The New Business Landscape

Movers and shakers talk to Success about innovation, technology and where the action is for entrepreneurs.  

Success Staff

America is facing a mounting innovation crisis. Small businesses—which are growing in number, thanks to new technologies and lower start-up costs— have responded to the call, helping this country regain its top position in innovation and entrepreneurialism. Success talked to several successful business leaders and entrepreneurs to assess the state of small business today, the impact of the Web 2.0 revolution, and the emerging trends of the new business landscape.

Moderator Billee Howard is executive vice president, managing director, and co-creator of Weber Shandwick’s Global Strategic Media group in New York. In that role, Billee provides high-level media counseling to clients such as MasterCard and the Colombian Coffee Federation and is responsible for tracking innovation trends.

Moderator Jennifer Risi is executive vice president and cocreator of Weber Shandwick’s Global Strategic Media group in New York. She leads several of the firm’s leading global accounts, such as the Inter-Continental Hotels Group. She is also the creator of the agency’s new Voiceboxx product, which helps companies build their corporate reputation.

Henry Vogel is the chief revenue officer at Quigo, an online advertising and marketing company. Before joining Quigo, Henry was vice president of internet marketing at Ebay.

Paul Maeder cofounded the venture capital firm Highland Capital Partners. He has more than 22 years experience in funding new companies, specifically in the field of technology and software. 

Thomas R. Kunz is the president and CEO of Century 21 Real Estate. A 31-year veteran of the real estate industry, Tom has spent two-thirds of his career affiliated with the Century 21 system. 

Panelist Tommye Lambert opened Tommye’s Tiny Tots Childcare facility in New Orleans ten years ago. Now she’s preparing to open up her second facility. Since Hurricane Katrina, she has helped her community by providing affordable daycare.

Panelist Tim Williamson is the president and cofounder of The Idea Village, a nonprofit that provides tools and resources for high-growth entrepreneurial ventures based in New Orleans. Tim also serves on the State of Louisiana Small Business and Entrepreneurship Commission.

Rod Means has been an entrepreneur for more than three decades, owning four businesses, including two start-ups. He is currently a director in the San Diego region for SCORE, a nonprofit that provides free business advice.

JENNIFER RISI: Welcome. Business leaders are searching for new ideas and ways of injecting creativity back into the country’s business landscape. Today, the businesses that will succeed and lead their respective industries into the future are those that can identify ways to create lasting connections with their target consumers.

BILLEE HOWARD: We're going to focus on how small business is helping our country regain its leadership position in both innovation and entrepreneurialism. What, in your opinion, is the entrepreneur’s contribution today? And are small businesses more important or less important to our economy than, say, ten years ago?

HENRY VOGEL: I haven't seen a more vibrant time, in terms of the amount of innovation that's out there. Technology and the capital markets are facilitating the growth of small businesses. They not only combine to drive productivity and enhance the economy, they also have a social mission and an impact on people’s economic and personal well-being, which I think is really exciting.

TIM WILLIAMSON: I run a nonprofit in New Orleans. Right after Hurricane Katrina, in September of 2005, the first people to come back were the entrepreneurs who ran the small businesses that were the lifeblood of our communities. They came with their own money, their own resources, and really their own guts. These entrepreneurs can inject an incredible sense of optimism and become a catalyst to community development. Small businesses are going to be the ones that make New Orleans recover and grow for the next ten years.

TOMMYE LAMBERT: I agree. It’s much easier to start a business now, since we’re rebuilding. The entrepreneurial spirit is definitely here. If anyone has any type of business they want to start up or expand, New Orleans is the place to be.

ROD MEANS: I’ve been a SCORE volunteer for eight years. I’ve owned four small businesses. I started two from scratch, and I bought two. It’s remarkable the number of people we have seen who want to start their own business compared to eight years ago. They’re more technologically oriented, and there are certainly more women and minorities. There’s also an increase in stay-at-home moms and dads who are running their businesses from their homes.

TOM KUNZ: My whole company is based on small businesses. We have 8,400 offices around the world owned by entrepreneurs who run their own businesses and hire independent real estate agents. Our structure is based on making sure individuals have the desire and ability to start their own business in the community they live in.

JENNIFER: But what makes today’s entrepreneurs different from before?

TIM: Entrepreneurship is now about social and economic change. You’re seeing a generation of social entrepreneurs that is looking to build a double bottom-line type of business. There’s certainly a profit motivation, but there’s also the passion to solve a problem. The entrepreneur with the ability to change a major social or economic issue is part of a movement that could have a dramatic impact on our country and the world.

HENRY: What I see really differentiating entrepreneurs today is their ability to start with much smaller amounts of capital and less resources, in part because the ecosystem that’s developed to support them makes it more possible. Look at eBay, where individuals who want to pursue their passion can find other people who are interested in the same type of collecting. And then, you look at MySpace and YouTube and all the other media available for consumers to actually express themselves and to connect with others. It’s having a tremendous social impact, and revitalizing the spirit of the country.

PAUL MAEDER: Henry’s right on. Entrepreneurship is extremely healthy in the United States and has been all along. But now it’s proliferating from two directions. It used to be the few people with IT training and very specialized engineering training who went to Silicon Valley to start a company. Now, as other countries have recognized the startup and venture capital process, it’s overseas. Everybody else noticed it, and they’re mimicking it, and that’s great for world peace. The second direction it’s proliferated from is people doing fairly low-tech things out of their homes, through a vehicle like eBay or through approaching nonprofit management, using the same techniques that are used in entrepreneurial companies. The entrepreneurship engine is going global, and it’s going into other industries in the United States. And those are all very positive trends.  

BILLEE: Speaking of trends, we’ve all seen Web 2.0’s impact on the business landscape. How has it created growth opportunity in the small business world specifically?

TOM: In our industry, over the past six to eight years, we’ve seen tremendous growth in online services. New entrepreneurs have come in saying, We can do a home sell or a home purchase over the Internet. This has made the brick and mortar companies stand back and say, “Gees, we’ve got to wake up and start to address these types of issues.” When you get to the Web 2.0 revolution, you have to look at all of the information that’s available out there. How do we adapt to make sure that our franchisees, who are small businesspeople, understand how to use those tools and systems?

TIM: As an entrepreneur, you used to build on your local networks. Now, because of technology and the existing infrastructure, your network is the world. You can access people, expertise, and resources. But at the end of the day, a good business is all about relationships. Current technology platforms allow entrepreneurs to build incredibly solid relationships in very little time, which obviously increases productivity as well as profitability. They’re figuring out a way to build relationships they never would have had pre-Web 2.0.

HENRY: I think they’re all elements of a virtuous cycle of innovation. Number one, the cost of technology and support services, whether it’s bandwidth, computing, storage, whatever, has plummeted, making it cheaper to get a business up off the ground. Second, new businesses (whether they’re media or e-commerce ones) have an ability to drive revenue much quicker, much sooner, without building out lots of infrastructure, their own ad sales forces, or their own distribution systems. Third, it seems to me there’s a more disciplined capital market today. Trillions of dollars that the venture capital business controls are now being deployed toward those resources. These factors are driving competition and innovation. They feed off themselves and actually are creating this boom that we’re seeing.

BILLEE: How are today’s small businesses, which are focused on technology, different from those that crashed and burned in the dotcom explosion that we saw in the late ’90s? Are we in a Web 2.0 bubble?

PAUL: The boom and the crash were really more an artifact of capital markets than anything the entrepreneurs did. All the entrepreneurs did was innovate as best they could. People started throwing money at them willy-nilly. The reason that happened is the same reason it always happens: There’s a lot of gain, and there’s imperfect information. So when people start saying, “This changes everything,” and “Throw all the old rule books out,” pretty soon, you have brokers selling stocks to little old ladies’ pensions that they probably shouldn’t be. It was the capital markets setting out ahead of the real underlying business fundamentals.
What’s happened since 2000 is that capital markets have gone to sleep, and the Internet has marched right along every year. The statistics on what percentage of retail volume was done online rose very steadily. Ultimately the general population is now fulfilling the promise that people first saw for the Internet. If you take out the bubble and the bust and just plot a straight line, it actually looks like a fairly rational growth process.
But now, because of good marketing and catch phrases like “Web 2.0,” the capital markets are getting excited again about the Internet. But there’s an adage that silly season in Wall Street only comes around every 10 years, because that’s how long it takes for a previous generation to get flushed out and their lessons to be forgotten. Certainly in the venture community, the lessons of the 2000 crash are still very much in people’s minds.

TIM: As someone who was starting a company during that time, seemingly the idea was to grab eyeballs with the hope of making money. It seems like now there are more reasonable business models that could work. People are looking at ways to show that money is being made now, not on the promise of the future.

HENRY: I agree with what Tim and Paul both said, absolutely. Five or six years ago, as Tim said, people were building fast and hoping that they could monetize later. Today, they can monetize from day one, in the sense that they could have an ad network solution that helps them generate revenue, build advertisers and customers, all in a very scalable and low-cost way.

BILLEE: But for businesses to grow, even in today’s environment, you need customer loyalty. What are the keys to creating customer loyalty today?

TOMMYE: To make sure you maintain that rapport with the individuals and the businesses within the community, so that they know you’re trustworthy and understand what you’re about. And then you build on that relationship. I’ve always had a passion for children and a drive to provide quality childcare. But it helps to have corporations come onboard and provide the entities that I needed to excel. I’m thankful for the support system in New Orleans with Idea Village, because they’ve come in and assisted with the things that would normally take more time. By doing that, I can advertise. I can get my business out there.

TOM: Customer loyalty is the mainstay of our operation. The timetable between the point of sale on the first property to the point of sale on the second property is so long—as much as five to seven years—that we continually have to build customer loyalty in between those purchases.

JENNIFER: Consumer-driven innovation seems to be at the heart of many companies’ business models. What are some of the new and creative ways companies can involve the consumer in the product and service development process?

TOM: First and foremost is communication. If you look at the Gen-Xers and Yers and even the Boomers, they want information when and where they want it. We bring the consumer in and keep him up-to-date and informed. From a real estate standpoint, doing that becomes even more important because it’s the single biggest investment many of these folks are going to be making, and it behooves us to bring them into that cycle as fast and as often as we can.

HENRY: We also use technology internally. You need to have plans to be able to efficiently communicate internally with your teams and to be portable, so that if you do have business disruption, there’s a way to continue business.

TOM: That’s a very good point. When Katrina happened, we had a lot of offices and salespeople in those marketplaces. Technology allowed us to find out immediately who’s been affected. Were there any injuries or deaths? Within hours, we were able to track down and find every one of our people. It was amazing to me how fast we were able to respond.

PAUL: I was just thinking that the the ability to get information rapidly and to build businesses into worldwide brands is pretty remarkable. Ten years ago, nobody knew of Yahoo! or Google. Now look at them!

BILLEE: In today’s market, there seems to be a rapid proliferation of businesses designed to fulfill very specific niches. Why is this happening? And which sectors exhibit the greatest potential for growth from a small business standpoint?

TIM: Niche businesses are obviously where people can get the most value for building the customer base, if you hit it right. An interesting niche that has came out of Katrina is the concept of business continuity or disaster management. Your business needs to be prepared to manage during all types of disasters. Whether you’re a real estate business, or a TV station or a hospital, or any business in the world, what is your business continuity plan involving technology and strategy?

ROD: Places like Wal-Mart Superstores have helped close small Main Street-type businesses, so niche businesses help fill that need. I have a client that’s gotten into ethnic foods because those kinds of things are not available to consumers. Other people are in health-related areas like personal training and organic food. They can meet trends faster than the bigger stores can.

TOM: Because of the low cost of entry and the use of technology, I think we’re going to see more and more of those niche kinds of businesses. They may not all be successful, but every time somebody comes on the scene with some kind of a niche process, it may spark the imagination of somebody else to say, “Jeez, I think I could do that better and make it more successful.”

BILLEE: So starting a business is easier than ever. But how do entrepreneurs and start-ups find funding in this new era?

TOMMYE: You have to start with a business plan if you want to obtain capital dollars. Have that dream written out, and then have individuals assist you with meeting your goals and objectives.

PAUL: In terms of raising capital, it’s never been easier. There are more venture capitalists and more capital dollars out there looking for a place to invest than ever before. All you need is a business plan that makes sense. Most of the companies we funded in the ‘80s and early ‘90s were companies that were selling technology to large corporations. As that market has become increasingly mature and saturated, a lot of vendors started to recognize that the small and medium business market represents an underpenetrated market for technology products. The big challenge is how to sell to them, because there are so many of them, and each one doesn’t represent a very large sale. The means to do that cost-effectively are now available because of the Internet. We’re seeing more and more business plans for products that you would previously only sell to a Pepsi-Cola or a Procter & Gamble.

TIM: There’s money out there for good ideas. We’ve found entrepreneurs who were savvy enough to build a network of folks with different levels of expertise that helped them build a solid business plan. When they ask for money, the funder typically looks at the team. The people who are just trying to find money all the time typically don’t succeed as well as the folks who are building expertise around them. A savvy entrepreneur who can walk into a funding meeting with a group of advisers and professionals will make the funder feel more confident.

ROD: I’ve never seen so much competition among banks in their eagerness to finance startups, in some cases with nothing more than a FICO score.

TOM: I see between 50 and 60 applications for franchises every single month. It’s appalling how many of those people don’t sit down and really focus on putting a plan together. They think they can jump into this business and make all this money. But they don’t understand that the primary focus in putting a plan together is getting customers, keeping them, and growing your business.
I would hope that anybody wanting to be an entrepreneur understands that you’ve got to get focused and know where you’re going to go and how you’re going to get there.