Management: There Are No Simple Businesses Anymore

Today even the smallest companies are quickly becoming very complicated. The consequences? The old rules of growing a business are no longer clear-cut, and the new rules -- more complex than anyone ever imagined -- have just begun to evolve

If you run a small business, you run your life. you control your destiny, and in the process you make a good living. That's the romance of running a small business. And it's also a myth.

People who own small businesses will tell you that the business -- if not the bank -- owns them. A small business invariably demands hard work and long hours that as often as not end in failure, not fortune.

Doing business in earlier times was always hard, but it was not necessarily complex. It typically demanded more brawn than brains. Energy and resolve often led to success.

Now that combination is not enough. If our times carry an economic subtext, it is this: There are no simple businesses anymore. Hard work will always have its place, but today managerial dexterity, mental acumen, and sharp instincts often spell the difference between success and failure for small businesses.

With the profusion of opportunities that accompany a globalizing economy, there arises not only an accompanying proliferation of hazards but an expanding universe of detail. The longer a small business lives, the greater the permutation of possibilities -- good, bad, and just plain confusing. And this phenomenon taxes small companies, which are typically resource constrained, more than large ones. In sum, for small businesses today there is much more to gain, much more to keep track of -- and much more to lose.

Doing Business Requires Trench Warfare
Small businesses must struggle all the more today for a host of reasons, the most seminal one being that competition has intensified. It now comes from all quarters -- and at an accelerating pace. At the end of World War II, the United States generated 40% of the world's gross domestic product (GDP), with its powerful multinational companies able to thrust into distant, and defenseless, markets. Now come the parry and the reverse thrust. By the end of the century America's share of world GDP should decline to little more than 20%. Combine that with falling trade barriers, large disparities in labor rates, and highly mobile capital, and you've got a recipe for economic trench warfare.

Today the offshore multinational can crawl into the microniche of an American company on Main Street. It can produce high-quality customized goods at low cost. Small companies can fight back with the levers of sophisticated computer technology and intellectual capital, but those assets create newfound expectations. Customers now demand ever-improving quality, increasing innovation, better pricing, and just-in-time delivery -- demands that stress smaller businesses that are already running flat out.

Meanwhile, in a downsizing world, loyalty is disintegrating between organization and employee, between vendor and customer. Everyone is looking for a better deal. Rising distrust breeds litigation, and litigation derails justice. As lawsuits devour time and money, how often can the small businessperson, already pressed for both, really afford to seek redress in the courts?

Government, meanwhile, persistently rewrites rules to bring order to an increasingly chaotic world, but that effort often produces the opposite effect, resulting in rising taxes and burdensome regulations. Government's forays into the private sector not only disadvantage small-business owners; they dispirit them as well.

Kiva Container -- Deceptively Normal
To illustrate at the grass roots why there are no simple businesses anymore, this story focuses on a single small business -- and an ostensibly very simple one. Kiva Container of Phoenix is in the packaging business. It makes boxes from both corrugated paper and cardboard, chiefly for manufacturers of consumer goods. Family run for three generations, Kiva provides a livelihood for 67 people, many of whom have been with the company for 15 years or longer. At Kiva the notion of family takes on an extended meaning.

At the same time, Kiva has been buffeted by extrafamilial forces, ranging from rising local taxes to increasing global competition, and that dynamic forms the substance of this story. Kiva's experience tells us much about how operating a small business has changed in the past generation. Mel Stafford and his son, Ron, started Kiva Container in 1957. (Kiva is the Hopi name given to the meeting place where the Hopi conducted their commerce.) In both form and spirit Kiva Container is tribal, binding three generations of the Stafford clan to it. Mel Stafford died in 1977, but his widow, Anna Lou Stafford (whose father, Arthur Whiteley, began working for the company when it was founded in 1957), still tends to administrative tasks at a beat-up metal desk in a back-room office. In adjoining offices sit her son, Ron, his laconic and easygoing mien offset by a heavy dose of gold jewelry, and his wife, Ruth, the soul and moxie of the organization. In her former life Ruth became -- at 21 -- one of the youngest female stockbrokers in Phoenix. After 13 years of thriving at the brokerage game, she "retired" long enough for a round or two of golf before realizing that retirement was no way to spend her life.

Down the hall sits Ron and Ruth's son, Tom, Kiva's executive vice-president of sales and marketing. The Staffords also have a daughter, Jo'elle, who is not with the family business. Jo'elle has lived in France for eight years now, where she is an avid horsewoman. Perhaps she has escaped because she knows what her mother has had to endure. Ruth usually arrives at work by 6 a.m., and her work day as often as not lasts at least 10 hours -- at the office, that is. Her lawyer relates stories of receiving faxes from Ruth, worrying over some legal matter, at 3 in the morning. Ruth has also been active with the National Association of Manufacturers (NAM), chairing its forum for small manufacturers for the past three years.