This synthesis is the conclusion of a research that has been done for more than 20 years dealing with more than 30 small businesses having a revenue between 1,0 to 20,0 million dollars in countries that included the USA, Italy, UK, Germany, Spain, Brazil and Argentina. The objective of the research was to find which technologies are suitable for small businesses and which are their limits for the development of these companies.
Revenue is the simplest way to define the size of a business, but its nature is given by its critical mass in the market, which is defined by the power of its brand. Small businesses are whether small, stagnated or start-up businesses.
The majority: The Archetype of Stagnated Small Businesses
Stagnated small businesses are such because their final goal is to appropriate as much as they can from the market justifying these profits by doing what they can, without considering what is needed.
These companies cannot grow, because growth requires delivering differentiated added value to the market which does not allow doing what can be done and demands doing what needs to be done.
These types of companies cannot organize their functional business processes because they affect the subjective environment to survive. They have no organized management and they work in what we named as “business feudalism” where the subjective leadership of the owner has to prevail over the functional needs of the business.
Stagnated small business can only deal in marginal low productivity niches. In competitive environments they tend to disappear. They do not the possibility of surviving after their owner dies. They are built “around” the owner like a feud.
These companies need to develop a subjective environment that allows building a parallel reality where the utopias of the future replace the functional data of the present.
They minimize the tools they use in order to allow the participants to develop their activities based on their personal way. The owners monitor them based on the cash-flow of the company which, in the short run, ensures their survival.
The minority: The Archetype of Small Businesses
A business is small when the CEO/Manager/Director has the intention and is able to influence personally the people that work in the company. This implies that small business have necessarily hands-on managers that have the capacity of leading the group through their actions.
They are centrally focused on profits and they do what is needed to obtain them. They are an adaptive entity that strongly depends on the capacity of the leader to understand what happens in the environment and transform it into business processes that have to be followed by the participants.
Small businesses are such because they intend to occupy a space in a niche or segment of the market, have an organization that is autonomous from the owner and have the capacity to learn from their mistakes avoiding their repetition.
Their weak point deals with the understanding of the critical mass they need to have to achieve their goals. That is why they frequently build the necessary justifications for their dysfunctional actions.
Small companies can assume a leading role, the role of a secondary leader or a non-influential role in the market. The role they assume depends on their capacity to influence the niches they work with.
Their growth capacity depends on the size of the niche or segment they work with and on the positioning of the competitors. These companies tend to be absorbed or disappear when the niche they work in becomes attractive for large companies.
They have a functional organization without definition of roles and they are users of operational tools that allow them develop the work processes that are basically driven by tasks while the objectives are monitored by the CEO.
The few: The Archetype of Start-up businesses
Start-up businesses are such because of their capacity of generating differentiated value for the segment they work in. These businesses are focused on a niche where they have a superior level of knowledge and value generating capacity. They supersede competitors based on their market orientation and technology.
Profiting is a secondary goal in these types of companies. That is why it is frequent that the participation of investors, who believe in the business model, introduces an upgrade to their profit orientation in order to move them from a small company to a medium or large organization.
They begin by having the same characteristic of any other small business, meaning they have the business separated from the owner and they know they have to do what is needed in order to be able to grow.
Start up businesses work as an entrepreneurial venture but have, deep inside, the values that allow them become an organized enterprise. They are extremely focused on the market which includes a superior learning capacity to adapt their possibilities to the needs of the market. They are a learning organization that feels proud for the value they add to the environment.
The separation of the role of owner from the role of CEO is basic in this type of companies. In the early stages of these companies this separation might require that the same person works as a CEO in the company while he sits as an owner at home.
They have structured functional roles and organized processes in order to be able to learn from the environment and sustain the differentiated value they add to the market. But it has to be considered that, while they are small, they are CEO dependent.
Conclusion: Turnaround of Stagnant Small Businesses
During these years we had the opportunity to deal with 5 stagnant small businesses (the names are confidential). The results of this process demonstrated that it is extremely difficult to transform stagnant small businesses into adapted small or medium businesses.
Fortunately this was possible in one case. Two companies left the market and 2 others are still struggling to survive. The nature of stagnant small businesses does not fit into the central business world. It only fits as transitory opportunity in marginal niches of low cost products and services.
Stagnant small businesses are necessarily over-adapted which means that they try to work in an environment they dominate, where they submit to the needs of the customers while they oppose to all things that endanger their position or works as a mirror of their real positioning.
Changing stagnant businesses is an extreme change for the owners, which requires that they change the personal relationship they have with “their” company.
There is no separation between the business and the owners of these types of businesses. The separation of this role implies that the beliefs of the owner need to be replaced by the needs of the market.
The change of these companies requires changing the collective intelligence of a company that is only possible by absorbing it by another company that has the necessary values.
This change is possible when the company is absorbed by a start up business which includes it as a division of the new company. This absorption requires that the owner is replaced by a CEO who might or not be also the owner of the company but the subjective environments is replaced by a functional environment. When it is absorbed by a medium or large company the small business disappears.
The greatest difficulty to deal with these companies is that their members can only listen to those who share their subjective opinions and there can be no room for aliens in this parallel world because they endanger their existence.
NOTE: The Unicist Research Institute was the pioneer in using the unicist logical approach in complexity science research and became a private global decentralized leading research organization in the field of human adaptive systems. It has an academic arm and a business arm.