It's hardly a secret that Americans love new things. From iPhones and water-miser toilets to plasma 1080p Blu-ray compatible HDTVs and plug-in hybrid cars, much of our time is spent using tools and toys that didn't exist a generation or two ago. It's not only big inventions, however, that change lives and make fortunes. Think about the equipment in today's dental offices and compare it to what was in use a decade ago. Virtually every tool has been substantially improved or changed. Interestingly, many of these state-of-the-art gizmos were thought up by dentists themselves who thought it was more fun to invent things than fill another bicuspid.
Similarly, many of the services we now take for granted are either relatively new or are packaged or delivered in innovative ways. For example, in contrast to the way they operated a generation ago, most small businesses now outsource payroll preparation, equipment maintenance, graphic design, and many other tasks to specialists whose work is better, cheaper, and faster than could be done in-house. Similarly, 21st-century electricians, plumbers, contractors, and most other service providers use many tools and techniques that didn't exist when Bill Clinton was president. A generation or two ago, hiring a housepainter usually meant living through a month of having a couple of men hang off heavy wooden ladders, swabbing away with short-handled brushes. Today the combination of lightweight ladders and scaffolding, power sanders, fast-drying wood-fillers, and paint sprayers means the same job can be done in a few days.
When goods or services are improved or replaced, someone always makes money. Much of the profit usually falls to those who quickly figure out a way to market the new product, service, or business method. For example, when easy-to-customize modular storage systems were first developed to organize closets and garages, interior designers who quickly embraced these exciting new tools charged hefty fees to customers determined to improve on closet designs that had changed little for several centuries.
Like art or poetry, "eureka" breakthroughs either occur or they don't—there is little most of us can do to turn ourselves into an Edison, Bell, or Shockley. But fortunately, to prosper in the small business world, you don't have to invent a palm-size camcorder or underwater telephone. In fact, most profitable innovations consist of combining or connecting two or more fairly mundane things. For example, in the early 1990s, a tiny website dedicated to buying and selling used items figured out how to combine the fun of a local swap meet or garage sale with the global connectivity of the Internet. Starting with the sale of a broken laser pointer for $13, eBay, now one of the world's most valuable corporations, was born. Similarly, Amazon.com's patented "one-click shopping" helped it create a hugely successful business selling a huge variety of merchandise.
In your own neighborhood, many service businesses probably now provide traditional services in ways so efficient and attractive that even in recessionary times, their customers stick by them instead of going to their price-cutting competitors. For example, several independent optometrists and eyeglass shops now work together, so in one stop you can have your eyes checked, order new high-quality and high-fashion glasses or contacts, and have them ready in 24 hours, with the further assurance that adjustments and minor repairs are free forever. An estate planning lawyer we know has given up her traditional office-based practice and switched to making house calls, an old-fashioned service that her clients, many of whom are elderly, find highly desirable.
Businesses are especially likely to profit from innovations that are congruent with powerful long-term trends, such as renewable energy sources, organic food, health-enhancing exercise, and recyclable packaging, to mention just a few. If your plumbing business goes green, in the sense that you emphasize low-flow toilets, showerheads, and more efficient hot water systems, you should easily set yourself apart from the half-dozen Roto-Rooter, Mr. Rooter, Zap Rooter, and AAA Rooter businesses in your area.
EXAMPLE: Poster Compliance is a California company that provides attractive state-specific laminated posters to employers, who are required by law to post certain information about wages and hours, health and safety law, workers' compensation, and so on. Faced with lots of competitors, Poster Compliance set itself apart by developing a line of posters using recycled paper and soy ink. In just a year, the "green" posters increased Poster Compliance's market share by a hefty percentage.
Many new enterprises turn in a profitable new direction when someone gets mad at how traditional enterprises operate and decides there must be a better way. It might be as simple as becoming disgusted with the quality of the coffee in local restaurants and figuring how to serve a tastier brew. As you sip your morning latté at Starbucks, Peet's, or an independently owned purveyor of excellent coffee, it may seem like this hugely profitable innovation was a no-brainer. Not so. If you are old enough to remember how bad most American coffee tasted 20 years ago, you'll understand just how much insight and determination was necessary to create businesses that really can serve a great cup.
Likewise, a local tile shop, which sells beautifully designed, handcrafted tile, got started in large part because its owners were frustrated with the unimaginative selection available at local building supply outfits.
EXAMPLE: The partners in a small architectural firm, BT Associates, are fed up with competing with dozens of other firms for every residential and small commercial job. To learn about a hot new field, they volunteer to design an emergency response center for their county, at no cost. When the center, which combines lightweight design with the strength and flexibility to withstand almost any conceivable disaster, as well as a NASA-like dedication to the optimum use of the latest communication techniques, wins several design prizes, BT Associates is quickly able to parlay its experience into a national leadership role in this specialized but growing field. They begin to land a substantial percentage of the jobs they bid on all over the country. Even when a local firm can use its political connections to beat them out, it often contracts with BT Associates for lucrative behind-the-scenes design help.