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Don't Underestimate Small Startups


Don't Underestimate Small Startups


The key to creating economic prosperity is not company size. When small startups across a wide spectrum of industries create high output value, they can achieve startling success.



Don't Underestimate Small Startups

By Joyce Yen
From CommonWealth Magazine (vol. 535 )

The new generation prefers to open small stores, studios or workshops instead of trying to become a corporate executive. In the eyes of the older generation, young people lack hunger and ambition for success, a development that many believe gives cause for concern.

However, such concerns can probably be attributed to a widespread myth: Taiwan has run into economic bottlenecks because it lacks new, rising large corporations, and that the lack of new, large corporations springing up on the island is due to the younger generation's lack of ambition.

However, Taiwan's true problem is a lack of up-and-coming sunrise industries, which is quite a different story from a lack of rising large enterprises. Taiwan has relied on a single industry – electronics contract manufacturing – for much too long. Electronics contract manufacturing is a sunset industry, and its gradual demise is dragging down the entire economy.

This being the case, it is high time that Taiwan push for a more diversified economy instead of looking for the next generation of corporate leaders. Moreover, it does not necessarily take large enterprises to create affluence. For example, in this year's Fortune magazine Global 500, many of the industrialized countries with the highest per capita incomes have fewer companies in the top 500 than Taiwan. (Taiwan has six, while Denmark, Norway and Austria each have one, and Singapore has two). What is important for prosperity is employment and high output value, but it does not matter at all whether these are provided by one large company or by millions of small stores and businesses.

As the Taiwanese economy has transformed over the past few years and the service industry has become more important, a number of new large enterprises have been born, such as the Wowprime Group, which runs a dozen restaurant chains, and the huge chain store conglomerate Uni-President Enterprises. But these are low-end service enterprises, which only need to develop standard operating procedures to be able to expand their network of outlets rapidly. While they provide a large number of jobs, they pay low salaries. The main reason why Taiwan's university graduates have to accept meager entry salaries of around NT$22,000 is that the capital-intensive low-end service industry thrives in the island's economic climate, whereas the knowledge-intensive high-end service industry languishes.

Outside of Taiwan, small workshops, studios and businesses often deliver the highest output value. Hollywood-based One Three Media, a successful television and web content firm headed by Mark Burnett, has only some 20 employees. The company has produced a number of successful TV series and reality TV shows that air in more than 70 countries, such as Survivor and The Apprentice. Even Taiwan has replicated the concept of Burnett's game show Are You Smarter Than a 5th Grader? under the name The One Million Dollar Primary School.

Burnett, the heart and soul of the company, likes to be personally involved in all projects. Therefore, he is not willing to expand his business, although hordes of interested investors have been knocking on his door.

And then there is wine, a product that generates sales in the order of several hundred billion US dollars per year. Surprisingly, the undisputed bellwether of the wine industry is not a large vineyard, but a small bimonthly newsletter based in the U.S. state of Maryland with a staff of three, called The Wine Advocate.

The newsletter's greatest asset is the nose and tongue of its publisher Robert Parker. The wine critic tries to taste and rate all wines personally. As a result, he has kept the newsletter a small operation for more than three decades.

What Taiwan lacks now are small startups with high output values across a wide range of industries and economic sectors. Because of our dependence on a single industry and our worship of big enterprises, our definition of success has become too narrow. A successful person must study electrical engineering or computer science at a national university (National Taiwan University, National Tsing Hua University or National Chiao Tung University) and join a large company of the likes of Taiwan Semiconductor Manufacturing Company or HTC. Venture capital firms are also only willing to invest in information and communications or online ventures.

Just think: Food safety has made the headlines a lot this year, but Taiwan does not lack food testing experts. Doesn't this constitute a niche for small startups?

Therefore, we should no longer believe that small startups stand for a lack of drive and ambition. Running a business is always tough and when a company is small, it must cope with the disadvantages of small scale. But the advantages are that they can focus, that they can boldly experiment and try the parts of the blue ocean that large enterprises don't dare to explore, and they don't need to wait for all those in upper management to grant approval.

Taiwan needs more small startups that dare to explore the blue ocean. That is the only way Taiwan will be likely to adopt a more diverse definition of success and extricate itself from the nightmare of having put all its eggs in one basket. (The author is the publisher of Ars Longa Press)

Translated from the Chinese by Susanne Ganz