How Small Businesses Inspire Big Businesses

Just imagine how intriguing it would be to hear stories about six road trips.  Six road trips across the U.S. that produced dozens of stories about what local small businesses on Main Street’s across America do that can inspire big businesses on Wall Street – or Madison Avenue megabrands, or enterprise of any size -- in today’s economy.

Well, that’s exactly what you get when you read the new book, Roadside MBA:  Back Road Lessons for Entrepreneurs,Executives and Small Business Owners.

•  You’ll read those dozens of stories captured by three information-hungry economist/b-school professor buddies who traveled Memphis, TN to Omaha, NE; Charlotte, NC to Atlanta, GA; Chicago, IL to Cincinnati, OH, and so on.

Applying economic reasoning to the strategic questions that challenge any business, the authors reveal what real American small businesses can teach us beyond the bounds of most MBA programs or curriculum. 

The stories are grouped by lesson topics:

• Scaling a Business
• Establishing Barriers to Entry
• Product Differentiation
• Setting Prices
• Managing Your Brand
• Negotiating Effectively
• Hiring
• Delegation
• Battling the Big Boys
• Strategy is a Continuous Process

Mike Mazzeo

Recently, coauthor, Mike Mazzeo shared more insights about his book, and the journeys he shared with coauthors Paul Oyer and Scott Schaefer:

1.  What surprises about small business did you learn during your road trips?

Mazzeo:  We were continually surprised by the creative strategies that small businesses had developed to compete better in their markets.  While most of the owners did not have formal business education, they had internalized many of the key frameworks that we teach to MBA students and made them work for their companies.  

A great example was Panhandle Converter Recycling, a company that we met with in Dothan, AL. The business extracts the precious metals from junked catalytic converters -- going into our interview we expected a straightforward story about buying, processing and reselling.  Instead, we learned that catalytic converters come in all shapes and sizes and it is impossible to know -- without cracking it open -- how valuable the precious metals inside might be.  Panhandle developed its strategy around dealing with this uncertainty.  They kept detailed information on the contents of converters they had processed in the past and turned this data into a system to ensure they never paid junk dealers more than the value of the metals that they could extract.  We never expected that data analysis would be the key to success for such a company.

2.  What are the two or three most common themes you heard during your road trips?

Mazzeo:  One recurring theme was about growth and scaling.  For the small businesses we met with, growth was a nearly universal aspiration.  But growth was easier for some businesses and more difficult for others.  In large part, prospects for growth were rooted in the fundamental economics of the business.  We met with a company in North Carolina -- Steele Rubber Products, Inc. -- that produces replacement rubber parts used by collectors when they are restoring classic automobiles.  These rubber pieces are produced from a mold, so once the company has fashioned the mold (which can be quite expensive) the costs for making each part for sale is quite low.  This is the kind of business that is set up well for growth, because you don't have to keep making investments and incurring expenses to sell more.

Another theme for small business was how to think about strategy when competing against larger companies -- we called it "Battling the Big Boys."  These larger companies have built in advantages like scale and marketing efficiencies; it is crucial for a small business to build its strategy around things the "Big Boys" aren't able to do well.  In Spartanburg, SC we met with Sims Bouwmeester who started a small PR/marketing company whose competitors were large advertising agencies.  These agencies typically worked on big, multi-year retainers and weren't flexible enough to do smaller jobs.  Taking advantage of this weakness, Sims built her business around being "project-based" and was willing to take on even the smallest of contracts.  In her first year in business, she had served over 100 different clients -- many of which wound up giving her more work later.

3.  Do you think you missed some valuable stories by having not traveled to Texas and all but one place in California?

Mazzeo:  There were great stories to be found all over the country, so we certainly missed some in the parts of the U.S. we haven't made it to yet.  But, we aren't done taking road trips -- in May of this year, we visited businesses in California and Arizona.  Texas is definitely on the list for future trips, as well as North Dakota.

4.  What lessons did you learn about people during your road trips?

Mazzeo:  One interesting thing that we learned was the successful small business owners are invariably great story tellers.  This isn't surprising, when you think about it -- to be successful, you need to tell the story of your business to customers, to bankers, to employees, just to name a few. We loved listening to the stories about how these businesses got started and how their owners met the challenges that they faced.

5.  What lessons did you believe were more prevalent during your trips that would have not existed or been less existent prior to the economy's downturn in 2008/2009?

Mazzeo:  As we traveled around the country, we saw that different businesses were touched by the downturn very differently.  The downturn certainly made the business owners more careful but it didn't dampen their optimism.  And, you need that kind of optimism to run a small business successfully because it is an uncertain endeavor even in the best of economic times.