MINITRENDS: How Innovators & Entrepreneurs Discover & Profit From Business

The book provides an excellent method & mindset to find & exploit emerging trends with a 2-5 year pay-off--we call them Minitrends--for fun and profit.

Importance of Minitrends

 

In 1982, John Naisbitt published the book Megatrends, describing ten overarching trends that would “define our so-ciety.” Today, more than two decades later, many of those trends are still relevant: our transformation from an industrial society into an information society, from a national economy to a world economy, and from a representative democracy to a participative demography.

 

Naisbitt’s insights sensitized us to the emergence of new Megatrends: the rise of China as a major and growing economic power, the convergence of computing and communica-tions technologies, the movement from a Physics Age to a Biology Age, our increasing awareness of the impacts of cli-mate change, increased government intervention into the financial arena, new long-term energy shortages, the aging of populations in many of the world’s most prosperous nations, and they just keep coming.

 

Even though all of these Megatrends have important im-plications for individuals, companies, and governments throughout the world, they are generally well-recognized and understood. Therefore, these overarching Megatrends offer little competitive advantage to specific individuals or businesses. Yet buried in each of these Megatrends are less obvi-ous emerging trends, which I choose to call “Minitrends.”

 

Minitrends go hand-in-hand with Megatrends, but are harder to spot. Within the Megatrend of an aging population, for example, are the Minitrends of people remaining active in the workforce for longer periods of time and increasing movement of elderly individuals to smaller nursing centers. Within the Megatrend of convergence of computing and communications technologies are the Minitrends of virtual lives and interactive Web platforms. Within the Megatrend of long-term energy shortages are Minitrends of increased electrification of industrial processes and the development of advanced digital machines.

 

There are, of course, many Minitrends emerging that have little or no relationship with a Megatrend. These include trends such as the increasing participation in virtual worlds, the increasing number of people working at home, and the development of new approaches to the giving and receiving of advice based on information technology advances.

 

ROLE OF MINITRENDS

 

Megatrends normally fall under the aegis of governments and large international corporations; Minitrends, on the other hand, often have relevance to wider audiences. Although many Minitrends promise to grow increasingly important within the next few years, they are typically not recognized nor appreciated by the general public or most large compa-nies. Employing the principles of Minitrend application can provide you with significant professional and personal advantages if you are alert enough to recognize emerging Minitrends, clever enough to realize their significance, and talented enough to take full advantage of the opportunities that they represent.

 

In today’s business world, uncovering, analyzing, and acting on Minitrends can provide opportunities for individuals and small groups of individuals to establish successful new businesses, for small and medium-size businesses to expand and grow, and for large businesses to take advantage of sig-nificant changes in their operating environments. (In this book the term “individual” is used for a single person or for groups of six people or less; the term “large business” is reserved for companies that have revenues of at least $200 million per year or have 50,000 or more employees; and the term “small and medium-size companies” is used for companies between these two sizes.)

 

The purpose of this book is to assist you, the reader, in uncovering and analyzing promising Minitrends, to provide techniques for selecting specific Minitrends which merit follow up, and to present techniques for translating the identified Minitrends into profitable business opportunities. In the process of accomplishing these objectives, I make extensive use of the experiences of individuals, including myself, and organizations, including my own, that have been involved in the successful application of Minitrend analyses.

 

As mentioned in the preface, I use the term “gems” in the major section headings as a metaphor for Minitrends because both have inherent value, require effort to uncover, entail processing to achieve their full value, and, can be very valuable to their discoverer.

 

Minitrends and individuals

 

•           In Dallas, Texas, in 1967, Rollin King and Herb Kelleher noted the growth in the size and number of businesses in the Texas cities of Dallas, Fort Worth, Houston, Austin, and San Antonio. They had the foresight to see that air traffic between these cities was destined to grow steadily over the coming decade and envisioned the business opportunities of an airline that provided dependable, economic, and friendly service, primarily to business customers. The result was the creation of Southwest Airlines.

 

Currently, Southwest Airlines is the largest airline in the United States in terms of the number of passengers carried domestically. It maintains the world’s second-largest passenger fleet of aircraft and in January 2009, reported its 36th consecutive year of profitability.

 

•           In Austin, Texas, in 1984, Michael Dell, while still in col-lege, noted the increase in the demand for personal com-puters. He observed that individuals were much more cost-sensitive about computers than businesses, and believed that he could eliminate many of the costs of

buying computers by distributing them to customers by mail service. Mr. Dell dropped out of college to found Dell Computer, Inc. The company focused on a “config-ure to order” approach to manufacturing, i.e., delivering individual PCs configured to customer specifications.

 

Starting with a capital of $1,000, the company grossed more than $73 million in its first year in business. In 1999, Dell overtook Compaq to become the largest seller of personal computers in the United States, and in February 2005, the company was listed in first place in Fortune magazine’s ranking of the “Most Admired Companies.” Current company net income is over $41 billion per year.

 

•           In San Bruno, California, in February 2005, Steve Chen, Chad Hurley, and Jawed Karim, former PayPal em-ployees, noted the increasing capacities of digital electronics, particularly in cameras and cell phones. They noted the growing ability of individuals to produce short film clips. They perceived a business opportunity in providing a method for individuals to distribute these film clips and for others to download these clips. Based on these factors, the three entrepreneurs founded YouTube, LLC. The company began operations in headquarters located above a pizzeria and a Japanese restaurant in San Mateo, California.

 

YouTube reports that more than 65,000 new videos are being uploaded every day and that the site is receiving 100 million video views per day. In November 2006, the company was purchased by Google, Inc. for $65 billion.

 

•           In the late 1990s, Romi Haan, a young Korean wife and mother, was frustrated by the time and effort required to keep the floors in her home clean and sanitary. Moreover, she noted that other Korean homemakers were similarly chagrined. To address these frustrations, Ms. Haan decided to develop a “steam mop.” After several years of effort, she was able to bring to market a successful steam cleaner that uses high temperature steam to loosen and wipe away dirt, kill germs, mites, fungus and E. coli from any hard floor surface. To produce and market the new product, Ms. Haan established the HAAN Corporation.

 

In 2007 the HAAN Corporation had revenues of about $90 million and has now expanded into the United States.

 

•           In early 2006, Tomoko Namba, a former McKinsey & Co. partner, noting the obsession of Japanese mobile-savvy youngsters with the latest electronic devices, launched the DeNA Co, Ltd. in Tokyo, Japan. The initial product of DeNA was “Mobage Town,” a collection of online games, chat rooms and virtual characters, accessible only by cell phone. The innovative feature of this product is that users were and still are able to use the programs free of charge. Users, however, are invited to take part in the site’s social network service where they can buy, for real-world money, clothes, accessories, and even furniture and real estate for use in a virtual world.

 

The new system was an immediate hit and by the end of 2007 had 11 million members and was logging more than 15 billion page-views per month. For the year ending in March 2008, the net profit at DeNA, reached 6.7 billion yen ($65.6 million), 80 percent of which comes from purchases on the site’s social network. Recently, DeNA has opened up subsidiaries in China and the United States.

 

In many cases, flexibility, low overhead, and ability to move quickly provide individuals with unique opportunities to take advantage of emerging Minitrends. The principles and techniques presented in this book provide guidance for seizing such opportunities.

 

Minitrends and small and medium-size companies

 

Minitrend recognition is also of significant value to small and medium-size companies by alerting them to new business opportunities. In fact, the ability of smaller companies to succeed in an environment in which larger companies have more resources, stronger financing, and greater staying power may well depend on keeping alert for emerging Minitrends and reacting rapidly to their emergence.

 

•           American Superconductor, Inc. (AMSC) was established in 1987, shortly after the discovery of the high-temperature superconductivity (HTS) phenomenon. (HTS makes possible the transmission of electricity without current losses at relatively high temperatures.) Although a great deal of research and development was needed before superconducting wire could be produced in bulk quantities and utilized in practical applications, AMSC became the world’s leading developer and manufacturer of HTS wire within a relatively short period of time. The company shortened the time from research to market by developing a variety of practical applications including power cables, motors, generators, and specialty magnets. But the story was not an immediate commercial success: despite a continuing series of product and process advances, the company failed to turn a profit for a number of years.

 

In the early 2000s, AMSC noted an increasing demand throughout the world for clean energy sources, particularly wind energy. The transient nature of wind power, however, presents very serious technical problems, such as severe voltage fluctuations, excess stresses on gearboxes, and reduced equipment lifetimes. The management of AMSC saw the need for equipment to address these problems and, using the company’s expertise in HTS, developed the superconducting D VAR System to meet this requirement.

 

The company’s engagement in the wind energy arena represents an entirely new business line, and its wind power sector generated 65 percent of its sales in 2007. AMSC management is currently considering entry into the thermal solar energy area whose variable production characteristics are somewhat similar to those of wind power. AMSC is continuing to stay alert to attractive Minitrends.

 

•           In many cases, important Minitrends may reflect changes in market demand. Companies must be alert to such changes and modify their strategies accordingly. For decades, watchmakers in Switzerland were acclaimed for the precision and accuracy of their products. A twenty-one jewel watch was the quality standard of the world. In the 1960s, however, electronic digital watches, which are extremely accurate, began to replace mechanical watches. Some of the more perceptive Swiss manufacturers recognized this trend and reacted by changing their concentration from the general timepiece market to a high-priced specialty market. Anyone could buy a Timex to tell the time, but only the sophisticated and well-to-do could show off a Rolex.

 

In similar manner, U.S. bicycle manufacturers noted the public’s increasing interest in health and environ-mental matters and converted their marketing effort (and products) from a low-cost means of transportation to a vehicle offering healthy and environmentally-friendly exercise. The fact that there are currently more than 2,000 bicycle manufactures throughout the world testifies to the success of this strategy.

 

•           In a more personal area, my company, Technology Fu-tures, Inc. (TFI), represents an example of the importance of a small company taking advantage of emerging Minitrends. When TFI was founded in 1978, we concentrated on conducting research and training in technology forecasting in the petroleum industry. Our clients included most of the major companies in that industry, e.g., Exxon, Shell, Gulf, Continental, British Petroleum, Phillips, and Atlantic-Richfield. As time went on, we observed the increasing consolidation of these companies, while also noting increasing public interest in computers. Acting on the recognition of these trends, we increased our efforts in the computer area, and, at one time, the computer industry provided the majority of TFI’s income.

 

During this period we also noted increasing interest in entrepreneurship, so we initiated a workshop and be-gan consulting in this area. These efforts resulted in our being engaged by a number of companies and government agencies to promote entrepreneurial activities in their organizations.

In the mid-1980s, we took note of trends developing in the telecommunications industry, particularly in mobile communications, and began a concentration in this area. We assisted in the establishment of the Telecommunications Technology Forecasting Group, which is comprised of representatives from the nation’s leading local exchange carriers. Currently, telecommunications consulting, research, and education provide more than half of our total revenue.

 

After the Twin Towers attack in 2001, we judged that there would be increased interest in national intelligence processes, so we initiated projects in that area. These projects became an important source of income for TFI as we conducted forecasts for the Central Intel-ligence Agency, the National Security Agency, and the National Geospatial Intelligence Agency.

 

Over the last couple of years we have noted increasing interest in the energy/environmental area, and we are in the process of enhancing our capabilities in this arena. Recently, we have conducted forecasts in areas such as the electrification production processes, fuel cells, hybrid electric cars, and home technology integration.

 

Overall, I am convinced that an ability to identify and react to emerging Minitrends has been essential to our company’s survival and success for more than three decades.

 

Minitrends and large companies

The invested capital, trained labor forces, and established markets often motivate large companies to ignore or dismiss Minitrends. Normally, the difficulty and expense of making significant changes to established products, processes, and procedures discourages large companies from making such changes. Successful large companies, of course, do pay atten-tion to trends, but normally they concentrate on larger trends because of the cost, time, and effort required for changes in strategy. Even large companies, however, should keep a radar on for Minitrends that may offer promising new business opportunities or threaten current business operations.

 

When large companies (or usually individuals or component groups inside the companies) note emerging Minitrends they believe have the potential of being a significant opportunity or threat, they most often act to acquire or partner with a company that has already established a position in that arena.

 

•           Demand Media, a company headquartered in Santa Monica, California, specializes in distributing website content to existing large company websites and in creat-ing website content for search engine queries. Recently, the company noted the increasing interest in RSS (Really Simple Syndication) feeds, a format for deliver-ing regularly changing Web content.

 

Demand Media became aware of Pluck, Inc., a leading on-line producer, publisher, and syndicator of profes-sional content and social media solutions. Pluck utilized proprietary software to help mainstream media outlets syndicate blogs. These services coordinated well with Demand Media’s own services, and, in March 2008, the company purchased Pluck to take advantage of its contacts and capabilities.

 

Demand Media currently operates the world’s largest blog syndication network that connects newspapers and other media sites to selected blogs. The company’s software runs on more than 200 websites, including those of USA Today, The Washington Post, and Fox News.

 

Demand Media recognized the emerging RSS Minitrend and the purchase of Pluck provided Demand Media with an opportunity to cash in on this trend.

 

•           Xerox Corporation is one of the largest global document management companies in the world. It manufactures and sells a range of color and black-and-white printers, multifunction systems, photocopiers, digital production printing presses, and related consulting services and supplies.

Although the company has been successful for more than a century, it is continually on the alert for developing trends that could affect its operations.

 

In the late 1970s, Xerox became aware of Kurzweil Computer Products, Inc. (KCP), a company that had introduced the first system for recognizing omni-font optical characters in 1974. This computer program was capable of recognizing text written in any normal font, and a commercial version was introduced in 1978. LexisNexis adopted the program to upload legal and news documents from paper onto its nascent online databases.

 

In 1980, Xerox bought KCP because of its interest in further commercializing paper-to-computer text conversion. Since then Xerox has continued upgrading the Optical Character Recognition device, now called Xerox TextBridge, and it continues to be a market leader.

 

•           In January 1982, AT&T, acting under an agreement with the U.S. Department of Justice, divested itself of its seven Regional Bell Operating Companies or “Baby Bells.” The managements of these local exchange carri-ers (LECs) realized that changes were in the air and supported the formation of the Telecommunications Technology Forecasting Group (TTFG) to examine emerging trends. TTFG contracted with Technology Futures, Inc. to assist in these examinations. Among the trends identified and analyzed were:

 

          Adoption of local digital switching

          Expansion of cell phone usage

          Use of access lines on fiber digital loop carrier

          Growing market for digital communication services

          Expanding variety of imaging on Internet

          Significantly increasing utilization of household broadband services

 

Although the LECs reacted to these trends differently, these analyses provided and continue to provide, insights that are useful to the companies in strategic planning, investment decisions, and analyzing tax and depreciation allocation.

 

The cooperation of the TTFG members illustrates that Minitrends can sometimes assist groups of companies, as well as individual companies. Also note that each of the listed trends represents a combination of Minitrends. The expansion of cell phone usage, for ex-ample, is driven by a number of technical advances, changes in social norms, and different business models.

 

FAILURE TO RECOGNIZE MINITRENDS

 

Recognition of and action on emerging Minitrends can provide attractive opportunities to individuals and companies. Failure to recognize and appreciate emerging Minitrends, however, can result in serious problems for existing companies.

 

When they have been successful for a long period of time, both individuals and organizations are often prone to “stick to their own knitting,” i.e., continue activities that had proven successful in the past. In many cases this mentality can lead to decline and disaster. Fewer than 30 percent of the companies listed on the Fortune 100 twenty-five years ago are still on the list today.

 

Often the primary reason for the demise of such companies has been a failure to recognize and react to changing trends. Individuals and companies are not done in by the bullets from the front, but the unrecognized bullets coming from the side or back. In today’s world of increasingly rapid change, failure to keep abreast of developing trends is often a prescription for surprise and tribulation.

 

Examples of such failures include:

 

•           The Sharper Image Corporation was founded in 1977 as a catalog business selling jogging watches. The com-pany established retail outlets in 184 locations through-out the United States over the next twenty years, mostly in shopping malls. The company specialized in high-end electronics and special-interest gifts and featured open sales displays where potential customers could easily browse and closely inspect the products. In time, its retail stores accounted for 60 percent of the company’s total revenue.

 

Sharper Image showed agility in reacting to trends by shifting its emphasis from catalog sales to retail stores and, later, by utilizing eBay sales. The company grew and grew. Sharper Image remained alert to emerging trends in both its product lines and sales processes, and as a result its business remained successful for more than three decades. At one time, Sharper Image employed 2,500 people nationwide.

The company, however, failed to appreciate the public’s decreasing interest in high priced luxury items, the aggressive pricing policies of big box competitors like Best Buy, and the general decreases in large mall shopping. In February 2008, the company filed for Chapter 11 bankruptcy, blaming low sales, aggravated by a decline in consumer spending. Sharper Image failed to see the Minitrend “bullets” coming from unexpected quarters.

 

•           Wonder Bread was introduced to the public in May 1921 by the Taggart Baking Company of Indianapolis, Illinois. The company was famous for being an industry pioneer. The original appeal of Wonder Bread was that it stayed fresh much longer than other breads. In the 1930s the Taggart Baking Company was one of the first baker-ies to market sliced bread. In the 1940s the company introduced “enriched bread,” adding vitamins and minerals to its loaves, and its bright red, yellow, and blue packages began appearing throughout the United States.

 

Although the Wonder Bread brand had a long history of innovation, its owners failed to appreciate the increasing preference of the younger generation, particularly in Southern California, for healthier whole-grain breads and “premium” loaves. Because of declining sales in that area, in August 2007, the current owner, Interstate Bakeries, Inc., announced that it would end production of Wonder Bread in the Southern California market, leading to a loss of 1,300 jobs.

 

•           In Seattle, Washington, in 1971, Howard Schultz, the owner of a local coffee roasting and distribution com-pany, noted the increasing affluence of the American public and their desire to receive gracious treatment in their daily activities. Schultz recognized that there was a market for small businesses featuring top quality coffee and an opportunity to relax in an attractive environment. To take advantage of these emerging Minitrends, Mr. Schultz initiated the very successful Starbucks chain which offers top quality coffee drinks in a friendly and relaxed atmosphere.

 

Starbucks has a long record of appreciating Minitrends, but failed to recognize the trend that more economically-stressed customers were beginning to opt for similar, lower-cost drinks offered by fast food restaurants such as McDonald’s. While still popular, in summer 2008, the Starbucks company announced the termination of 1,000 employees, and in November 2008, the company reported a 98 percent decline in profit for the third quarter of the year. To be more economically competitive, Starbucks has recently introduced a line of instant coffee.

 

Note that in each of these three cases, the company’s success was based on its recognizing and taking advantage of emerging trends, while their later difficulties can be attributed to failing to identify and react to other emerging trends. The difficulties of General Motors, Bear Sterns, Circuit City, Mervyns, and Linens n’ Things also serve as examples of what happens when companies fail to be alert to developing Minitrends. The lesson is individuals and companies must be constantly alert to emerging Minitrends in technologies, social norms, market demands, laws and regulations, and economic and financial realities for continuing success.

 

ALL VERY INTERESTING, BUT FRANKLY, SO WHAT?

 

Most start-up enterprises begin with major disadvantages in their competition with larger established companies. Established companies have successful products and loyal customers; they have proven supply, manufacturing, and distribution systems; and they enjoy financial superiority and powerful allies. Four out of five start-up companies fail within the first five years. A major reason that some start-up enterprises survive and, indeed prosper, is their ability to recognize and take advantage of Minitrends.

 

Ms. Haan and her steam mop, Dell’s mail-order PCs, and Demand Media’s smart acquisitions all brought in consistent smart profits, and will continue to do so, so long as the now established companies keep their radar open to Minitrends coming from all sides.

 

For small and medium-size companies, the Minitrends that are most valuable are those that can build on their current ar-eas of business. Companies must be alert to developments in their own business areas and in related areas.

 

For large companies, emerging Minitrends may offer attractive opportunities for advancing, or protecting, their cur-rent product lines or for expansion into new business arenas. Because of the structure of large companies, an individual or a special group in the company is more likely to initially recognize an important Minitrend. Bringing the Minitrend to the attention of company management to determine how it might fit into the company’s plans and strategies is then the responsibility of that individual or group.

 

In all of these cases, if you are to effectively take advantage of Minitrends, you must recognize and act on the trends at the appropriate time in their development: early enough in the development process that few others have recognized the trend’s importance, but far enough into the development process that the trend is likely to continue, and that the financial payoff can be realized in a reasonably short period of time (two to five years).

 

 

 

I hope the examples described in this chapter convince you of the potential value of recognizing and appreciating the im-portance of emerging Minitrends and of acting on this recognition and appreciation. The rest of this book is dedicated to demonstrating how you can use Minitrends to your own advantage and that of your organization. I begin this task in Chapter Two, where I present techniques that will assist you in identifying promising Minitrends.

 

Note that this book discusses the exploitation of Minitrends in a step-by-step manner. In reality, however, application of the process requires the adoption of a mindset that encompasses all of the elements of the concept.