Makers and sellers of ink jet printers and supplies can take heart from a recent Lyra Research report while photofinishers can only read and weep. As the number of households with digital cameras increases, home printing of digital photos will continue to be the trend for the majority of users. Worldwide, at-home printing sales are projected to increase from US$7.1 billion in 2003 to US$9.9 billion in 2008.

Whenever a market undergoes a technological change of the magnitude facing amateur photography, existing products and their suppliers invariably fall vulnerable to dislocation. Change begets change, and the question for those already in such markets is whether to embrace the new technology or search for ways to lengthen the lifespan of the old. For those specializing in the new technology, the question is how far and how fast to reach into the new marketplace. Technological change doesn’t merely present new opportunity; it demands a response.

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Later this week, September 30-October 1, a group is gathering at the Wharton School’s SEI Center for Advanced Studies in management, to explore whether the traditional idea of what constitutes a company is obsolete. Their goal will be to reconcile the ways in which companies do business in the twenty-first century with the company model that first began to take shape with the writings of Adam Smith in the eighteenth century.

That model saw a company as the maker and seller of products. At its height it drove firms toward vertical integration. A company strove to own or control everything from the taking of raw materials out of the earth through the manufacture, distribution, and sale of the products those materials were turned into.

Today’s global companies are more likely to be the managers of value chains in which many different companies control a part of the materials and processes that bring about the creation and distribution of products. That’s not exactly news to anyone watching the business scene. But the results of the change just may be.

For example, it may effect how a company’s value is determined. Bricks and mortar, machine tools, inventory, and other hard assets have historically been the heavyweights on a company’s balance sheet. Today, maybe the strength of the value chain is more important than the real estate a company owns.

The SEI Center is conducting a survey to see how business executives around the world view the changing role of the company. You can participate by answering four questions.

It will be interesting to see what comes out of these discussions, and others like them that are bound to take place in the near future. One thing is for sure. Smaller enterprises are the recipients of much of the opportunity that the shift to a “value-chain economy” is bringing about. With the largest of companies no longer feeling a need for vertical integration, opportunity knocks for the agile, smaller players who can provide part of what the biggies need.

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One of the most recognizable and copied consumer products of the twentieth century has been updated to twenty-first-century functionality. The venerable Swiss Army Knife– the all-purpose pocket tool that comes with everything from a corkscrew to a toothpick–now offers the choice of a 64MB or 128MB USB memory stick as one of its “blades”. Victorinox, which registered the original Swiss Army Knife in 1897, has brought out the SwissMemory, “for computer users on the move.” (Picture/link of the SwissMemory is at the bottom right of the Victorinox website homepage.)

The SwissMemory is a harbinger of things to come. It’s a real trendsetter because it tells us that the concept of carrying data with us has hit mainstream. Twenty-three years ago the first IBM PCs went on sale. Now pocketknives carry around more memory than most of the first PC users ever dreamed of having available in their desktop boxes.

As data portability becomes both ubiquitous and invisible, new markets for devices that carry it and for purposes to use it will appear. Sure memory sticks have been around for a while, but not as long as the Swiss Army Knife. At first glance, the impact of mating the two may seem like a gimmicky product enhancement that will sell a few more pocketknives. But the real impact of such a tool is to tell us how important portable memory is becoming, and to wake us up to its use potential.

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Franchising is big business among small businesses in the US according to a study by the International Franchise Association Educational Foundation and PricewaterhouseCoopers. The study reports that franchised businesses account for 9.5% of the US private-sector economy.

According to the study, franchises directly employ 9.8 million people, about the same number as the US durable-goods manufacturing sector. Combine direct employment with indirect, and the study says the job total grows to more than 18 million, nearly 14 percent of US private-sector employment.

Two types of franchises are identified by the study:

1. Business-format franchises such as automobile services, convenience stores, hotels, restaurants, and tax-preparation services.

2. Product-distribution franchises such as gas stations, vehicle dealers, and beverage bottling and distribution.

Data for the study was collected from a variety of sources and much of the statistical information reflects 2001 numbers when 767,483 franchises were operating in the US.

Franchised businesses play a far larger role in the US economy than a surface view might suggest. While everyone recognizes the corner McDonalds as a franchise, how many realize the local Ford dealer is also one? Businesses that sell to small business would do well to recognize the growing trend of franchising and develop strategies for selling goods and services to master franchise holders. Pricing and service should take into account the value of building relationship with both individual franchisees and parent companies.

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When it comes to identifying the trends of the moment and probably the near future, it pays to look at where consumers are increasing their spending. In little more than a decade, spending by Americans on pets will have doubled from US$17 in 1994 to a projected 2004 total of US$34.3 billion. In 2003, the pet-spending total of US$32.4 billion was 60% larger than the toy industry and 33% larger than the candy industry according to an American Pet Products Manufacturers Association (APPMA) survey.

With 40 million Americans shopping for gifts for their pets in the upcoming holiday season, everything from jingle-bell collars to golden ID tags and self-cleaning kitty litter boxes will be moving from store shelves to homes shared with animals. And according APPMA COO Bob Vetere spending on pets is not expected to diminish anytime soon.

When an industry doubles its sales in 11 years, it’s telling us something. Yet impressive gains like these often seem to fly under the radar of people looking for the next big entrepreneurial thing.

Looking for a market to exploit or to sell into? How about just following the money?

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China produces 29% of the world’s mobile phones, 58% of its clothes, and 74% of its toys. The McKinsey Quarterly report Checking China’s Vital Signs focuses on the country’s 9%-a-year economic growth over the past 24 years. McKinsey examines the sources of this remarkable growth, explores its effect on consumers and businesses, and addresses four challenges confronting China.

Misallocated capital

Weak banks

Needed economic liberalization

Economic disparity between rural and urban dwellers

For anyone interested in doing business in China or with Chinese companies this is a must read. McKinsey has devoted a whole issue to China. The Vital Signs report can be read for free, but other topics in the special issue are available only to paid subscribers.

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Over the past decade there has been a decline in consumer interest in major sports when compared to other forms of entertainment according to a recent article in the McKinsey Quarterly. In Europe between 1996 and 2001, the number of TV viewers of sports fell by 15%. In the US, NFL Monday Night Football has lost 17% of its viewers since 1999.

In the US, the number of people participating at the amateur level in sports that are major revenue producers on the pro level is also on the decline. For example, from 1991 to 2001 the number of participants in baseball fell by 10%. It is thought that a drop in participation in a sport ultimately translates to a smaller audience for that sport.

In 2002 US networks lost an estimated $4 billion on sports programming. The rate of revenue growth from global corporate sponsorships has fallen 6% annually since 1996. Sports increasingly are competing among themselves for a tighter pool of funds.

McKinsey identifies six challenges facing every professional sport that must be addressed if that sport is to be a successful business. The historically major sports face a watershed with these six challenges:

- Players’ salaries
- Changes in technology
- Pricing
- Internationalization
- Innovation
- Illegal activities by athletes

Are we seeing the end of professional sports as a lucrative business that drives other economic activities? I think not. But professional sports are undergoing an upheaval. Alternatives such as extreme sports are coming on line and the population of sports enthusiasts is aging and changing. Think of the baby boomers and what they no longer play. Think of the teen and preteen girls who follow women’s soccer in the US. The picture of professional sports as a business is likely to be a mosaic in the future. That will probably mean less money for the longtime leaders in sports revenues, but more income overall as more sports draw their share of the audience.

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Product quality and value trump brand in the process of deciding what to purchase and who to buy it from according to a Millard Group online survey. The results come from more than 66,000 respondents. Thirty-seven percent of the respondents listed quality as the most important factor, and 26% cited price. Only 2% pointed to brand as the deciding factor in making a purchase.

For a long time, I’ve thought that brand was an over-rated, or at the very least misunderstood, aspect of marketing. I think brand is a subset of permission. Customers give permission to marketers to sell to them. During much of the twentieth century, brand acceptance was the mechanism for granting that permission. Brand names indicated quality.

Today’s proliferation of products and services combined with a multitude of ways to purchase has lessened the importance of brand as a quantifier of quality and value. When people can turn to the Internet to check out quality reports from actual users of a product or service, brand loses its importance as a value identifier and permission earner.

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The majority of companies in the US and Canada with sales of over US$250 million are failing to respond adequately to emails with high-value purchase intent and are missing out on revenue opportunities according to an eGain survey conducted in July 2004. Three hundred companies were surveyed, and key cross-industry findings show that 41% of companies did not respond while only 17% responded with an accurate and complete answer.

The retail sector performed the best with 53% responding within 24 hours. Financial services companies were the least responsive with 59% not sending any response.

Smaller enterprises should take note from this failure of larger companies and see it as an opportunity to deliver better customer service. Firms selling customer relationship services to companies should recognize these poor marks for the opportunity they present.

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SATS is an attempt to revolutionize commercial air travel in the US. If the project is successful it will distribute commercial air travel to thousands of smaller airports and put people into four- to ten-passenger air taxies. NASA believes:

1. Travel time will be reduced as people access nearby airports.

2. Economic development will be spurred in smaller communities.

3. Air congestion around large cities will be reduced.

4. Safety will be improved.

The current air travel system of hub airports and large commercial airliners has become overtaxed with congestion and has been overtaken by events (September 11, 2001). Many see its continuation as unsupportable. Airline bankruptcies and flight delays they say will worsen and eventually disastrously disrupt the whole system. SATS is an alternative that is beginning to look better as time goes by.

The SATS concept is made possible by the trend toward the development of a new generation of small jets that can be manufactured for less money, are easier to fly, and can be operated more efficiently. If adopted, the system is projected to go into operation in 2015 and to reach full implementation as early as 2020.

SATS has been on the horizon for a while, but has received surprisingly little attention given its potential impact. Calling it revolutionary is putting it mildly. Communication and transportation will be major drivers of business for the foreseeable future. The Internet and low-cost computing have already reinvented communication. Now SATS is promising to make travel to anyplace in the US easier and more affordable. It’s estimated that up to 5,000 airports could be incorporated into SATS. Change of this magnitude will open tremendous opportunities for small businesses and the companies that service them.

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