01 Apr 2001

The Small Business Difference: How Smaller Companies Manage with Less

Re: Gregory Slayton (MBA 1990)
by Garry Emmons


A few years ago, H. Kent Bowen, the Bruce V. Rauner Professor of Business Administration, undertook a study of smaller companies (firms in the $5 million to $50 million range) in order to develop cases and teaching materials for the elective course Running and Growing the Small Company. As Bowen explained to an audience of returning MBA alumni during a reunion presentation last fall, “In approaching some one hundred companies, ranging from manufacturing to service businesses, we were attempting to discover the operating principles for running and growing a small business. We wanted to learn how companies that lack resources and clout respond to a range of issues, from developing products and services, to establishing supplier relationships, to hiring and growing a staff.”

In the spirit of his research, Bowen began his presentation, titled “Running and Growing the Small Company: General Management Déjà Vu,” by asking his audience about their concerns, as owners and operators of small businesses. A number of issues were voiced: sales and marketing; cash flow; hiring and motivating employees; smooth succession within family companies; expanding beyond a successful business niche; systematizing a business so it will run without the owner’s hands-on attention; and dealing with government, especially over tax and regulation matters.

These concerns, Bowen told his audience, closely conformed with those expressed by the companies in his research pool and are issues that are central to top management in companies of five hundred or fewer employees. He then shared some of his findings. “All companies that start small, whether they grow tremendously or stay modest in size, deal with the question of how to put systems in place that will ensure the company’s longevity and continued success,” Bowen said. “An important part of that process is developing systems and measurements to ensure that the people you hire, beyond their résumé qualifications, will fit the firm’s culture. That’s a big problem for small companies.

“People often equate small business growth with financing,” Bowen continued, “but we found that businesses more often than not are constrained by nonfinancial considerations, such as ‘How fast can I hire and acculturate people into my company?’ and ‘How fast can I develop a special set of customers?’ ”

Bowen then presented a brief video featuring Gregory Slayton (MBA 1990) discussing the situation he faced in 1997 when he took over as president and CEO of a small company called MySoftware. The firm was a struggling Silicon Valley business that developed and sold software for a variety of small-business needs such as creating direct marketing campaigns, brochures, and Web sites. While making moves to cut costs and stabilize the company for the short term, Slayton sought new ideas from his team for future growth possibilities. “The company needed a high-growth idea that would work or else it might be doomed,” Bowen noted.

Slayton’s plan was to pursue a number of new avenues simultaneously, to be very honest about what was working and what was not, and to cut any losses early. While several seemingly promising approaches went nowhere, one looked particularly good, even though it was a departure from the firm’s core business. The new product was software that could mine huge databases and organize information that was both usable and affordable for small businesses. But when it didn’t take off with its target customers, Slayton and his team were quick to adapt. Sensing a new opportunity, they merged with another company, with the result that MySoftware became a division of a new entity called ClickAction, which specializes in e-mail marketing programs for both small and large companies.

What, Bowen asked the audience, are some of the lessons to be drawn from Slayton’s experience and those of other small business operators? He quoted educator John Holt: “The true test of intelligence is not how much we know how to do, but how we behave when we don’t know what to do.” This formulation seems especially applicable in the small-business realm, Bowen said. “We find that time and time again, in the absence of certainty, business leaders exemplify the kind of intelligent thinking that Holt describes. They experiment and learn. And in a fluid environment, winners are those who know how to take risks but can cut any losses quickly, in order to take advantage of changes and new opportunities in the marketplace.”


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