Quarterly Journal on Management
From the publishers of THE HINDU BUSINESS LINE
Vol. 2 :: No. 2 :: August 1998
Across the globe, in developed markets such as the USA and developing markets such as India, small businesses have always accounted for the bulk of employment, wealth creation and economic growth. Furthermore, the importance of large companies will decrease still further in the twenty-first century because, as my previous article in the March 1998 issue of "Praxis" described, there are some fundamental flaws with large organisations that are threatening their effectiveness. These flaws are a lack of adequate market-based incentives for employees to perform to the same levels as they would as entrepreneurs, dependence between employees who rely on their colleagues to carry out their jobs in organisations, the presence of force in managerial contexts such as task-setting, office presence and team membership and increasing difficulty for managers to successfully intervene because of their limited understanding of today's complex global unorganised world.
Not only are large organisations fundamentally flawed, but there are some fundamental forces in the economic operating environment that help small businesses to match and exceed large organisations.
Transaction costs are the costs of getting into a position to do business, before the business itself is carried out. Transaction costs are falling rapidly because of enabling technologies such as the Internet, electronic agents (computerised assistants that find out information, organize meetings with other people's agents and so on) and mobile communications. Because of the Internet, it is easy for any individual to have a global presence instantly. Any individual can inexpensively set up an Internet site and people around the world can then inexpensively access that information. Word of mouth recommendations, often by electronic mail, mean that the web site's success depends upon the perceived value of the content published there.
Markets are increasingly contestable because ideas matter rather than current power configurations or wealth. Contestable markets are those that can be entered and exited easily and profitably. Too often in the organized world, new opportunities accrued to established large organisations, necessitating organisational membership to participate in wealth creation. However in the unorganised world, entrepreneurs who have generated unique content or ideas, can then leverage those ideas by licensing their logo and outsourcing the actual production and distribution of their ideas.
The outcome of all this is the realization of the voluntary exchange principle that no-one need do anything they do not want to- people are not forced to be employees and do what they are told in organisations- they can earn a successful living as self-employed entrepreneurs.
Human civilisation is developing from Lean Liberty to Fat Slavery to Lean Slavery to Fat Liberty. Lean Liberty is the state of civilisation in developing countries where there are few widespread government welfare programs and people fend for themselves. Fat Slavery is the situation where large government and business institutions provide everything for citizens and employees- initiative is not encouraged, compliance is. But the fundamental flaws are turning Fat Slavery into Lean Slavery- employees are trapped in routines and their organisations are not necessarily the best or only means for developing careers and realising individual potential. Ultimately, we should be striving individually and collectively for Fat Liberty by harnessing the fundamental forces and achieving the glorious combination of both autonomy and independence and wealth and prosperity.
For individuals to thrive and achieve Fat Liberty, they must have a brand presence. It is no longer just products that need to develop a brand identity; so too should individuals. In large organisations and hierarchies, people were "rankers"; interchangeable units of economic production carrying out jobs that were closely defined by organisational procedures. Instead, self-employed individuals should be "branders": people who think of themselves as brands and cultivate the differences that make them special. A brand comprises an inner core of knowledge and expertise and an outer core of network contacts, integrity and honesty and so on. A brander needs to work hard at developing both their inner and outer core, through continuous learning and nurturing rather than neglecting business and personal contacts. In fact, in the unorganised world, individuals should behave like companies, and companies like individuals.
People can become branders by developing multiple "lifestreams". Lifestreams are activities in life that particularly interest a brander and that they are particularly talented at doing. A lifestream is more than just a hobby; it is a means to earn a living. A lifestream is something active; for example, it is not just watching a sport such as cricket, but organizing a fan club or Internet site related to it. Lifestreams ebb and flow during the course of life, with different lifestreams taking prominence at different times. Whichever lifestream is most prevalent for the time being, the brander ensures that none stop flowing completely. It is important that each brander has MULTIPLE lifestreams: too many people let their workstream predominate and dominate, with little time spent developing anything else. The best form of job security there is in the unorganised world is to have alternative means of making a living, in other words, multiple lifestreams.
Individuals such as branders will increasingly no longer earn their living within traditional business organisations, but instead will work within more dynamic forms of company that I call "collapsible corporations". These are clusters of people from inside and outside of the organisation92s traditional boundaries partnering and collaborating voluntarily, dynamically and impermanently in order to meet customer requirements.
Establishing business partnerships extends a small company92s reach and helps to turn a vision into reality by extending the scope of the idea and the resources working on developing it. Business partnerships also fulfill many of the social aspects of business in collapsible corporations, acting as regular contacts and support systems. Business success for small businesses is all about combining complementary capabilities to add value to the service you offer to customers. Win-win relationships are the name of the game. Leveraging complimentary skill sets for mutual gain is the order of the day! Agents and business partners can generate and call you into mutual revenue earning opportunities. As opposed to strategic alliances, which tend to be exclusive, contractual and involving financial investments, business partnerships are typically non-exclusive relationships set up without significant exchange of money between the partners. Business partnerships are often non-contractual relationships based on mutual benefit and trust. Business partners may work with your direct competitors.
The key for successful partnering is to provide better responsiveness and support than competitors who are also partnering the same companies. In business partnerships, co-operation is essential. For customers, responsiveness is everything. Customers have got to be able to get straight through to you because they may not call back. You have to make information about your company92s activities readily available to potential customers and meet their needs closely and flexibly in a prompt and efficient way. For your partners, customers are everything. There is no point in setting up a partnership if it is not going to bring mutual reward i.e. mutual customers.
Large market-leading companies who have set up business partner programs should be more than willing to support smaller companies if these smaller companies can deliver solutions to their customers cost-effectively, flexibly and quickly. If the company is consistently responsive and professional, then they are large enough to get the business. If you are a competent and responsive partner then chances are you'll get introduced to a large percentage of their suitable customers - irrespective of your company's size. Size does not matter - behavior does.
In fact, in today's global diverse unorganised world, size is not a useful criteria for evaluating companies. There is no such thing as a small business because all individuals have access to and seek recourse in support systems such as their network, customers, friends, family, suppliers and partners. As such, small businesses are often made up of collections of individuals - often self-employed - who work together for mutual gain. For example, a kitchen studio company may only formally employ two people - a sales manager and accountant, but when you take into account the people who work closely with them - plumbers, fitters, builders, tilers, electricians, decorators and so on, you see that the "small" business is actually more powerful and capable than it at first appears. Company size does not matter much, other things such as responsiveness and reliability are more important. As such, large companies may be in the best position to meet customer requirements, or small companies, depending on what the requirement is and how much customers are willing to spend and when they need the job done by. Large or small is not the most important selection criteria- there are flaws with large organisations and disadvantages such as resource constraints with many small businesses.
A combination of the fundamental flaws of larger organisations and the fundamental market forces helping to bring about small business success, means the valuable end of commerce will increasingly be carried out by different means- markets rather than firms in the twenty-first century. To succeed in such an unorganised business environment, entrepreneurs need to think of themselves as brands and develop knowledge that they leverage through business partnerships. The result is a fundamental transformation in the nature and form of business- one that creates the potential for ALL individuals to participate in wealth creation, rather than the majority of new opportunities being conferred upon those people who are employed by large companies. This facilitates a brand new economic system called "technological capitalism" that has the potential to close the gap between the first and third worlds in countries such as India and give EVERY individual the opportunity to pursue economic opportunities.
The future is not what it used to be. We are all entrepreneurs now! Size does not matter! "One man bands" have become " single person armies"! Onwards towards Fat Liberty!
Simon Buckingham is the creator of the unorganisation lifestyle for the twenty-first century. His five unorganisation handbooks can be accessed free-of-charge on the Internet at http://www.unorg.com