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wJones
EC Container 5

Statement on Automation and Small Business

Statements
Citation

Warren Jones, Lana Rubalsky (2010) "Statement on Automation and Small Business", wJones Research, June 3, 2010

Abstract

The face of small business has radically changed over recent decades as community designs have physically separated small business establishments from residential dwellings.  Franchises have replaced most independent neighborhood based “mom and pop” shops, whose owners were knowledgeable of both customers and products.  Large, remote manufacturers and operationally efficient distribution companies have replaced most community based artisans and manufacturers.

A new generation of intelligent automation tools will significantly enhance the ability of independent small businesses to both manufacture and distribute products and services on par with franchise and remote manufacturing companies. Process oriented service agents and bots will enable independent businesses to broaden service offerings while increasing product quality and consistency. Intelligent, micro manufacturing systems will enable the creative artisan to competitively build and sell imaginative products.

We believe that intelligent automation will bring into closer balance large and small, remote and local such that the inherent advantages of each form of business will both find success in the market. As a result of the new smart tools, even the smallest businesses will be able to participate in a new model of competition as they become both customers of and suppliers to larger competition.

Separating Small Business from the Customer

The franchise model makes it possible for a small, or family owned entity to have the facilities, brand awareness, marketing and logistics capabilities comparable to a large, complex enterprise.  This business format became popular in the United States after World War II, when community builders began to zone areas exclusively for home building and retail establishments.  This meant that storefronts could only operate at distances greater than foot traffic would allow, ensuring that their customers would have to travel, typically by car, to shop at an enclosed or strip mall location.

This changed the process of small business in several ways:
  1. Customers became less likely to personally know the establishment owner. This reduced the level of trust between seller and consumer and increased the amount of litigation and expectation for government regulation.  This had a secondary causal effect of increasing the regulatory (legal) and administrative costs.
  2. The storefront was no longer on a route that customers travelled. Instead of the store being on the path when traveling to friends, family, or work, it would only be frequented if the customer chose to shop.  This increased the requirements for sales and marketing.  This had a secondary effect of increasing the importance of brand and creating a cost incentive for opening multiple outlets to maximize value of brand investment.
  3. The shop owner, without a prior knowledge of neighborhood customers, was required to broaden inventory options. This increased inventory costs and logistics complexity.  It also reduced the ability of proprietors to retain familiarity with products carried.  This had a secondary effect of creating a cost incentive for opening multiple outlets to minimize inventory costs and to maximize value of supply chain and logistics investments.
  4. The artisan retailer, increasingly found the retail effort to be both untenable from a workload perspective and unprofitable. This caused many artisans to close retail shops and focus on distribution relationships.  This had the secondary effect of increasing the need for mass production skills and eliminating direct customer interaction.

The impact of the above was that many small shops closed down or were replaced by a franchise model.  Many artisans closed down either their retail shops or their manufacturing operations.

The overall impact on the economy was a reduction in skilled labor, as: 
  1. Shop owners, previously knowledgeable of customers and products were replaced by workers better able to read and follow a franchise script.
  2. Artisans, skilled in crafting products addressing local needs and tastes were unable to manufacture in the quantity necessary for strong distribution arrangements and were replaced by low skilled plant workers, first domestically and then overseas.

Reassessing Progress

The coming technology of this decade may change the underlying factors behind the move from retail and artisan labor skilled in products and customers to operations oriented labor skilled in assembly and distribution.  Certainly there will be a continued, strong need for both manufacturing and efficient franchise operations, yet a combination of technologies will enable skilled retail and artisan labor to fill a far greater niche in the provision of goods and services to society.  The niche status will remain as such as long as communities are built without integrated retail which is often best served by franchises and large retail distribution organizations.

The technologies that will change the balance include:
  1. Intelligent social and mobile communications tools will enable customers to constantly align needs with contextually relevant goods and services.  This form of connectivity will be “size and purse blind,” and will enable smaller establishments to “be found” by new customers, remain in close contact with existing customers, and compete locally with larger organizations.
  2. Intelligent transportation bots will enable efficient same day delivery of products without human drivers.  Without the additional mass or freewill constraints of human driven transportation, bots will travel faster and use less energy.  This will enable on demand manufacturing by community based artisans and manufacturers.
  3. Low-cost robotic manufacturing assistants will enable work at home artisans to develop and produce unique and form superior products.  They will also leverage intelligent mobile communications, agents and transportation to sell direct to customers.
  4. Operations tools will enable skilled artisans and customer-focused retailers to work with large retail operations.  As operations become more flexible and intelligent, customer focused artisans and sellers will be able to provide products and services to larger operations.  They will also be able to leverage the superior operations and distribution resources of the best large operations organizations to better serve their customers.  The retail solution will no longer be a choice between big box or little box, but an honest integration of competition and cooperation.

Illustrations

Cherry Pie
Home Based Textiles
LittleBox Retail
BigBox Retail

EC Container 6