The State of Small Business 1997
The best way to introduce the stories in this issue is to tell three more--three brief anecdotes from the past 12 months of small-business life. Together, they suggest what the new economy has come to and how its creators do their work
Twenty-seven universities and research groups band together to do something about the dearth of statistical information on entrepreneurial activity in the United States. The coalition, called the Entrepreneurial Research Consortium (ERC), begins with a simple question: How widespread is entrepreneurial life? That is, what percentage of American households include someone who has started, tried to start, or helped fund a small business? The ERC conducts a nationwide survey to find out.
The anticipated answer is 10%, according to ERC coordinator Paul Reynolds, a professor at Babson College, in Wellesley, Mass., though some guesses are as high as 25%. What percentage does the survey find? Thirty-seven percent. More than one out of every three American households is involved in entrepreneurship.
Reynolds and his colleagues are stunned. "New and small businesses," he says, "are a far more integral part of American life than anyone anticipated."
The planet's most powerful corporate and political leaders gather in the alpine resort town of Davos, Switzerland, for the annual World Economic Forum. Inc. writer Jerry Useem is there and later describes a dark-suited conclave of the international establishment, every continent represented. In the past, the talk might have celebrated Europe's once-envied welfare states or Japan's then-ascendant top-down economy or the third world's claimed headway toward a Marxist Shangri-la. But this year things have changed.
In one session, Israeli Prime Minister Benjamin Netanyahu extols his country's "thousand high-tech start-ups." In another, Secretary-General of the United Nations Kofi Annan, a Ghanaian, hails not socialism but "market forces." And in the corridors, everybody talks about 20-year-old German computer entrepreneur Lars Windhorst, already a self-made millionaire, who now aims to build Vietnam's first sky- scraper. Chancellor Helmut Kohl calls Windhorst the risk-taking role model for all young Germans.
Among those present are Nelson Mandela, Yasser Arafat, Newt Gingrich, and Jack Welch. But the one attendee everyone seems to search out, to want to connect with, to try to touch is Bill Gates. "What we need is a few Bill Gateses in Europe," says one conference participant, a recent cochairman of a giant Swiss-Swedish industrial concern. "We need to glorify entrepreneurship."
Longtime Inc. contributor David Birch boards a plane in New York for a trip to Europe. Taking the seat beside him is a young man--clean-cut, well-mannered, earnest. It turns out that the young man is from Utah and is making connections en route to Poland.
What takes you to Warsaw? asks the inquisitive Birch.
Well, says the young man, have you heard of the Shelby Cobra? It's a famous old aluminum-bodied sports car, very beautiful, first made in Britain in the 1960s. They're mostly made out of fiberglass now, and they're extremely expensive. But my dad has an original, and he loves it. Everybody does. And my brother and I got to thinking about how much people would love those cars if we made them the way they used to be, out of aluminum again. How maybe we could start a company and do it.
The young man goes on: So we asked ourselves, Who in the world can make things out of aluminum? Who's skilled at molding aluminum bodies? People who make airplanes, that's who. Then we wondered, Now where is there an airplane factory that doesn't have enough to do? And we realized, Aha, the people who made MIGs must not have anything to do anymore. The Cold War's over, Russia's out of money, the Eastern bloc isn't building fighter jets, right? And where are the people who made MIGs? We found out they're in Poland. So we faxed the factory, and I went. Turned my dad's Cobra into a thousand pounds of car parts and spent three hours clearing customs. At the factory, the Poles reverse-engineered the design from the measurements of my dad's car, and in four months they had made a mold. They were brilliant. Six months after we contacted them, they were making cars. Ours cost one-tenth as much to build as the fiberglass replicas, and ours are aluminum. Ten times better. The factory in Poland is now the largest private enterprise in town.
When Birch retells the story, he pauses here and lets it echo. The young man's name, he continues, is David Kirkham. His company is Kirkham Engineering. Can you believe it? Birch asks me. Two guys from Provo, Utah, start a business making cars in a MIG factory in Poland to sell throughout the United States. And they just asked a simple question. Where are the people who are skilled at making things out of aluminum? Now they're producing a Cobra 10 times better than the replicas for a tenth of the cost. They're going to clean their competitor's clock . . .
Listening to all this, we think, Maybe, maybe not.
But we get the point.
The point--of all three stories--is twofold.
Number one: entrepreneurship has arrived. The question of whether it is mainstream, accepted by the powerful elite, or big enough to cross U.S. borders and thrive is no longer open. Entrepreneurs are the creators of the new economy. And everybody wants to be one.
Number two: the entrepreneurial playing field has been elevated--and enlarged. The limitations that founders face are fewer or are simply ignored. Think of the question that propelled the creators of Kirkham Engineering. It wasn't, Who in Utah knows how to build cars? It wasn't even, Where is an aluminum-body factory in the United States? It was, Who in the world can make things out of aluminum?
Only by asking such a big question did the Kirkham brothers find able engineers half a world away, eager for work even at one-fourth the going U.S. rate and ready to move instantly to seize an opportunity. And only by finding them--with their advanced design skills, low costs, and gift for swift turnaround--did the Kirkhams gain the competitive advantage they couldn't do without.
Possibly, the very willingness to ask such large questions and to act on the answers is becoming the foundation for company-building success. That willingness is hard to describe but easy to see--a kind of large ambitiousness of imagination. It may be the defining characteristic of the people building today's notable companies and reprogramming the business world in the process, the people who are the creators of the new economy.
The stories in this special issue of Inc. identify more of those characteristics and address the questions raised by the emerging new generation of professional entrepreneurs. Who are they? (See Tom Richman's " Creators of the New Economy," and " The Evolution of the Professional Entrepreneur.") How do they affect the way the economy works? (See " Churn, Baby, Churn," by Jerry Useem.) Where do they live? (See " The Four Best Small-Business Neighborhoods," by Joel Kotkin.) What are they pioneering that we don't even know about? (See " Crossover," by Heather McLeod.) And why do they do what they do? What are their lives like? (See " The Years of Living Dangerously," by Edward O. Welles.)
What we found by asking those questions was a picture of the state of small business--right now.
Who are the creators of the new economy? This year's State of Small Business special issue, edited by Inc. executive editor MICHAEL HOPKINS, proposes answers.
- Entrepreneurship's next frontier? It's the world of nonprofits, writes HEATHER McLEOD. In " Crossover," she describes the culture clash.
- For 20 years, JOEL KOTKIN has studied entrepreneurial cities. Here he describes the four best small-business neighborhoods in America.
- In " The Years of Living Dangerously," Inc. senior writer ED WELLES depicts a 20th-century small-business life.
- What economic role do entrepreneurs really play? Inc. associate editor JERRY USEEM knows. See " Churn, Baby, Churn."
- From angel investments to work-style changes, editor ELYSE FRIEDMAN presents a facts-only picture of the Inc. world in " The New-Economy Almanac."
- Inc. executive editor JEFF SEGLIN unveils the mind of the worker in the survey-based " Americans at Work."
- For all its artfulness, argues Inc. writer-at-large TOM RICHMAN, company building now requires a lot more science. See " Creators of the New Economy."