Tom Koulopoulos small Financial markets, employment, education -- all are defying predictable behavior. They are failing us. Somewhere between the apparently limitless opportunity and the terror of being left behind, we struggle to redefine the rules while plummeting toward some great new unknown.

The inevitable fate of the Internet market lies in its increasing complexity. Complexity, which many have predicted, will lead to an implosion of the "Internet bubble" as consumers and businesses scurry to meet expectations, market capitalizations, and euphoria racing farther and farther from their grasp.

But while the megamergers dominate headlines, small business is experiencing phenomenal growth. An unprecedented availability of capital is seeking investments at an increasing velocity - fuel for innovation and entrepreneurship.

As a small-business owner, operator, or aspirer, it is probably this combination of velocity and the inevitability of some new, as of yet unforeseen, framework of the Internet market that simultaneously frightens and attracts you.

Free markets have always encouraged diversity, choice, and evolution. And this has lead to an increasing number of new opportunities for enterprising entrepreneurs. But, as with any evolutionary system, the pace of change in free markets accelerates as time progresses - making the need to respond increasingly more important as a survival tactic.

The manner in which any system - biological or economic - manages this rate of accelerating creation is by balancing increasing complexity with increasing efficiency. As the stuff of innovation becomes easier and faster to come by, the complexity required to support the next wave of innovation must increase at least as fast.

The problem is that we have long associated speed of innovation with the size of the organization (i.e., small is fast). That works when the value chains of a large enterprise are rigid and not easily reformed to meet the demands of the market. But what if we were able to create value chains instantly? What if all business, especially e-business, was nothing more than the infinitely malleable and instantly responsive universe of small business? Far-fetched? Read on.

Let's establish basic tenets of business in the new Internet economy:

  1. Size does not determine speed.
  2. Speed is determined by time to community.
  3. The faster you can create a community of suppliers, partners, and distributors, the more likely you are to succeed.

Sounds simple, right? Sure, until you get mired in the myriad tasks involved in forming a community, from identifying partners to negotiating terms and contracts to justifying the costs of building each new value chain. Which is why large businesses dominate markets in the face of enormous inefficiency. In short, traditional value chains have created insurmountable barriers to entry for small business. (Hard way to learn this lesson: Try to compete against an industry behemoth. Easy way to learn this lesson: Pick up any of Michael Porter's books, such as Competitive Advantage and Competitive Strategy, and you'll get all the education you need on this topic.)

Here is where the rules change.

Published on: Mar 21, 2000