A small seafood restaurant attracts new customers with virtually no marketing budget. An iPad case manufacturer “A powerful, important, and eye-opening book. Simon expertly demonstrates how, by skillfully using generates more than $1M in revenue in four months with only four employees. A voiceover company is able technology, social media, and collaborative tools, even the smallest of businesses can achieve amazing to connect thousands of artists with opportunities, all without expensive hardware and software. A law fi rm levels of success. The New Small is a very big idea. Read it, but be warned: You may want to change your increases access to key information while dramatically reducing technology-related costs and risks. And these life once you’ve fi nished it.” Mitch Joel – President of Twist Image and author of Six Pixels of Separation four companies are hardly unique. A new breed of small businesses is using Software as a Service (SaaS), free and open source software, social media and networks, mobility, cloud computing, and other emerging technologies to do things simply not possible even fi ve years ago. In The New Small, you’ll discover how these companies ABOUT THE AUTHOR creatively and intelligently use technology to: PHIL SIMON is the author of the • Reach new customers Why New Systems Fail (Cengage, 2010) • Reduce costs and The Next Wave of Technologies (John Wiley & Sons, 2010). He consults • Increase internal collaboration and communication companies on how to optimize their use • Create fl exible work environments of technology. While not consulting, Phil speaks about emerging trends and tech- Rife with profi les from a wide variety of industries, The New Small nologies. He also writes for a number off ers pragmatic advice and lessons about how small businesses are of technology-oriented media outlets. harnessing the power of emerging technologies. It’s a must-read He received a BS in policy and manage- for small business owners—and those thinking about starting ment from Carnegie Mellon University their own shops. and a master’s in industrial and labor relations from Cornell University. ACCLAIM FOR THE NEW SMALL To fi nd out more about Phil or read “ We’ve known for a while that ‘small is the new big,’ to quote Seth Godin, his blog, visit one of his web sites: but a piece has been missing—specifi cally the piece that explains how www.philsimonsystems.com technology has been accelerating the trend and how companies can www.thenewsmall.com harness technology to take advantage of it. In The New Small, Phil Simon does a masterful job of fi lling that void. I heartily recommend it.” – Bo Burlingham, editor-at-large Inc. Magazine and author of Small Giants: Companies That Choose To Be Great Instead of Big “ A veritable treasure chest of management tips and technologies. PHIL SIMON PHIL Simon’s storytelling rivals Malcolm Gladwell and his knowledge of technology rivals Chris Anderson. A must-read.” – Paul Spiegelman, Author of Why is Everyone Smiling? “ An excellent book for seasoned business owners and entrepreneurs alike. When you read The New Small, be sure to have a notepad and highlighter handy. Highly recommended.” How a New Breed of Small Businesses Is – Shama Kabani, Author of The Zen of Social Media Marketing “ In this powerful and indispensable book, Simon shows how small Harnessing the Power of Emerging Technologies and medium-sized business can out-duel the big guys through smart and sharp adoption of nimble tech.” ISBN 978-0-9829302-3-6 – Jay Baer, Co-author of The NOW Revolution 90000 > phil simon Author of The Next Wave of Technologies and Why New Systems Fail www.motionpub.com US $19.95 9 780982 930236 Foreword by Chris Brogan - President, Human Business Works New Jersey Production Director: © 2011 Phil Simon Kristen Eckstein Imagine! Studios, LLC All Rights Reserved. No part of this work http://www.artsimagine.com covered by the copyright herein may be reproduced, transmitted, stored, Cover Designer: or used in any form or by any means Luke Fletcher graphic, electronic, or mechanical, http://www.fletcherdesigns.com including but not limited to photocopy- ing, recording, scanning, digitizing, Editor: taping, web distribution, information Kathleen Atkins networks, or information storage and http://www.kathleenatkins.net retrieval systems, except as permitted under Section 107 or 108 of the 1976 Proofreaders: United States Copyright Act, without John Pierce the prior written permission of the http://www.flyingspress.com publisher. Karen Gill Published by Motion Publishing, LLC Book Website Developer: Caldwell, New Jersey Shiri Amram http://www.shiridesignstudio.com ISBN-13: 978-0-9829302-3-6 Library of Congress Control Number: 2010918004 TABLE OF COntEnts Foreword by Chris Brogan. .xi Preface. xiii Acknowledgments. xvii Introduction. .xix Part I: Trends and the Five Enablers . 1. Chapter 1: Technology and How We Work. 3 Chapter 2: Major Trends Driving the New Small. .17 Chapter 3: The Five Enablers. 33 Chapter 4: The Continuing Search for Meaning at Work. 53 Part II: The New Small . 65 Chapter 5: Defining the New Small . .67 Chapter 6: The Big Switch in Action. .81 Chapter 7: The High-Tech Dentist. .89 Chapter 8: Restrained Creativity. 97 Chapter 9: Forging the Right Path . .111 Chapter 10: Reaching the Tipping Point. 123 Chapter 11: Where Old and New Collide. .135 Chapter 12: Flexibility Personified . .147 Chapter 13: The Distributed Company. .157 Chapter 14: The Computer Buddy . .169 Chapter 15: The Virtuous Cycle . 177 Chapter 16: The Chief Seafood Officer . .187 Part III: Becoming One of the New Small . .197 Chapter 17: True Collaboration. 199 Chapter 18: Finding the Right People and Partners. .211 Chapter 19: New Small General Management Principles. 223 Part IV: Thinking Ahead . 241 Chapter 20: Predictions and Concluding Thoughts. .243 A Humble Request from the Author . .255 Bibliography. 257 Index. .261 Part I TRENDS AND THE FIVE ENABLERS Part I of this book covers the reasons that the New Small is adopting emerging technologies en masse. It then provides a chapter on the specific emerging technologies allowing these companies to do so much. These are the Five Enablers, and they are: Cloud computing Software as a service (SaaS) Free and open source software (FOSS) Mobility Social technologies Part I lays the foundation for the rest of the book. It describes the changes taking place in the workforce as well as the technologies giving the New Small a leg up. Chapters 1 Technology and How We Work 2 Major Trends Driving the New Small 3 The Five Enablers 4 The Continuing Search for Meaning at Work Chapter 2 MAJOR TRENDS DRIVING THE NEW SMALL All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as self-evident. —Arthur Schopenhauer n the mid-1990s, there was no New Small. It simply could not have ex- isted. Sure, there were progressive small businesses that embraced an Iethos different from the rest, using technology in interesting ways. Of- ten singled out as “quirky,” these companies allowed employees to do fun things at work. They created cool cultures by creatively using the technolo- gies available at the time. However, those technologies were not nearly as powerful as the Five Enablers. As discussed in the last chapter, small busi- nesses have historically used inferior technologies relative to large organi- zations. Times have certainly changed. We’ve entered a whole new world, and this chapter explores it. It covers the major trends and events in both tech- nology and labor markets that have allowed the New Small to blossom. These eight specific trends are: The rise of the freemium model Improved offshore development Better outsourcing The explosion of software choice The rise of the social customer and social technologies The erosion of the employee-employer social compact The increased use of contractors The war for talent The Rise of the Freemium Model Perhaps nothing allows the New Small to do more with less than free and open source software (FOSS), discussed in more detail in Chapter 3. Collectively, the massive rise in popularity of the Internet and the adoption of broadband connections have allowed software companies and develop- ers to distribute their wares at virtually no cost. Fifteen years ago, people like William Hurley (now of Chaotic Moon, profiled in Chapter 15) worked at Apple Computer. Software companies like Apple had to deliver their products via physical media—typically on compact discs (CDs). Manufac- turing thousands of CDs costs a great deal of money, to say nothing about packing and shipping them. Back in the 1990s, some companies willingly accepted these expenses as costs of doing business. America Online (AOL) most readily comes to mind. As a whole, though, relatively few software vendors were keen to just give their stuff away. That has changed. On March 23, 2006, venture capitalist Fred Wilson wrote a blog post entitled “My Favorite Business Model,”i in which he articulated the rationale behind freemium. Here is its premise: Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc., then offer premium priced value added services or an en- hanced version of your service to your customer base. Freemium entered the business zeitgeist with the 2009 publication of Chris Anderson’s bestselling book Free: The Future of a Radical Price. The popularity of freemium cannot be overstated. Innumerable companies have embraced this business model, including Skype, Pandora, Google, Facebook, Twitter, Box.Net, Trillian, and probably tens of thousands of oth- ers. In fact, these days, many if not most software vendors offer some type of free or trial version of their software.