Today I’ll be live blogging from Grow Smart Biz conference in DC, hosted by Network Solutions. There is a great speaker lineup and I’m happy to have stolen the password asked politely for the password to the Internet, even though I’m not officially registered as a blogger today.
Here’s the play-by-play: Roy Dunbar just spoke on the state of the small business economy. Next, Alex Orfinger from the Washington Business Journal is headed on the stage and is running down the Agenda for today’s conference.
Now, Chris Anderson, the Editor and Chief of Wired Magazine will be speaking on two things: 1) The opportunity for small businesses overall, and 2) the economics of running businesses today.
As a small business owner in the technology industry, Chris Anderson understands the needs of small businesses and believes this is the golden age of small businesses. Here’s what he had to say:
1) The opportunity for small businesses overall:
This thought is taken from Chris’s first book, The Long Tail.
The niche element of small businesses offers supreme ability to offer better customer service and specialization of trade. Small businesses are able to target a market who want to obtain a highly-specialized product.
As consumers, we are able to differentiate our own unique and individual tastes and preferences–and support those tastes and preferences that best fit our needs. Small businesses can target these customers and refine the means by which the products and services are delivered. With globalization, large companies are targeting ‘the mass market’ and as such, don’t capture the entirety of the market.
To capture this market, small businesses are able to be adroit and ascertain the proper strategies online to reach the markets–a “scale-up” approach to find these niches and market to them. Large companies face a disadvantage when trying to ’scale-down’ to these SM approaches and capture the market.
2) The economics of running businesses today:
His second point comes from the theory outlined in his second book, Free: The Past and Future of a Radical Price.
Pre-Millennium, business owners would market their product by giving away elements of their product, but not its entirety.
For example, they would have people dip-into the product for free, but then have to support it for several months or years afterwards. For example, the razor/razor blade theory—Give away the razor, but sell the blades. This way, people have to buy into your product.
But now, we have a new theory of free—going from a people business to a software business—from brick-and-mortar to the digital. Digital costs are minimized every year. The Internet, for example, is a media channel that is ‘free to use.’
First wave of the Internet included banner ads. The second wave included digital targeted ads. However, the third wave of the Internet is the Freemium model.
The Freemium (sp?) model: It’s the 21st century of free. It’s the reverse of the previous understanding of the market. If you give away 90% of your product or service and then capitalize on selling the rest of the product by enhancing it in some way.
Side note: The problem I have with this understanding of the economics of business is that you can’t just offer a product or digital service—‘if you build it, they will come’ theory. Your constituency still needs the power of the Groundswell to illustrate the importance of the product or service. My thought is that building the influence of a product or service has to be an essential element of the marketing and PR campaign—finding and marketing to the increased niche market.
Back on track, however, the thought process is that customers will be using free products and then eventually ‘opt-in’ to the ‘paid-version’ of the products. The ‘free’ option has to be highly valuable, but then, your ‘paid’ version of the product has to add even more value.
For example, the music industry was one of these industries that went from hardware to software. The video game industry and software industries are also going from freemium to premium models of business.
However, the psychology of freemium has to be carefully understood and then created. Having increased convenience, less or zero advertisements, troubleshooting, etc. There are a multitude of ways to monetize the freemium model. The key is to innovate your service.
Another side note: I also think that when companies go ‘digital,’ they can easily lose the personalization of their product or service. They need to ensure a strong brand image through the
Anyway, I’m now gearing up for a special note from Senator Mark Warner, who ran his business in the high-tech industry for 20 years and began Foundations to help private citizens of Virginia before being elected to the US Senate for Virginia.
