New York Times columnist Thomas Friedman, who once declared the world was flat, is essentially declaring economic growth to be flat as well — thanks to tough lending conditions. But in a recent column, he sees some glimmers of hyper-growth and hyper-productivity to come — still beneath economists’ radars — thanks to an emerging “do-it-yourself” business environment evolving around a growing array of online and cloud-based resources.
Friedman calls this phenomenon the “The Great Inflection,” borrowing from his description of the current economy as “The Great Recession.”
“The Great Inflection is the mass diffusion of low-cost, high-powered innovation technologies — from hand-held computers to Web sites that offer any imaginable service — plus cheap connectivity. They are transforming how business is done. The Great Recession you know. The ‘good news’ is that the Great Recession is forcing companies to take advantage of the Great Inflection faster than ever, making them more innovative. The bad news is that credit markets and bank lending are still constricted, so many companies can’t fully exploit their productivity gains and spin off the new jobs we desperately need.”
Friedman cites two examples of the radical changes in the way two companies are doing business:
- Greer & Associates, a marketing company, was able to produce a film at 20% of normal costs, due to the use of free online collaborative tools and Websites for writing and preparing the script, cheap stock photos, inexpensive voice-overs, low-cost music cuts.
- Ethan Allen Interiors dramatically increased product turnaround and cut costs through consolidation and componentizing production to Mexico. (Finally assembly still takes place in North Carolina.) “Five years ago,” the CEO told Friedman, “it would take about 20 hours of labor time to make a high-quality custom sofa. Now, due to our investments in technology and a smaller work force that is more highly skilled, the labor time to make this sofa is about three hours.” Ethan Allen is also applying innovation and technology tools to cut operational and marketing costs, and encourages employees to keep thinking outside the box. “Our associates recognize that reinvention is vital to our survival,” the CEO said.
The model Ethan Allen employs for economizing and operating lean is well documented, but Greer’s ability to deliver product at a fraction of the cost from online resources is something extremely new and powerful. Essentially, the availability of online or cloud resources is enabling businesses and startups to tap into information technology and other resources for pennies — thereby dramatically lowering barriers to entry into new markets.
An example I came across a couple of years ago and that I still find compelling is that of GigaVox Media, a podcast technology company. During its startup phase, the company tapped into Amazon Web Services for processing power, messaging, and storage. The cost for the first couple of months for operations? About $82, estimated GigaVox co-founder and CTO Doug Kaye. “We didn’t have to buy a single server,” he said.
$82 for a data center! With IT infrastructure costs this low and cheap — along with other resources such as the collaborative and production sites used by Greer — prepare for an explosion in entrepreneurial activity. Unemployment is high right now, and there are many, many, many professionals who see the startup route as a more sustainable alternative to seeking full-time employment.
Again, with this confluence of underutilized skills and cheap resources — the DIY economy — we may be on the verge of an explosion in entrepreneurial activity in the decade ahead that will rival anything we’ve seen before.
