Small businesses are amazing organizations, truly the backbone of a healthy US economy. In 2016 there were 30.7 million small businesses in the US comprising 99.9% of all firms, 33.3% of known export value, and 40.7% of private-sector payroll. In addition to this solid economic data, small businesses often promise remarkable intangible qualities: Innovation, customer centricity, quality, expertise, and flexibility, to name a few.
Qualities such as these are not exclusively or automatically endowed upon the small. They belong to the bold, a characteristic of the large and small alike, and a driver of upward mobility.
Anecdotes abound about the ability for small companies to out-innovate their larger brethren. Not so, according to research recently published in the Harvard Business Review. A major part of the innovation equation is the R&D budget – and larger firms are simply more capable of allocating significant investments in R&D.
According to the HBR article, “part of the reason for this growing corporate divide between big and small firms is the growing R&D expenditures of large firms. Our results support Lou Gerstner’s thesis that the elephants are not basking in their past glory, but can indeed dance and are even becoming nimbler.”
R&D is part of a larger ecosystem of intangible investments, things like brands, technology, and human resources. Research shows that as small companies invest more in these intangible items, they are statistically far more likely to experience major upward mobility, and that growth further feeds the company’s ability to reinvest. It’s a virtuous cycle that rewards intelligent investment, company size notwithstanding.
We’re all consumers, and we’ve all had experiences that reinforce the notion that large corporations are impersonal and incapable of excellent customer service. All those times you’ve been held at arms-length by an automated phone response have further calcified the prejudice, and rightfully so.
But the previous argument still holds: Any company that invests more intelligently in intangible items (like customer service) are more likely to have taken their entire organization on that journey towards world-class customer success. It’s that same virtuous cycle, just in a different flavor, and it doesn’t favor companies large or small.
This also not exclusive to small companies, rather, it’s a pursuit shared by successful companies. Consider a major brand, Proctor & Gamble:
“At Procter & Gamble, managers in Brazil turned strategic and organizational traditions on their head to develop low-cost, high-quality alternatives to premium products. They undertook this risky initiative on their own and self-organized to ensure closer cross-functional teamwork and partnerships with customers. They felt that they had an obligation to improve the lives of consumers who could not afford premium products. Similar institutional logic led the P&G Himalaya team, a global cross-functional group, to find ways to make Gillette razors affordable and desirable to men often bloodied by barbers using rusty or worn-out blades.”
Any business can enjoy outsize expertise in a niche specialty, but what happens when one – or several – of that company’s “experts” leave? Knowledge loss is a real problem, and it comes with turnover. The smaller a company is, the more likely it is that turnover will negatively affect certain aspects of its ability to operate in certain domains, including in its expertise. Though that likelihood can increase in small companies, it can be mitigated by various means, perhaps through fostering an environment that nurtures talent, creating a positive work environment, investing in employee satisfaction, etc.
Size doesn’t guarantee immunity to brain-drain.
Nor can size guarantee flexibility. Any well-managed company, large or small, will efficiently leverage its resources to respond quickly and nimbly to the market. While the largest companies can leverage resources and beg lawmakers for more regulation to drive smaller or less flexible competitors out of the market, the smallest companies can swiftly respond without having to deal with corporate red tape.
Here at Bold, we do our best to not only ensure our small business clients can succeed in a competitive environment – we strive to help them thrive through significant RMR opportunities. From automated accounting platforms to our suite of truly innovative cybersecurity solutions, Bold’s got the customers’ best interests at heart with products that enhance client productivity, security, and revenue. Check out Bold’s Network Navigator to learn how security can bolster your bottom line.
Davis, James. 2018. Knowledge Loss: Turnover Means Losing More Than Employees – HR Daily Advisor. Accessed 27 November 2019.
Kanter, Rosabeth Moss. 2011. How Great Companies Think Differently. Accessed 27 November 2019.
US Small Business Administration. 2019. Frequently Asked Questions about Small Business. Accessed 27 November 2019.
Vijay, Govindarajan. 2019. The Gap Between Large and Small Companies Is Growing. Why?. Accessed 27 November 2019.