Mighty Morphing

A new survey shows leading businesses have one thing in common: change.
Magazine Contributor
8 min read

This story appears in the November 1996 issue of Entrepreneur. Subscribe »

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."

New Wave?

Florida's commerce department goes private.

By Cynthia E. Griffin

Florida is on the cutting edge of a phenomenon some state officials believe may be the wave of the future. On July 1, the state dismantled its department of commerce and replaced it with two public-private corporations to handle economic development and tourism functions.

Enterprise Florida Inc. (EFI), a nonprofit corporation, handles economic development and international trade activities; its $28 million budget consists of $27.3 million in public funds and $550,000 from the private sector. The Florida Tourism Industry Marketing Corp. is responsible for increasing Florida tourism and travel. Both organizations are overseen by the governor's Office of Tourism and Trade.

Florida chose this groundbreaking route because it combines the solidity of government with the flexibility of the private sector. "This helps pull chambers of commerce, economic development councils and all the local groups that work for each area together," explains Catherine Deans of EFI.

Every quarter, public- and private-sector officials and concerned citizens will participate in a summit to discuss how Florida can be competitive in the global marketplace. The meetings are designed to give small and large businesses an equal say in the direction development takes and to facilitate quick responses to problems.

While he doesn't believe Florida's move has initiated a trend, Jay Kayne, director of policy studies for the National Governors' Association, believes the change is consistent with nationwide efforts to make departments of commerce more service- and customer-oriented.

"There are actually two trends going on; one is to make marketing [of the state] a public-private effort, and that's been going on a long time," says Kayne. "I don't think you're going to see too many places eliminate their state development agency because there are a number of functions those agencies provide besides marketing."

What might happen, speculates Kayne, is that there will be more development of private-sector counterparts to handle some of the promotional duties state agencies are prohibited from doing.

"The bigger trend I see," says Kayne, "is that [commerce department personnel] are spending more time making sure businesses in the state are happy and expanding instead of worrying about bringing in new businesses."

This is not to say, Kayne adds, that what Florida has done won't become a trend. If that were to happen, he believes such a development is probably two to four years down the road.

On The Job

Business lessons that last a lifetime.

Andrew dean knows how to market a new cinnamon roll recipe, keep the books for a shoe repair business, run an art gallery and manage a construction team. A weathered veteran of the work force? Actually, Dean is only 17 years old.

With the help of Samuel Kirk and his CES and Associates Inc., Dean and many other Nashville teenagers have discovered it's never too early to learn what goes on behind the scenes of a small business. Launched by Kirk in 1992, CES, which stands for "Creating an Environment of Success," introduces black teenagers to entrepreneurship through apprenticeships with local small-business owners.

During the first phase of the program, 10- to 14-year-olds observe small-business owners tackling their entrepreneurial duties for three days straight. The second phase, for kids 14 to 16 years old, includes membership in Youth About Business, CES' student-run small business. In addition, kids 16 and older can spend an entire summer observing a small business's daily operations. Through fund-raising projects, the company collects money for incentive trips to places like the Bahamas and Jamaica.

Dean believes CES has already put him miles ahead of his peers: "The program has given me knowledge I otherwise wouldn't have picked up."

Says Kirk, "I want young people to see that if you're willing to push yourself, you can accomplish whatever you want." --Lynn Beresford

Listen Up

A small-business ally offers a direct line to government.

Small businesses have often considered government regulatory agencies the enemy. Ironically, their newest, and most unlikely, ally in the battle against unfair regulation by the federal government is . . . the federal government. Not only has President Clinton given agencies such as the Environmental Protection Agency and the Occupational Safety and Health Administration a talking-to about overly harsh enforcement, but he's also established 10 regional Small Business Fairness Boards, made up of business owners, to ensure these agencies change their ways.

The president believes inspectors should be "encouraging compliance, not playing `gotcha, says Jere W. Glover, chief counsel of the Small Business Administration's (SBA) Office of Advocacy. "Looking for reasons to fine businesses is counterproductive."

Acknowledging that when it comes to government, even straightforward changes may take time to catch on, the SBA has appointed an ombudsman who will receive businesses' concerns and complaints, then pass along the grievances for the Fairness Boards to review.

"If there is an inspector who hasn't gotten the message from the president, we want to make sure [entrepreneurs] have a safety valve," explains Glover, who emphasizes the SBA is "not looking to solve everyone's individual problems, but if we see a pattern of problems, we will investigate them and report to the White House and Congress." --J.C.

Read All About It

What are business owners reading these days? The top 10 business books at press time (based on net sales) were:

1. The Dilbert Principle, by Scott Adams, $20 (HarperBusiness)

2. Wall Street Money Machine, by Wade Cook, $24.95 (United Support Association)

3. Principles of Corporate Finance, by Richard Brealey, $101.25 (McGraw Hill)

4. What Color Is Your Parachute--1996, by Richard Nelson Bolles, $14.95 (Ingram)

5. Get a Financial Life, by Beth Kobliner, $11 (Simon & Schuster)

6. Managerial Economics: Applied Microeconomics for Decision-Making, by Charles S. Maurice, $66.95 (Richard D. Irwin)

7. Investing for Dummies, by Eric Tyson, $19.99 (IDG Books Worldwide)

8. Beardstown Ladies' CommonSense Investment Guide: How We Beat the Stock Market and How You Can, Too, by the Beardstown Ladies' Investment Club, $10.95 (Hyperion)

9. Leadership Secrets of a Rogue Warrior, by Richard Marcinko, $20 (Pocketbooks)

10. The One-Minute Manager, by Kenneth Blanchard and Spencer Johnson, $9.95 (Berkeley Books)

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