The result: a multiyear, multinational, ongoing research project known as the Global Entrepreneurship Monitor, or GEM, which counts (in effect) the number of working-age adults who are engaged in acts of company creation. GEM has come up with some startling findings. In the United States, according to the most recent data, some 11.3% of the working-age population are either running a young business--less than three years old--or are actively trying to start one. Since there are about 180 million Americans between 18 and 64, that means more than 20 million of us are prospective entrepreneurs. Even allowing for a healthy number of wishful thinkers in the bunch, it's a good-sized group.
As Butch said to Sundance, who are those guys? Many of the company starters, of course, aren't guys at all. Though men outnumber women in these ranks by about 60 to 40, that leaves maybe 8 million female entrepreneurs along with 12 million males. Compared with the general population, more entrepreneurs have a college education, and proportionally more live in urban areas. Otherwise they are spread out all over--among regions of the country, among income levels, and among ethnic groups. A friend of mine is one of the people who would have answered "yes" to the GEM survey, and his story is probably pretty common in this age of downsizing and restructuring. For 20 years, Bob Grant was a top sales rep for Thomas Publishing, the century-old company behind the famous product guide known as the Thomas Register. But in 2002 Thomas was reorganizing, and Grant began to question his future with the company. Presto: Scarcely six months later he was CEO of Grant Inc., now a rapidly growing marketing-communications firm in the Boston suburbs.
What all this means, of course, is that entrepreneurship has become an accepted occupational choice in the United States, occasioning a continuing boom of company building that fluctuates modestly with economic conditions but persists at a generally high level. Part of the boom is attributable to today's technology: The ubiquity of personal computers and the Internet gives company builders market-access and information-processing capabilities they couldn't have had 25 years ago. And part is surely attributable to corporate downsizing, which has provided a cadre of experienced businesspeople such as Grant to undertake the building of new companies. But by now this is a self-sustaining phenomenon. Entrepreneurship is taught in more than 1,500 colleges and business schools. It is supported financially by millions of people. To imagine that many of those eager company starters are suddenly going to go out and get a real job--well, it strains credulity. Opportunities are limited? Tough: Guess they'll have to create their own.
As to how they're likely to go about creating opportunity, some will do what entrepreneurs have always done. They'll hit upon a hot new concept in restaurants, say, or in toys, or in clothing. They'll target a growing market, such as the burgeoning Hispanic population. But what we have learned in recent years is that you don't need a lucky hit or an expanding market to create a growing company. What you do need is a smart CEO--one who understands how entrepreneurial businesses can carve out niches in today's economy right under the noses of larger competitors, simply by playing to their own strengths. One such strength is the ability to pursue certain kinds of innovation. A second: the ability to create a company that people actually want to be part of.
Natural-born disrupters
Seven years ago a lanky (six-foot-eight) Harvard Business School professor named Clayton M. Christensen published an unassuming book titled The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail. It was a scholarly work, densely packed with research. But it promptly hit the bestseller list on the strength of its novel and provocative thesis. Some innovations, said Christensen, sustain an industry--they offer better performance, more features, everything that existing customers are looking for. Other innovations disrupt an industry. They may not work as well as what's already out there, but they bring useful products or services to people who never had them before. A classic example is Canon's small-scale copiers, in wide use by the early 1980s. The inexpensive copiers couldn't do nearly as much as the big Xerox machines of the time, but they made desktop copying available to small businesses that couldn't afford a Xerox. Christensen's insight was that disruptive innovations are rarely attractive to the companies that dominate an industry, just because they carry lower profit margins and don't serve the needs of those companies' best customers.
Much of Christensen's message--elaborated in a subsequent series of articles and in a second book published just last year--is designed to help large companies become more innovative. But it's easy to see how growth companies can compete in a Christensenian marketplace. For one thing, smaller businesses always have a built-in advantage as experimenters and explorers. Almost by definition, large companies have high cost structures. To grow they need big new markets. So they hesitate to invest in innovations where the profit margins and the market size are essentially unknown.
It's hard to imagine a better description of today's technology world. A reasonable observer in 1984 might have foreseen the explosive growth in PCs, and in 1994 the rapid expansion of the Internet. But in 2004? Um, quick, how big will the market be for Internet-based telephony? For polymer-based computing chips? Large companies are nosing around many such markets, but nervously--which means that much of the innovation will be undertaken by start-ups and nimble young companies that sniff out a niche worth exploring. Right now, for instance, a handful of entrepreneurial businesses are leading the charge into wireless networks composed of tiny interacting sensors that can monitor aspects of the physical world, from the performance of commercial refrigeration units to the movement of armored vehicles on a battlefield. Kris Pister, CEO of Dust Inc. in Berkeley, Calif., has told more than one reporter that sensor networks will be "hugely revolutionary," capable of doing "for the physical world what the Net did for the world of ideas." He may be right--but who knows? And who knows how big the margins in such a business would be? Absent clear answers to such questions, this and many other high-tech markets will be the province of entrepreneurs for years to come.
