path to your door if you build a better mousetrap.
I’ll periodically post on other facets of this new phenomenon. Let me know your thoughts — and where you’ve seen trickle-up innovation in action.
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A defining moment in Globality comes when Whirlpool creates a $150 washing machine to sell in Brazil. First, the company had to figure out that Brazilians wash clothes differently than Americans — they use small loads. Then it had to comprehend the market - washing machines are a status symbol for their owners, a kind of Brazilian iPhone. But they’re a status symbol that shouldn’t cost more than about $150.
Whirlpool’s first effort to sell washing machines in Brazil involved stripping down one of its U.S. models. It fulfilled neither the dreams nor the budgets of Brazilians, and failed. So Whirlpool got smart — it came up with a washing machine designed from the start for the Brazilian market, by Whirlpool’s Brazilian engineers and designers. It was manufactured in Whirlpool’s Brazilian plants. It took some five years, but they came up with a product, the Ideale, that sold for $150, and created a massive new market.
This mini-case study on Whirlpool epitomizes two key arguments that the authors of “Globality” want to make:
There are giant new markets emerging in the global economy;
Even high-cost Western companies can win in low-cost markets, if they’re willing and able to adapt to these markets, rather than trying to make the markets adapt to them.
Whirlpool aside, “Globality” is a cold slap in the face for Western executives who think they’re safe from upstart competitors from the developing world. The book mostly justifies its subtitle, “Competing with Everyone from Everywhere for Everything.” There’s a list of 100 ‘Challenger’ companies in the back of the book, most of which make a market-share grabbing appearance at some point in “Globality.” The authors are basically saying that in the globalized economy, competition — for investments, for customers, for resources, for talent — no longer comes from the Fortune 500, or even the Inc. 500 — it comes from everywhere.
The authors, Harold L. Sirkin, James W. Hemerling and Arindam K. Bhattacharya, all of Boston Consulting Group, have a sweeping vision:
We look forward and see a new era emerging. We call it globality, a different kind of environment, in which business flows in every direction. Companies have no centers. The idea of foreignness is foreign. Commerce swirls and market dominance shifts. Western business orthodoxy entwines with eastern business philosophy and creates a whole new mind-set that embraces profit and competition as well as sustainability and collaboration.
We’re not there yet. But the world may be moving this way, and they show why the companies to watch might not be Google and Apple, but Embraer, Tata and Goodbaby. In fact, they offer some good evidence for one of the ideas I think will shape business and society in this century, which is that real innovation will come from everywhere.
A Wharton School discussion of Globality that features Harold Sirkin.
One strength of the book is the way it breaks down the operating strategies of fast-rising companies in China, India, Brazil and elsewhere. There are deep insights into how the big companies in the developing world operate. We see their disadvantages (Chinese firms have no choice but to sometimes do what the government tells them, whether or not it’s good for business) and their advantages (even if wages for typical Chinese workers grow at 8 percent a year and those for U.S. workers by 2.5 percent a year, by 2040, Chinese labor on average will still cost one-quarter what it does in the U.S.A.).
Another strength is that it breaks down myths. For instance, the idea that the developing world is only good for cost-cutting. There’s a chapter on some of the genuine, world-beating innovation taking place in emerging markets. It will be clear to readers why many of the Challenger companies are gaining market share in the West, and even buying iconic Western firm. Challenger firms are well-run by ambitious, creative leaders who’ve got effective strategies for global expansion. Translation — they’re set to clean the clocks of Western firms who take it for granted that they are better run than some firm in a former backwater like Brazil.
Most executives will also appreciate chapters on how to develop and keep talent in a global environment, how to delve deeply into the business environment in emerging markets, and on ‘pinpointing,’ Sirkin et al.’s term for making the invisible hand both visible and tactical.
There are plenty of ways Western companies can stop themselves from being swamped by what the authors refer to as a tsunami. Whirlpool is just one of a number of examples of Western businesses innovating in emerging markets. One big plus of “Globality” is that it doesn’t think Western firms should panic, nor threaten their inevitable destruction at the hands of the world’s Challenger companies.
For all its strengths, the book is sometimes an uneven read. One bad point is where Sirkin et al. quote Zhou Susu, a top executive at ZTE, the biggest Chinese maker of wireless networking equipment, as saying “Our local staff usually works twelve to fourteen hours a day. It sounds terrible to our competitors.” It ought to sound terrible to Zhou, especially given that the authors note (much, much later) that “as many as 20 million kids are left at home alone for weeks and months while their parents take jobs in cities or at distant work sites.”
Perhaps ZTE is not the Chinese version of Armour and Swift, inspirers of “The Jungle.” But Sirkin et al. say nothing of the sort. Instead, they go on to cite a piece in the Atlantic in which an anonymous American executive says “There’s none of this ‘I have to go pick up the kids’ nonsense you get in the States.” If globalization means sweatshopization, that’s not a good thing for anybody.
The bigger flaw in the book is that the authors must tell Western CEOs how to respond to their vision, which means they end up writing a self-help book, and those are only compelling to people who know they need the help. The last chapter, which should inspire action, instead becomes a “Honey-Do” list for Western CEOs.
Still, “Globality” is a near-essential read for Western executives. The world economic crisis may even accelerate its themes, barring a return to protectionism. It would be good if the authors could add a chapter to a future edition assessing what the credit crisis means to companies in the developing world. For instance, Cemex is one of the book’s stars, but its use of debt to fuel acquisitions has caused it major problems. It is not the only company in the list of Challengers that may founder on the shoals of the capital crunch. All-in-all, “Globality” looks like a reliable map to the way business will be in the years to come.
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In the highly publicized chicken wars, KFC seems to be winning the financial battle over El Pollo Loco. But is it really fair to compare the smaller chain to Colonel Sanders' empire?
How’d you like to earn a few thousand dollars for less than an hour of your time? This is no get-rich-quick come-on. The extra income is the potential payoff for making a few simple and painless money moves.
