The 18 Best Industries for New Businesses

The economy may still be recovering, but some industries are experiencing plenty of growth and low competition. Inc released a list of what they consider to be the best industries for new businesses. Although it is unclear exactly what criteria was used to narrow down their selection, the options are actionable. Many times, a list of industries is simply that:  a handful of top-level categories. Inc’s list provides granular detail that executives and entrepreneurs want to see, like naming “software as a service” and “education technology” versus “internet technologies” or even “technology.” “Green construction” can also be found on the list, which is unsurprising, but  it also silently acknowledges that not all categories within the green movement are necessarily sustainable.

Find the full list below:

1. Candy
2. iPhone apps
3. Health-care technology
4. Beer, wine, and liquor wholesale
5. Software as a service
6. Home health care
7. Yoga products are services
8. Technical and trade schools
9. Fast-casual dining
10. Green construction
11. Niche consulting
12. Education technology
13. Temporary staffing firms
14. Government services
15. Accounting services
16. Repair services
17. Self-improvement
18. And, of course, Energy

Did you see any surprises on this list? Did Inc leave off any other emerging industries. Let us know what you think by leaving a comment below.

How Wall Street Reinvented the Investment Bank

With President Obama’s speech to mark the one-year anniversary of the fall of Lehman Brothers, we had the opportunity to evaluate the progress over the last twelve months. Many of us are wondering what has changed, and if the changes to Wall Street have been substantial enough to stabilize a market.

Knowledge@Wharton spoke with Jeremy Siegel and Richard Herring, finance professors at the Wharton school, to analyze the situation. Surprisingly, their point of views are not similar.

When asked how Wall Street has changed, Siegel responded with:

We saw the whole concept of the investment bank totally changed. It killed itself as a standalone institution. It had to be absorbed by a commercial bank, as was the case with Bear Stearns, or in the case of Lehman, liquidated or take on a commercial-bank holding company status to get federal [funding] access … Even Goldman Sachs, the most successful of the investment banks, [did that].

By definition of a standalone entity, the investment bank may never return. Herring, however, questions if any existing entities will take its place, such as hedge funds. He also serves as an example that not everyone in the financial industry agrees the environment has changed much as it has to.

It’s changed surprisingly little … Some institutions will be paying record bonuses again. In fact, the U.S. government has set up a situation where [bonus systems] can be very easily arbitraged by institutions getting essentially federal money [while] taking risky positions and making easy profits. In one sense, we’ve made the situation worse.”

While the public has been watching to see how the financial industry will fix itself, the proposed reform from the President may deserve the most attention. And even if Wall Street has both supporters and critics of the Obama administration’s proposal, its likely that the most significant changes still lie ahead.

Photo credit: jpellgen

3 Ways Luxury Manufacturers Drive Sales During a Recession

Dollar stores, discount big box retailers and fast food chains saw the silver lining that comes with every recession, but they were not alone. Companies that manufacture luxury products refused to accept a decrease in sales with a drop in consumer spending power. Below are three examples of how luxury companies weathered the storm:

1.  ”Used” is such an ugly word; BMW focuses on pre-owned

BMW, among the best examples of a luxury automotive manufacturer, saw a decrease in sales caused by the recession. Instead of strictly pushing new sales, they reinvented the idea behind owning a used car.

According to Bloomberg, “U.S. sales of so-called certified pre-owned luxury autos rose 4.7 percent this year through August, bucking a 31 percent drop for new luxury models, according to researcher Autodata Corp. BMW, Lexus and Mercedes certified sales jumped 14 percent.”

• Takeaway:  Companies can retain the value of their brand without dropping prices. Provide or emphasize options that already exist at lower price points.

2.  Apple drops prices while introducing features

Earlier in the month, Apple introduced a refreshed line of iPod nanos with perhaps the most significant technological improvement since its introduction:  the ability to shoot and record video. And they did it with a $20 reduction in price.

• Takeaway:  Reducing prices alone makes a company look desperate, and the practice harms their brand. Reducing prices while adding features strengthens their brand while remaining competitive.

3.  Louis Vuitton/Ralph Lauren looks to the East

Reuters and Bloomberg report that LVMH and Ralph Lauren are looking to expand and penetrate China and Lebanon in the next few years, and their expansion has already begun. Companies like these want to lay the foundation for years of growth by increasing the percent of revenues derived from emerging markets.

• Takeaway:  All markets are affected during a global recession, but not all markets are affected or respond equally. Modern-day executives should pay attention to opportunities abroad.

Starbucks’ Instant Brew for Instant Change

It’s been a little more than a year since Howard Schultz returned to the iconic Starbucks Coffee Company as CEO.  The stock, which has tumbled from 19 at the beginning of 2008 to 10, hasn’t performed quite as well as analysts expected and shareholders hoped.

Now, Schultz introduces Via, its inaugural venture into the instant coffee category, to a less than enthusiastic public.  Starbucks fanatic blog “Starbucks Gossip” gave sneering remarks:

“Okay, company over. Everyone go home”

If there’s one thing Schultz loves, besides growing an empire of coffeehouses, it’s a well brewed cup of coffee. Starbucks has been known for its luxury designer drinks at a high price point.  The venture into instant coffee may allow Starbucks to reinvent the category, much like how it reinvented the coffee shop in the early 1990s.  Via brings the cost down to encourage people to still enjoy their morning Starbucks, even if they have to wait until they arrive at the office for that first sip.

Fast Company was able to sample an early taste test.  Starbucks set up a blind taste test to try competitor instant coffees, Starbucks’ brewed coffee, and Starbucks’ new instant coffee.  The results?  Favorable, but only if you are used to drinking Starbucks:

Most were impressed, calling the flavor “impressively rich” and noting that “the color, taste, and consistency are identical to a $2+ venti.”

Keep in mind, a few of the samplers from Fast Company didn’t like Starbucks’ original brew.  And Starbucks didn’t provide cream or sugar for people to add to taste.  If the sample was comprised of regular customers, it’s likely that the results would have been more positive.

Even in a recession, Starbucks has already introduced a line of instant oatmeal, which performs very well. The Via instant coffee will join the product lineup to allow any customer an affordable Starbucks breakfast, to go.

Top 30 Innovations Over the Past 30 Years

The word “change” may never be the same.  For some, it’s change from the previous political administration.  For others, it’s global change and a new approach to each problem we encounter as a world.  But looking back over the last few decades, what would be the most significant innovations that changed how we live?

PBS’ Nightly Business Report celebrated its 30th year on the air with a special on the top 30 innovations in the past 30 years.  NBR solicited nominations from the public, and a panel of professors from Wharton sorted and awarded the top innovations.

From medication and technology marvels to those basic staples like LEDs found in every device, the list is not very surprising.

1. Internet and the Web
2. PC/laptop computers
3. Cell phones
4. Email
5. DNA testing and sequencing/Human genome mapping
6. Magnetic Resonance Imaging (MRI)
7. Microprocessors
8. Fiber optics
9. Office productivity software
10. Non-invasive laser/robotic surgery (laparoscopy)
11. Open source software and services (e.g., Linux, Wikipedia)
12. Light emitting diodes (LED)
13. Liquid crystal display (LCD)
14. GPS systems
15. Online shopping/ecommerce/auctions (e.g., eBay)
16. Media file compression (jpeg, mpeg, mp3)
17. Microfinance
18. Photovoltaic Solar Energy
19. Large scale wind turbines
20. Social networking via the Internet
21. Graphic user interface (GUI)
22. Digital photography/videography
23. RFID and applications (e.g., EZ Pass)
24. Genetically modified plants
25. Bio fuels
26. Bar codes and scanners
27. ATMs
28. Stents
29. SRAM flash memory
30. Anti retroviral treatment for AIDS

What’s missing from this list?  And should social networking (which affects people online and who have registered for services) really score higher than genetically modified plants (which fill the shelves of every grocery store)?

A Change in the Rapacious Executive

With unemployment on the rise and stressed out executives unsure where they may find their next deal, the business world has succumbed to an epidemic of an unusual kind:  politeness.

In an article from The Economist, one journalist writes:

Rudeness is out, and civility is the new rule in an uncertain world. The former kings of abrasive behaviour—Masters of the Universe bankers, hedge-fund traders, private-equity chiefs—have been humbled. On Wall Street, says a banker, “it’s now all about charm and openness and taking time with people.” Cocky young things straight out of the best business schools have stopped skipping interview appointments, recruiters say, and there is much less looking over people’s shoulders at drinks parties, reports one veteran. Many people, fearful for their jobs, are trying to burnish their contacts at other firms.

Upper-level management discuss the details of their annual strategies with vendors while employees from all levels exchange handshakes and greetings with unfamiliar faces.

Is it all a facade that we set in place during tough times?  Will it be a permanent change that we’ll see throughout the business world?  Unlikely, but business is easier when working with willing and cooperative coworkers.  Besides, those contacts may just offer the next step in your career.

Modern executives should be aware of the people they work with every day and decide for themselves if they can be more polite.  On the other hand, the best executives should be able to detect when someone is being nice to them for the sake of their career.

The One Question Google Asks All of its Products

Take a look at some of the web services Google has grown, bought or cultivated in its web arsenal.  We have their basic search, the AdWords network, YouTube, Maps and Streetview, Gmail, Documents and Calendar, just to name a few.  We also see some of those little products that don’t quite appear on the main page but they still support, like Google Earth, Chrome, Goog 411, Knol, Picassa and trends.

Some products are related directly to search and finding answers to information, but others (especially products like the now defunct Lively) entered into new worlds and industries.

How could Google possibly evaluate every product and whether or not to continue to support each initiative?  After all, many of Google’s products have yet to turn a profit.  Services like YouTube alone are run at a lost, and YouTube is probably a few years away from entering into the black.

In an article for the New York Times, senior vice president of engineering Jeff Huber says, 

“There’s no single equation that describes us, but we try to use data wherever possible [...] What products have found an audience? Which ones are growing?”

Ultimately, Huber says people at Google ask, “is there an interest in our products?”  If there is—like YouTube—it’s likely they’ll continue to support the initiative, even at a financial loss.  If there product hasn’t found a strong audience—like social mobile network Dodgeball—it’s unlikely they’ll continue with the service.

Secondary questions come in to play as well, such as “does this service solve a substantial problem?” or “did this product have trouble attracting Google employees for development?”

How anyone can use this question

Modern executives, bloggers and entrepreneurs can use the question of “is there an interest in my product?” for almost every new venture.  

• For online entrepreneurs:  Let’s say you took the initiative to launch your own social network  in your free time a few months back.  Take a look at the people using the network.  Are people relying on your service and using it regularly? Do you see consistently more account registrations than when you began?
• For modern executives:  Let’s say you developed a new process within your organization to reduce the amount of reports people are creating and, thus, reducing the amount of time people on your team spend crunching numbers.  Are people using your process?  Does your process actually address the problem you created it for, and does it do it well?
• For bloggers:  Let’s say you launched a new type of section on your blog, such as a fresh back of links every Friday.  Do you find your readers, through stat tracking software, reading those links?

Moving forward

Make a list of each initiative/project that you are supporting.  Is there interest?  If not, what steps can you take to get more people involved?  Are you willing to wait a few additional months to see if there will be any interest?

The IKEA Effect: Why We Keep Failing Projects Alive

Even when signals and coworkers tell us that a project may not work, we push to finish.  We could have exhausted all resources and be well beyond our deadline, but we refuse to say enough is enough.

Why is this?  After all, our time could be better spent on our projects and more innovative ideas.  Michael Norton, for the Harvard Business Review, calls it “The IKEA Effect.”  Imagine assembling a complicated piece of furniture.  Regardless of how much you paid for the piece, you’re unlikely to give up assembling the item until it is finished.  It may take hours to put together a $20 chair, but you continue.  You don’t admit to yourself that you could have performed other tasks, or multiple other tasks, in the same time frame.

Norton adds:

Research conducted with my colleagues Daniel Mochon, of Yale University, and Dan Ariely, of Duke University, shows that labor enhances affection for its results. When people construct products themselves, from bookshelves to Build-a-Bears, they come to overvalue their (often poorly made) creations. We call this phenomenon the IKEA effect, in honor of the wildly successful Swedish manufacturer whose products typically arrive with some assembly required.

In one of our studies we asked people to fold origami and then to bid on their own creations along with other people’s. They were consistently willing to pay more for their own origami. In fact, they were so enamored of their amateurish creations that they valued them as highly as origami made by experts.

Modern executives should take a moment to consider the projects in their lives they’ve refused to abandon because of time commitment.  Unfortunately, sometimes personal relationships are the same way.  What are you doing, or have you been doing, that uses time better spent elsewhere?

5 Ways Microsoft will Imitate Apple to Survive in Retail

When Microsoft announced their decision to enter the retail space, many critics remembered the days of Gateway Country and the current Sony Stores who demonstrate products but move little merchandise. Perhaps the only reason why tech columnists are not entirely laughing is because Microsoft grabbed one of Walmart’s retail executives to help them enter the industry.

The list below reveals five ways Microsoft will have to copy Apple’s retail strategy in order to survive the industry.

1. Premium locations.  Apple, as a premium brand ignored, the conventions of big box computing stores and Gateway Country.  Instead of positioning themselves on the outskirts of towns and in desolate suburbs, they rented locations in the center of shopping districts and major metropolitan areas, like Manhattan or Chicago’s Michigan Avenue.  Apple’s are set up along side high-end fashion retailers, and the location matches their brand image.
2. Plenty of qualified sales people.  Technology is tricky, and Microsoft develops software and hardware for everyone, at every computer literacy level.  Microsoft will have to employ approachable, knowledgeable, patient and charismatic sales associates that push features and remain advocates for the Microsoft brand.  Above all, these people should be willing to educate customers so they can make the best decision for their needs and expectations.
3. Training events for adults/summer camps for the kids.  Apple pulls people into the stores to show them the software, let them play and tweak the little devices, and ultimately learn how their tools help people live better lives.  Microsoft will have to demonstrate to the public how Windows Vista, and Windows 7, has the same impact. Hold events, and let customers come together to learn about the products and meet people who are trying to same things.
4. Unify the Online, Software, Hardware and Retail Experiences. Apple has done well to unify their image and feel across media and environments, thanks to a relentless set of brand guidelines.  Microsoft needs to pull their brand on to the same page as well.  With the retail stores, we could see the future of the Microsoft brand, and see how their entire brand will adjust over the next few years.
5. Move the merchandise off the floor and simplify the layout.  Big box electronic stores are set up like mazes in grocery stores.  Plenty of products are set out on shelves for customers to help themselves.  Apple, on the other hand, may have as little as a tenth of their inventory on the shelves.  Out of the 70 customers that may be swarming a store at any time, Apple may only have 30 demo computers on display. It works well because people are not overwhelmed by selection.  Think of a person looking to change the type of toothpaste he or she may use.  Standing in a grocery store isle reveals ten different brands, and each brand may have multiple types.  On the other hand, think of a person looking to buy a laptop at one of Apple’s retail stores.  They really only have two options:  consumer-level or professional-level.  The decision to buy becomes that much simpler.

What do you think? What does Microsoft have to do to succeed in the retail industry?

Renegade Goals

The first quarter of every year sends executives scrambling for a set of annual goals to submit to their managers. Goals have been shown to improve company performance in just about any organization in any industry.  The problem arises, however, when executives are blinded by the benefits of goals to see how they may fail to fulfill the objectives of a company.  In the worst situations, poorly conceived and executed goals are detrimental to an organization.

Harvard Business School released a working paper on developing goals likely to cause positive results.  The paper gives an examples of how choosing goals that conflict with objectives affect the organization, and they use everyone’s favorite American automotive narrative to illustrate their point:

In the late 1960s, the Ford Motor Company was losing market share to foreign competitors that were selling small, fuel-efficient cars. CEO Lee Iacocca announced the specific, challenging goal of producing a new car that would be “under 2000 pounds and under $2,000” and would be available for purchase in 1970. This goal, coupled with a tight deadline, meant that many levels of management signed off on unperformed safety checks to expedite the development of the car—the Ford Pinto. One omitted safety check concerned the fuel tank, which was located behind the real axle in less than 10 inches of crush space. Lawsuits later revealed what Ford should have corrected in its design process: the Pinto could ignite upon impact. Investigations revealed that after Ford finally discovered the hazard, executives remained committed to their goal and instead of repairing the faulty design, calculated that the costs of lawsuits associated with Pinto fires (which involved 53 deaths and many injuries) would be less than the cost of fixing the design. In this case, the specific, challenging goals were met (speed to market, fuel efficiency, and cost) at the expense of other important features that were not specified (safety, ethical behavior, and company reputation).

The paper ends with a checklist of how to assign goals properly:

• Are the goals to narrow/specific?
• Are the goals too challenging to achieve within a time frame?
• Do short-term goals harm long-term objectives?
• Will any goal increase the likelihood for an employee to take a risk, and is your organization comfortable and prepared with a risk management strategy?
• Could any goal encourage unethical behavior?
• Are goals established on common standards so they can be tailored to individuals while still remaining fair to others?
• Will goals positively influence the organization’s culture?
• Are employees intrinsically motivated?
• Considering your organization and industry, is learning or achieving a level of performance more important?

Establishing goals for an organization is not as simple as turning objectives into actionable statements.  Modern executives should view goals from multiple perspectives to check for clarity in how employees may interpret or act on a goal.  Above all, goals should push management’s strategy for moving forward while enforcing the organization’s guiding principles in the process.

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