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Just Managing: Big Business in Small Businesses

Let the promise of tremendous change lure the venture money and the easy headlines. The most successful entrepreneurs are the ones who, instead of making promises, roll up their sleeves and find a way to make money on the new world that is already here.

As author Peter Drucker puts it in Innovation and Entrepreneurship, "Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a service."

Indeed, exploiting change is a key concept in the entrepreneurial world.

Consider the emergence of the huge market spurred by the need for existing small businesses to achieve basic competence on the Web. While the world's largest companies have sufficient resources to hire consultants and develop their own Internet technologies, the 20 million or so small companies in this country are still grappling with the most basic of questions: How can I set up an effective Web site? How can I process orders and track customers online?

Answering such questions has enabled a handful of companies to take off. Just as the folks who really made money during the Gold Rush were the folks selling the pans and pickaxes, the companies selling Web competencies to small businesses are growing healthily. In fact, this space has become quite crowded during the past several years, with competitors such as Onvia, vJungle and Allbusiness among the many companies trying to become the big business serving small businesses.

While it's too soon to pick winners and losers in this exploding market, the experience of two companies sheds light on what the Net can support for small businesses.

First off, the Net has proved a fertile ground for service companies that focus their attention on solving immediate and specific problems for small businesses turning to the Net. That's certainly the case with BizLand, a Burlington, Mass.-based company that helps small companies with such basic competencies as setting up a Web site, conducting online transactions, hosting real-time conferences and offering search capabilities. BizLand also offers these services on a private-label basis for the clients of companies such as Xerox and 3Com.

Soon, according to BizLand CEO Steve Sydness, clients will be able to use his company's services to tap into a personalized "dashboard" that tracks their key financial indicators. Small businesses will be able to log on in the morning (or the dead of night, for that matter) and immediately access key metrics such as outstanding receivables, site traffic figures, online sales numbers and more. This focused approach has enabled the company to sign on more than 1 million customers, a fact that Sydness mentions as frequently as a politician stumping for a recount.

But Sydness, who helped software company Great Plains grow from a private, $6 million company to a public company with more than $200 million in sales, now finds himself at a company struggling to maintain a startup mentality in the face of rapid growth. So BizLand has taken measures such as handing out its first "Big Drill" award last week. The award, which recognizes individual ingenuity and initiative, is intended as a reminder of the company's bootstrapping days of just a year ago. At that time, the company could get cable access to the Net only by literally drilling a hole in the ceiling and tapping into the line of its willing neighbor.

The success of BizLand and others shows that launching a Web services business requires a grounded understanding of how small businesses are using the Web - today, not in the distant future. The fact is that a thriving market exists now for companies that help existing businesses on the Web, as opposed to companies that would help dreamers looking to hatch the business world anew.

Says Steve Papermaster, CEO of Agillion, another company that helps small businesses leverage the Web: "A lot of entrepreneurs are enamored of the idea that they can be born under the Web and grow under the Web." Papermaster calls that syndrome "dotcomitis" and defines it as a mistaken belief that launching an Internet business is neat and tidy - "no marks, no fuss," as he puts it. "That is a reality in less than 1 percent of the cases," he says.

Papermaster argues that the Web has proven to be a tremendous vehicle for supporting the growth of existing small businesses, not a petri dish for a new spawn of economic life. "Using the Net to extend a working business is the natural model in successful businesses," he says. "Your market is not defined by the Net in 99 percent of the cases."

Agillion's main focus for its core client of small to medium businesses centers on customer management. Papermaster, who has founded several successful companies previously, has always found the complex logistics of customer management to be the Achilles' heel of small businesses. Tending to the details of tracking orders and monitoring sales distracts entrepreneurs from the heart of small business: listening and responding to the customer. So Agillion now offers a Web-based service that provides personalized customer interaction tools to its customers.

"The key for small businesses is that they have to retain their close customers," says Papermaster, "They have built up these relationships over the years, and now the expanded reach of big businesses are threatening this."

Only by achieving parity through assimilating tools that work can small businesses fend off this assault, he argues.

Just as the widespread adoption of Quicken and Quickbooks has automated accounting for small businesses, the continued spread of companies like Agillion and BizLand will turn Web competence into a business commodity as essential as a knowledge of the books and an ability to sell. Once that happens, startups will find themselves facing a fundamental question even sooner: What sets us apart from everyone else? What do we offer that no one else does?

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Just Managing – articles that Tom wrote for The Industry Standard and some Business Articles written for Inc., Fortune Small Business, Harvard Management Update, and other places.

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