Why small business innovation will be the catalyst for cultural change – and enterprise will not

You don’t need to do a lot of reading to realise there is a crisis bubbling away under the surface of large Australian business.   The internet/digital has delivered a lot of change.   About two weeks ago Flight Centre announced a profit downgrade due to Bookings.com and AirBNB.   Both of these businesses have created this impact in under five years.

You don’t need to look too far to find predictions of disruption. The banks are being disrupted by new style services like peer-to-peer lending.   Uber has disrupted taxis.   The entire media industry has been disrupted by the internet.   Seven Media Group did a $1 billion write down of value in the last 12 months.

It’s really hard for big business to change.   Apart from the fact big business has lots of resources they also have lots of impediments. There is the pressure from shareholders that limits the amount of risk boards will take to drive innovation. There is the culture of compliance that fills the halls and offices of most big companies. There are a huge number of cultural rules both spoken and unspoken that govern behaviour in these companies. It’s just the way they operate and people need to comply or they stick out and that is mostly not a good thing.

Big companies are not inherently evil but they can do evil things. A number of banks found themselves in trouble recently because of advice their advisors were giving people. This advice was no doubt given under a subtle and unspoken pressure to do whatever it takes.

Small business on the other hand lacks the resources but with that comes a pile of advantages:

Owners Structure:

Most small businesses have an ownership structure that means one or two people own the business.   These people have within the constraints of the law and their finances complete freedom to do what they find interesting, rewarding and stimulating.   These businesses are often driven by passion and interest and this can sometimes mean money is less important than the job at hand.

Sure everyone wants to make money but if you look at the Readers Digest once the worlds biggest private company the founder and his wife loved art and had the world’s finest collection.   It was their business and they were happy to sacrifice profit for their passion.  So small business can operate at a higher level if it chooses.  The Readers Digest Founders curated the finest collection of impressionist art,  closer to home small business sponsors community activity too niche to interest big companies.

Appetite for risk:

Small business is by nature risky. It’s very difficult to build a business and harder to make these businesses sustainable in the long term.   The people in these businesses are by nature risk takers. If they spot a new opportunity they will go after it.   It’s wired into the DNA of many small business owners.   Look at how AirBNB and others got started.   Someone saw an opportunity to profit in a niche that no one else wanted and created a new category.   No large company would ever have chased this opportunity.

Digital Customers:

People the world over are connected to the internet.   By mobile or desktop.   There are more people in China connected to Wechat than there are in the entire USA.   In summary technology has effectively levelled the playing field. This makes innovation possible because connectivity and connection is no longer the barrier. Small business can innovate in this environment just as well as big business.  Small business can satisfy themselves here.  I’m working on commercialising the disability sector.  This is of no interest to big organisations.

Digital Tools:

Todays small business has access to better digital tools than the enterprise and lots of these tools are really inexpensive.   The tools are better because they are designed to work out of the box.   Enterprise tools are made to be customised to the specific needs of the enterprise.   Enterprises spend years implementing these tools while small companies can pull the required tools together in next to no time.   It’s extraordinary how quickly this has all changed.   We built a site 10 years ago for a client and there was $500,000 in hardware, $1 million on software licenses and the hosting cost $25,000 per month.   This has changed but a small business today would get all of this for $1,000 a month and get to use it immediately.

Do good not evil:

Small companies can decide how good they want to be.   If the owners have a passion for the environment they can make specific decisions around the way this will impact decisions in the business.   Some companies encourage staff to take a day a month for volunteering.   37 Signals in the USA was reputed to have given the entire company a 4 day week because they were making enough money. Regardless of what you want to achieve for the planet or your staff you can do this in a small business.

The future of Australia is in the hands of small business.   We have the chance to make the country and the world a better place.   We don’t have to do anything we think is outside our principles and values.

So this is a call to arms for all small business.   We need innovation, we need a more thoughtful approach to management, we need businesses that are going to build the future they want for themselves and their families.  We need digital innovators to build new services and products to take to the world.

There is a the joy in doing your own thing but it’s also comes with a  responsibility.  Use it well.