The Digital Explosion
Remember the saying, “when one door closes, another one opens?”
KABOOM!
Technology is a giant stick of dynamite, blowing every door in the neighborhood open. And while there might be some collateral damage from the blast, opportunities are abundant.
The fundamental requirements for business haven’t changed. A business requires two things:
Supply of a product or service
Demand for a product or service
But the practice of starting and growing a business is practically unrecognizable from just 50 years ago. Technology is the great equalizer. It redistributes enhanced capabilities from the few to the many. It allows small up-and-comers to compete head-to-head with more established, resource-rich competitors — it’s like giving David a firearm to battle Goliath. It wasn’t too long ago that a top-of-the-line inventory management system would cost thousands of dollars to purchase, many hours to integrate, and expensive servers to maintain. Today, it’s built directly into e-commerce platforms that cost less than a few bucks a day. And that’s one of the thousands of examples that demonstrate the equalizing effect technology has on competition.
The advantages large companies had over new entrants are constantly being slashed; in many ways, small is becoming advantageous. Tech reduces the cost of some capabilities and eliminates many barriers altogether.
Bye-Bye Brick and Mortar
Independent and family-owned stores have been fondly referred to as “Mom and Pop” shops for decades. The physical shop created the backbone of the consuming American economy. Shoppers walked to their community grocers, hardware stores, and barbershops to transact with their neighbors and meet their needs. The image of the entire family pitching in to help customers, sweep sidewalks, and close up shop at the end of the day is iconic in period-depicting sitcoms; even the kids pitched in. The whole idea is idyllic, invoking a nostalgic Mayberry-esque quality that we long for in a certain way.
The mass production of automobiles and the price drop that followed transformed consumers from pedestrian shoppers into mobile consuming machines. Transportation became cheaper and more accessible, consolidating the shopping experience into catch-all big-box retailers. The era of cheap, accessible goods had arrived.
Things have changed. It’s no longer the Mom and Pops under the gun — not even established behemoths can escape the threat of e-commerce. The decline of face-to-face retail is sad in a sense, but it’s a boon to resource-scarce, hyper-creative entrepreneurs.
Inventory? Not necessarily.
Remember that inventory solution I was talking about earlier. I omitted an essential piece of information. Not only is spending a lot to track and manage your inventory unnecessary, you might not need inventory at all. If you launch a clothing brand, you can elect to have merchandise printed as your customers buy rather than tying up cash in inventory. Even better, the printing company will ship your fresh merch directly to the consumer — you never have to touch the product.
This is a breakthrough for the lean entrepreneur. You can avoid purchasing thousands of dollars of inventory that might not sell. You can avoid fire sales, steep discounts, and significant write-downs. Even if you ultimately decide to purchase inventory, perhaps to earn bulk discounts and lower your costs, you have the option to test the market before committing your cash.
Geographic Freedom
Silicon Valley is a hub for technology and innovation. Detroit was a hub for engineering and automotive production. Hollywood is the center of the motion picture world. These geographic centers of specialization are called economic clusters — places of extraordinary competitive success in a given domain (hbr.org).
Clusters emerge when specialized workers congregate in a geographic area. When a cluster starts to form, companies in that area benefit from access to specialized labor. Additionally, complimentary businesses move in, reducing friction in the supply chain. These concentrated areas have been a vital feature of the modern economy, but perhaps not for long or to the extent of the recent past.
Physical location limits are dissipating as new ways to communicate and collaborate spread from one industry to the next. World-class teams can be dispersed around the globe, no longer shackled to a specific region or city. This revelation benefits both workers and employers. Workers can live where they’d like, provided they have adequate internet service, and employers can access an unlimited labor pool, a considerable advantage when looking for specific skills, experience, and knowledge.
Take Silicon Valley, for example. The so-called Bay Area exodus has been widely reported as residents have fled the area to places like Austin, Phoenix, Miami, and Nashville, taking their jobs with them. Collaboration tools like Slack and Asana combined with virtual meeting platforms like Zoom allow remote work in ways that weren’t possible a few years ago.
Clusters and hubs aren’t going away - there will always be groups of people on the edge of innovation. But these clusters won’t be solely geographic. They will increasingly be virtual communities where like-minded people gather to share ideas and innovate.
Decentralized Work
Entrepreneurs need help along the way. We’re all limited in our skills, time, and resources. You’ll face obstacles, but don’t panic; finding help is easier than ever. When I decided to start a podcast, I had nothing but a concept in mind. Within a week, I had the audio setup delivered to my door, the cover art created by a friend, and the show’s introduction recorded by a voice actor I discovered on Fiver. A few weeks later, I was dropping new episodes and building an audience.
Talented people are no longer beholden to companies. Freelance marketplaces can help you find talent in areas you lack competence. I can’t draw a symmetrical circle, much less design a logo, but plenty of uber-talented artists are available and chomping at the bit. You don’t have to hire expensive full-service marketing firms right out of the gate. Seek specialists in your areas of greatest need and those who can provide the greatest return to your business. (Fiver and UpWork are a couple of places to start).
Creating and growing a business is challenging but more accessible than ever. That means you have more resources but also face greater competition. Take advantage of the technological explosions that have changed the business landscape. And when you are sitting atop your industry years from now, don’t forget that technology is blowing open doors for greater swaths of competitors behind you.
