In a recent discussion with some colleagues, we found ourselves discussing the current state of the US and global economy. Why has the economic recovery been so slow which has caused the middle class income to stagnate? In my opinion, its because the companies and jobs we are creating are not delivering high value products or services. What we need is innovation driven entrepreneurship.
The State Of The Current Economy
Entrepreneurship and the start-ups they create are the engine that drives economic growth and jobs. In 2016, 99.7% of all firms in the US were small businesses (private sector companies with less than 500 employees). These same small businesses create 33.6% of known export value and employ 48% of private sector employees. In addition, 60% of all new jobs are created by small businesses.
That's a lot of impact on the economy. So what is going on? When you dig underneath the numbers, they reveal some shocking issues.
While 60% of all jobs today are created by small businesses, back in 2001 that number was 69.8%. At the same time, the average median income has been effectively flat since 1998 when you account for inflation.
So we are seeing a slowing of start-ups creating new jobs and the jobs they are creating has caused the median household income to stagnate.
Innovation Driven Entrepreneurship
We need more than just more start-ups who create low paying jobs. We need businesses that brings innovations to market that deliver such high value that customers are willing to pay a margin premium.
This is what I'm calling innovation driven entrepreneurship or some may call it innovation driven start-ups.
These start-ups don't have to follow in the model of Silicon Valley and be focused on technology. Innovations can cover a wide range of areas. I recently came across a very innovative idea for a new approach to a bicycle that I think could open that market to new customers who are not ridding today.
Another example is innovating education and how we prepare students with STEM skills that will prepare them to compete in the emerging creative economy. Check out what Zaniac is doing.
What I'm not talking about is an entrepreneur copying some existing business or franchising a business for their local community. These are all good and play a role in the economy. But these small businesses are typically not going to drive a disruptive product or service that will return a margin premium.
How Do You Start An Innovation Driven Start-up?
We've covered on this show a number of ways to think about discovering ideas and then executing to turn those ideas into a killer innovation. When it comes to innovation driven entrepreneurship, think about in two parts:
Innovation: Find a problem, ideate a solution (product, service, business model, etc), test it with others then adjust and repeat the process.
Entrepreneurship: Find and focus on a customer who needs your innovation, serve that customer, find another customer and then repeat until you achieve scale.
While this sounds simple, it is incredibly hard. You will face disappointment and setbacks while also experiencing the thrill when a customer says they love your innovation and actually pays for it.
How Can I Help You With Your Start-Up?
I want to help you take your idea and create a business that turns your idea into an innovation. Given the sheer number of people, I can't do this 1:1. So I've joined a community that hangs out in a private Slack area full of innovators and entrepreneurs. There is where you can find the expertise you need while also sharing you expertise with others.
Check out The Innovators Community to learn how you can be part of the community.
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