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Entrepreneurial Small Businesses Have the Tools to Survive This Recession!

My experiences over the last few days, working with 3 drastically different companies has made me realize that smaller and flatter companies with an eye on innovation are better equipped to survive this recession than larger pyramid structured ones.  

Companies with many layers of middle management are at a disadvantage in this climate, because they take longer to make decisions and execute them.  This pyramid structure breeds a culture where the staff is trying to move up the ladder, not run the business.  The company follows the CEO’s direction and maybe a handful of other executives that are part of the inner circle.  The problem comes when the company needs drastic and quick change.  If there are ten levels of management it might take two months to trickle down to the people that are actually executing.  After the two months, I am willing to bet the instructions are completely different than those the CEO gave.  Remind you of a game of “telephone”?

On the other hand, in small businesses people are more inclined to know what everyone’s specialties are and go directly to the source when things need to get done.  If the small business sees numbers tanking compared to last year, they can analyze, devise plans, adapt and move forward before the large corporation even moves an inch.  Maybe this idea of small business that I am describing is more of an entrepreneurial environment, but it is surely a more effective mode of communication and operation.

Some might argue that social media can bring this flexibility to larger corporations, flatten out their structure and change their communication styles, but today I am a cynic.  I think that companies where the culture is driven by people who are “in the know” are not inclined to use or adopt blogs, twitter, social networks or any tool that is meant for collaboration.  They actually fear them because they cannot control the conversation.

In contrast, entrepreneurial small businesses live for that one good idea that will push them over the edge.  For them, sharing ideas between staff members is expected and communicating with customers is desired.  This is why social media is a set of tools that small business can use to overtake their corporate competition, not the other way around.  Look at how Gary Vaynerchuk of Winelibrary used social media to grow his wine business.  He didn’t spend millions of dollars mass marketing, he figured out a way to interact with a new audience of potential customers. 

I am not a right wing conservative, but I do believe that it is the small businesses that test out new ideas and share information with their staff and customers that will not only survive this downturn, they will also grow.  Its this idea that motivates me to learn about the new gadgets, sites and tools that come out every day so I can recommend them to my clients and friends to enable them to succeed.  The top of my list recently has been open source tools(I love wordpress, mysql, openoffice), hosted services (basecamp, centraldesktop, google apps, amazon web services, salesforce) and social media( blogs, twitter, facebook, linkedin, ning, friendfeed).  

What’s on your list?

 
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3 Comments  comments 

3 Responses

  1. Flavio

    I am not sure if size is key in describing communications and their flexibility to face change. Just to mention one example, I work at a big company that promotes communication fairly well (instant messenger, blogs, even its own “wikipedia”). However, I do agree that the bigger the business, the more challenging it is to foster innovation.
    At this point I am still uncertain on whether you need the ability to act fast (that one would expect in a successful small business) or the strength and background of a bigger company that should be prepared to survive (or has already survived) hostile environments. It all depends on the industry too: some are dominated by big industries and some aren’t. In both cases, the good qualities of big or small companies have proven to outweigh those of the other.
    So I believe it all leads back to innovation. If we’re talking about, let’s say, gourmet restaurants, where one expects smaller businesses to be the norm, flexibility and customer focus are a must. On the other hand, financial strength, reliability and efficiency in costs are non-negotiables in an industry like Energy. When the market shrinks, it is likely to expel the weakest competitors. It is the company’s (and ultimately its people’s) duty to make the difference.

  2. Alice

    Your post reminded me of a book I was working on over a year ago — Spiral Up by Jane Linder (http://www.amacombooks.org/book.cfm?isbn=9780814409176). Linder argues for making space for employees to develop their own projects and encouraging an environment that fosters ideas rather than traditional management (or micromanagement) which encourages ok to medicore results. The book’s ideas are hard to describe in brief, but they have a different relevance now to than when the book came out. Initially it was how companies could encourage entrepreneurial behavior within a traditional structure (so hard to adapt), but this can be a method for companies to encourage new directions and solutions in the current crisis of 2009. Maybe decisions could have been made differently in the pyramid if they’d been made from the bottom-up than the bottom-down. More of an exchange than orders.

  3. jordan

    @Flavio

    Thank you for bringing a difference perspective to the conversation. I haven’t worked with a large company yet that is fostering conversation. It is refreshing to hear that all levels of management and staff are adopting it.

    I think you are definitely right that different companies need to approach this recession differently. Some need innovation and some to to defend and strengthen their brand. Look at Tropicana’s new campaign to reconnect with their large user base by going “100% Orange”. Their product is the same, just different messaging and branding.

    I still think innovation is what is going to get the global economy the boost it needs and that the small business is best equipped to do it.

    @Alice

    I agree decisions could have been made differently with a bottom-up structure instead. But with this reverse pyramid how many levels can the system handle before it breaks down? I am curious, in Linder’s book, does she describe the optimal management structure to implement a successful entrepreneurial work environment?

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