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Mighty Morphing

A new survey shows leading businesses have one thing in common: change.

Change is in the air, or so it seems. Over the past year, 85 percent of all small businesses reported changing the way they do business, according to the recently released Survey of Small and Mid-Sized Businesses--Trends for 1996 conducted by Arthur Andersen's Enterprise Group and National Small Business United. In addition, 97 percent of fast-growing businesses (defined by the survey as businesses that increased their revenues by at least 10 percent over the year) reported that things, they are a-changin'.

Why the metamorphoses? When asked about their greatest challenge this year, survey respondents answered overwhelmingly with a single word: competition. "Now that the economy has improved, [entrepreneurs] are focused on competing with other businesses in their industries," says Laurence Hayward, marketing director with Arthur Andersen's Enterprise Group. "To do that, they have to change the way they've traditionally done things."

Hayward adds that fast-growing businesses in particular "don't let things stay the same. If it's not broken, they fix it. They change what they're doing at a moment's notice to gain a competitive advantage because they realize if things stay the way they are, some other competitor will do it better."

Of the ways in which entrepreneurs choose to change, Hayward points out that upgrading computer systems is the most popular option--partly because it's the fastest and often cheapest way to improve a business, and partly because the opportunities to upgrade seem endless. On the other hand, the second and third choices--developing new products and services and improving the quality of products and services, respectively--could have "a significant impact on the bottom line but require major decisions and major investments," Hayward says.

And despite the hype about global marketing and lightning-quick expansion strategies à la Boston Market, only 6 percent of companies reported changing through either of those venues. "A lot of companies [in the survey] were focused on reinventing themselves rather than on making real estate investments or expanding into new markets," says Hayward. "They're going through a self-improvement phase. After they solidify their business, they may indeed expand in terms of buying new locations or going abroad."

However, it's not so much what your business can do to change; it's what change can do for your business. Even the change-resistant are starting to convert. According to Hayward, while 15 percent of businesses surveyed reported no substantial changes this year, that marked a decrease from the 26 percent who held out last year. Hayward is surprised the drop wasn't greater. "It's kind of strange [not to change] in this environment," he says. "Besides, the nature of small businesses is to change a lot. The fast-growing companies are those that plan for tomorrow."

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This article was originally published in the November 1996 print edition of Entrepreneur with the headline: Mighty Morphing.

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