Jordan Salvit

I am a firm believer in the power of innovation and have been waiting for something to wow us out this economic recession.  Unfortunately, I came to a pretty sad realization today and am afraid that we are stuck in a viscous cycle that may not end anytime soon.  Now that you are either scared or think I am a lunatic, here is why.

Small businesses no longer have the capital to innovate and are too busy figuring out how to survive.  They are cutting expenses daily and trying to operate with less in the bank.  Although banks are “turning profits”(I put that in quotes because I don’t believe them), there aren’t many new loans being given.  Honestly, small businesses aren’t even looking for the money because who knows when they’ll be able to pay it back.  

Large corporate businesses aren’t innovating either.  They are looking at this economy as a time to squash the competition and gain a larger portion of the market share.  From a business point of view, if I were the CEO, that is exactly what I would do.  It makes sense to spend money to beat the competition while they are hurting, this way when things turn around revenue will increase exponentially.  

From a consumer’s point of view and the idealist in me, I want large corporations to spend money on research and development.  If one new sensational product came out this year from a proven corporation, spirits could be lifted and new cash would be infused into the economy.  This would start a chain reaction and help lift the global economy.  

Am I asking too much?

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?