Fewer entrepreneurs are starting fewer new businesses. Can social ride to the rescue?
The graphic above is from a new report by the Brookings Institution, “Declining Business Dynamism in the United States: A Look at States and Metros.” It charts the entry and exit rates for new business in the U.S. between 1978 and 2011. What it shows is that the U.S. economy has become less entrepreneurial over time.
According to the report, “… recent research shows that dynamism is slowing down. Business churning and new firm formations have been on a persistent decline during the last few decades, and the pace of net job creation has been subdued. This decline has been documented across a broad range of sectors in the U.S. economy, even in high-tech.”
Business dynamism, says the report, “is the process by which firms continually are born, fail, expand, and contract, as some jobs are created, others are destroyed, and others still are turned over. Research has firmly established that this dynamic process is vital to productivity and sustained economic growth. Entrepreneurs play a critical role in this process, and in net job creation.”
Finding Innovative Ideas in Social
Many things are required for an entrepreneur to start a successful new business, but a key one in many cases is an idea for an innovative product or service. Where can entrepreneurs find such ideas? Traditional voice of the customer (VOC) techniques are outdated and yield minimally useful data and insights. A much better way to find the kind of ideas and insights entrepreneurs need is to use social analytics to mine the online conversation.
Nick Webb, a world renowned business futurist and innovation thought leader, says that the biggest challenge in innovation is understanding what current and future customers want and how they’ll respond to a new product. He has experimented with using social listening to find better insights into customer wants, which in turn leads to more successful new products—the kind of products to build a company around.
Nick has found that one of the key attributes of the best social listening tools is that they’re exquisite instruments with a high degree of sensitivity. Unlike traditional VOC techniques that require big movements and lots of data points to identify a trend, with social listening, you can drill down and find small but significant movements. They may take the form of five sound bites on Twitter, but those five sound bites could be epic in terms of heralding an emerging trend. Individual sound bites can hold tremendous insights that spark ideas for innovative products.
Social Listening—Mandatory for Disruptive Innovation
There are basically three flavors of innovation: incremental, breakout and disruptive. Disruptive innovations disrupt the current market behavior, rendering existing solutions obsolete. “Today, if you want to go beyond incrementalism into breakout and disruptive innovations,” says Nick, “I believe social listening is mandatory. It takes you beyond rigid thinking and allows you to adopt a fresh perspective and find disruptive ideas that have significant value to the enterprise and to customers.”
Entrepreneurs need new ideas, and social is an ideal way to find them. It’s not only fast and accurate, it’s far less expensive than using such traditional research techniques as surveys and focus groups.
So can social reverse the decline in business dynamism? Maybe not all by itself, but as a proven, efficient way to find ideas that can become the foundation of a new business, it’s a tool every budding entrepreneur should be using.
To learn more, you can download our report, “Find Better Ideas for New Products with Social Listening.”