How the Internet is giving Small Business Saturday an edge

November 29, 2014, 2:01 PM UTC
Small Business Activity Ahead Of Small Business Optimism Report
Employee Amy Merritt prepares a flower arrangement at Flowers By Julia in Princeton, Illinois, U.S., on Monday, June 11, 2012. The National Federation of Independent Business (NFIB) is scheduled to release small business optimism data on June 12. Photographer: Daniel Acker/Bloomberg via Getty Images
Photograph by Daniel Acker — Bloomberg/Getty Images

Today is Small Business Saturday. Main Street shops across the country will have their chance to get a share of the holiday dollars, as voices from Yelp to President Barack Obama urge customers to “Shop Small.”

Since its inception in 2010, Americans have responded in growing numbers, with more than $5.7 billion spent last year alone by consumers who were aware it was Small Business Saturday, according to the National Federation of Independent Business and American Express (AMEX).

While we turn our attention to America’s small businesses, this new appeal of the small is not just taking hold one day of the year. Something is actually changing.

It used to be that “economies of scale” meant bigger was better. Since the days of Henry Ford, mass production brought down the price of everything from cell phones to washing machines, and big box sellers were the purchase point of choice as a result.

But today we find ourselves in an era of “unscale,” where small businesses and entrepreneurs can successfully compete with far larger competitors, as Hemut Taneja of General Catalyst wrote last year in the Harvard Business Review.

There are three reasons why small businesses are positioned to better compete.

First, small businesses now view their markets as global. In fact, the National Small Business Association’s 2013 survey of small businesses found that 64% of respondents reported selling goods or services outside the United States, up from 52% three years earlier.

With new trade agreements, including the Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership, likely to come to a vote in the next year or two, Washington could open up even more markets to small companies.

Second, the Internet is only one of many ways where technology is changing the game for small businesses. Operationally, small businesses and entrepreneurs were often at a disadvantage in the early days of information technology. It was expensive to buy and maintain computer systems and keep up with changing software and upgrades.

Now, cloud computing and other innovations are at the fingertips of small business owners. With that, systems like payroll, inventory management and accounting can all be purchased as services that are maintained through automation, at state-of-the-art levels.

And, that brings me to nimbleness. Today, a small business can spend less time on the back office and more time innovating and outselling their larger competitors. Large firms find it hard to innovate, ironically, due to their scale. As a result, it’s often less costly for them to buy up new ideas in the form of small companies. In fact, 2014 looks like it could be a record year for acquisitions, with giants like Yahoo (YHOO)

making 18 purchases of smaller firms this year alone, while even outside the tech world, General Mills (GM) scooped up the organic food maker Annie’s Homegrown.

The reality is that large companies are looking to develop supply chains that bring them not only just-in-time components and materials, but also new, entrepreneurial ideas that position them to lead their market.

Entrepreneurship has always been America’s secret sauce, and there’s likely been no better time to be an entrepreneur. You can reach global markets, use technology to have smaller and smarter back office operations, and all the while, continue to be nimble and create innovative products and services.

And, on Small Business Saturday, attention deserves to be paid to the unscaling forces at work today that are helping “the small” gain ground. They are also helping America stay more competitive and continue to be a land of limitless potential and opportunity.

Karen Mills is a senior fellow at Harvard Business School and Harvard Kennedy School focused on competitiveness, entrepreneurship and innovation. She was a member of President Obama’s cabinet, serving as administrator of the U.S. Small Business Administration from 2009 to 2013.

Read More

Great ResignationInflationSupply ChainsLeadership