Taste, Trends, and Technology Effect
Let’s assume you have a good description of your proposed business, and the business is an extension of something you like and know how to do well. Perhaps you have been a chef for ten years and have always dreamed of opening your own restaurant. So far, so good—but you aren’t home free yet. There is another fundamental question that needs answering: Does the world need, and is it willing to pay for, the product or service you want to sell? For example, do the people in the small town where you live really want an Indonesian restaurant? If your answer is “Yes” because times are good and people have extra money, ask yourself what is likely to happen if the economy goes into a slump ten minutes after you open your doors.
To make this point more broadly, let’s use a railroad train as a metaphor for our economic society. And let’s have you, as a potential new businessperson, stand by the tracks. How do you deal with the train when it arrives? You can get on and ride. You can continue to stand by the tracks and watch the train disappear in the distance. Or you can stand in the middle of the tracks and get run over.
To continue this metaphor, let’s now assume the economic train has three engines: taste, trends, and technology. Together they pull the heavy steel cars which can give you a comfortable ride or flatten you. Let’s take a moment to think more about each of these engines.
Taste
People’s tastes drive many of the changes our society speeds through. For example, in the 1970s, many of us changed our taste in automobiles from large gas guzzlers to small, well-built cars. American manufacturers didn’t recognize this change in taste until they almost went broke. The Japanese were in the right place with small, reliable cars and realized great prosperity.
Consider popular music as another example. Music styles change every few years, and some bright business people succeed by selling clothing and other accessories associated with each new music style.
What does this mean to you? Look at your business idea again. How does it fit with today’s tastes? Is your business idea part of a six-month fad? Are you going into something that was more popular five years ago than it is now and is declining rapidly? If so, you are likely to go broke no matter how good a manager you are and how much you love your business.
Trends
It’s one thing to understand that people’s tastes have changed and will undoubtedly change again and again, but it’s a lot harder to accurately predict what will be popular in a few years. I wish there were a central source of information about predicting future trends in any field, but there isn’t. You have the task of looking into the future and deciding where it is going and how that affects what you do today. Fortunately, a little research can do wonders. Here are some tips on how to proceed.
Read everything you can about your field of interest. Attend trade shows and talk to people in small businesses at the cutting edge of the field. Talk to people in similar businesses. Read back issues of magazines aimed at your proposed field. Your goal is to know enough about your proposed business to spot the trends that will continue into the next decade. For example, if you’re interested in opening a night club from the 1950s featuring a piano bar, mixed drinks, and lots of room for smokers, you should know that the consumption of hard liquor and cigarettes has gone down sharply in recent years and that nonsmoking lounges with wine and imported beer are doing very well. Putting this information together with other factors, such as your anticipated location and target customers, should give you a pretty good idea of what drinks you should offer. You might decide to serve a number of varieties of fine wine and imported beer and forget about a hard liquor license altogether.
Technology
Technology is your innovative kitchen appliance, your home computer, NASA’s new spacecraft, and even the proverbial better mousetrap. For example, lots and lots of people are working feverishly to come up with better video games, laser toothbrushes, wristwatches, TVs, and the like. Sometimes it takes years to perfect an item. That can be good news for small business owners, as there is plenty of time to prepare to profit.
Of course, there is a downside to new technology, too. It often involves high risk. There’s no guarantee of success just because the product is new. In fact, something like 80% of the new products introduced into the marketplace die a quick death. Remember HD-DVD players, the Edsel, and eight-track tape players?
What should you do to take advantage of new technologies? First, recognize that large-scale new technology ventures require vast amounts of money and will be beyond your reach unless you plan to have your small business grow in a hurry. Many companies expect to lose money for years during product development and approval before developing a big hit. However, there are often ways creative small business owners can find to participate in new technological trends. For example, many computer software companies started with little more than a good idea and a computer. Or to think even smaller—but not necessarily less profitably—lots of carpenters have done well making ergonomically correct furniture for computer work stations.
Pay attention to new developments in your chosen field and think about how you can take advantage of them. The explosion in mobile devices has popularized applications (or “apps”) that enable users to accomplish many functions previously associated with desk bound computers. Can your business benefit from creating such an app? Can you modify your software or website development business to accommodate the massive app market?
In short, new technology is a mighty engine that can pull the economy in new directions at terrific speed. Be sure you are riding on the train and not picking daisies on the tracks in front of it.
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From the initial dot-com boom in the late 1990s through the subsequent “dot bomb” in 2001, through the post 2001 rebound and 2008 mortgage meltdown, the only “constant” in the in online business world is “constant change.”
One thing is certain: the pre-2001 approach of just exploiting a hot domain name and buying up cyber “real estate” no longer guarantees success. Today, successful online companies track the same metrics as their offline counterparts—that is, they carefully watch revenues, costs, and profit and loss analysis. For example, one savvy Internet entrepreneur eventually closed his retail sporting goods store because employees—too busy shipping orders to Internet customers—were neglecting brick-and-mortar customers.
Some trends for success have emerged: a successful online retailer commonly carries a wider assortment of goods than a traditional brick-and-mortar store. Online retailers cater to an international market that operates around the clock. Many online retailers try to keep inventory investment as low as possible by having some of their suppliers ship orders directly from the manufacturer’s location to the retail customer (known as “drop shipping”). In this model, the online retailer pays the manufacturer’s invoice at a wholesale cost and collects cash via the customer’s credit card before an electronic purchase order is issued to the manufacturer.
And online retail business also requires intensive management and sometimes requires a bit more vigilance than a typical retail store. These businesses often work on lower than average gross profit margins. Since many online shoppers use the shopping bots mentioned earlier, savvy retailers make sure their products are found by the search engines. Finally, online retailers must either know, or must hire others who know, website programming as well as online banking and fulfillment operations—all of which are necessary to generate profits.
Online retail sales have been growing steadily and are forecast to continue growing. The same is true for online companies that provide services. Google, for example, earns steady profits from its online advertising program where a business pays a fee for each click through to the sponsored link. One advantage of this program is that a merchant can track the cost effectiveness of the program on a daily basis (and stop or start it at any time).
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Write a Future Trends Statement
With this discussion of taste, trends, and technology, I have attempted to focus your attention on the broad movements in the economy that can affect your business idea. Also, remember that there are similar trends in your local community. It’s at least as important that you pay attention to these. For example, perhaps you live in a farming community with no manufacturing industries and many migrant workers. It is unlikely that a high fashion clothing store would do well there, but you might do very well selling a new lighter, stronger, cheaper work boot, or chain saw, or stump puller.
Write down your first thoughts about what trends affect your business and where they will be in five years. Nobody expects a perfect forecast, but most financial backers want to know that you have thought through how your business will fit into the world in the next few years.
Future Trends Affecting Antoinette’s Dress Shop
There are two conflicting trends affecting my business. First, more women are entering the workforce. However, women increasingly must work to pay for family necessities rather than to make money for extras. For my business, this means that professional working women will appreciate even more in the years ahead the extra service and convenience that we offer.
Second, as the baby boom matures, the number of women in the age group that enters the workforce is declining. This means that I cannot count on an ever-expanding population base for my business.
To accommodate these trends, I plan to pay attention to my customer's changing tastes as they grow older. I also intend to find new ways to market to the smaller number of younger women entering the workforce.