Dr. Earl Smith is no stranger to entrepreneurship; after working on Wall Street he founded six for-profit companies as well as two non-profit organizations. Today Dr. Smith is the Managing Partner of The Federal Circle, where he specializes in expanding middle-market companies to true growth potential. “I get a great deal of satisfaction out of helping such companies meet and master challenges that are limiting their growth,” said Dr. Smith.
This political social theorist also gave WashingtonExec an insightful overview of where he sees the role of small business headed within the next five years. When asked if he believed the ever increase presence of foreign emerging markets will effect the small business Washington, D.C. community Dr. Smith replied, “While the rest of the world is surfing this new wave, Americans, and the American government, are increasingly seen as protecting the status quo.”
An interesting read from an entrepreneur with an academic prospective.
WashingtonExec: Why would someone already expanding as a small business need your services?
Dr. Earl Smith: Expanding companies represent the bulk of the clients I work with. I tend to get involved when a company has reached a sticking point. There are many the road that can take a company from concept to a mature, stable, sustainable, profit generating company.
In the start-up phase, much of the business that comes in is as a result of contacts by the senior team. Quite often a company will initially grow rapidly. There comes a time when the founders are no longer able to generate new business sufficient to keep the growth curve steep and see to the existing client base. This is normally the first major sticking point that they encounter. The company and management team has to reinvent itself. Restructure its approach to business development and to doing business in general. The changes required are so challenging to the founders that attempting the journey without a guide is perilous. I provide such support. A couple of years back, I wrote an article (Battle at the Cottage Gate) It is one of most commented on pieces.
Once a company emerges from the start-up phase, things get even more complicated. No single individual or group of founders possess the skills, knowledge and range of contacts to effectively meet such a wide range of challenges. A company encounters a different set of challenges at each sticking point. Growth brings the need for people who know the business of business. Earlier management could get by with an understanding of the business of the business. But increasing size and complexity renders that understanding inadequate. Because of my experience in building and managing large organizations, I help management navigate the reefs and shoals of a difficult passage.
WashingtonExec: What compelled you to go into the world of small business/small business investment? Why is helping emerging companies grow important to you?
Dr. Earl Smith: After almost two decades of living in Manhattan and building my own companies, I decided to pursue an interest in political and social theory. That took me to Scotland. I spent four years pursuing research. Then, writing and successfully defending a doctoral thesis. When my wife and I returned to the States, I had to decide what I wanted to do. We moved to the DC area so I could pursue both of my primary interests – business and political theory.
Soon I began to work with selected companies. My criteria focused on established, middle-market companies with experienced management. I get a great deal of satisfaction out of helping such companies meet and master challenges that are limiting their growth. I found that my experience and range of contacts were helpful in breaking logjams and unlocking potential.
I see myself as a reservoir of experience and contacts. In an important way, I am reprising the roles that my early mentors played in my life. They helped me tread paths that were new to me but familiar to them. I am doing the same with my own set of protégées.
WashingtonExec: How do you think the nature of small business will change in the next five years?
Dr. Earl Smith: Business has taken a markedly anti-humanist turn since the 80s. It’s almost as if entrepreneurs see both customers and employees as inconveniences. This attitude came to full flower during the build up to the bust in the 90s. There are two aspects of this that I think will change during the next decade.
The first is the that the reliance on ‘expert systems’ will fade. Small business are following their larger cousins in implementing very narrowly focused employee training protocols. The idea behind this theory is to define all of the situations and challenges that an employee will face and train them in the approved methods. The weaknesses of ‘expert systems’ are well know to system theorists. They produce brittle and inflexible systems that are easily broken and have difficulty responding to changing circumstances.
The second major change will be a return to treating the buyer as a customer rather than consumer. Increasingly, people are resisting the commoditization of consumption. Small business have a better chance of developing humanist tendencies. They can reconnect with buyers as values customers.
At the core of this distinction is the nature of the relationship between business and their source of revenue. The anti-humanist approach which is dominate today sees the dynamic through the lens of the predator-prey relationship. The humanist alternative is a relationship of mutual respect where the customer is again king.
WashingtonExec: Do you think the increase economic clout of emerging businesses in developing countries is affecting the landscape here in the Washington, D.C. small business community?
Dr. Earl Smith: I don’t think that emerging business in developing countries will have much leverage in the Washington landscape unless they find ways of channeling large volumes campaign contributions to selected candidates. The same is not true for emerging economies; which are backed by foreign governments. Washington is a BAPF town (bought and paid for). Politics runs on money not principle. In a purely expedient or instrumental business, only the very wealthy corporations or individuals have much sway.
I think that major challenge to American small business – and to the landscape here in Washington – comes in areas like the changing nature of the process of innovation. At a time when innovation is global, Americans are acting very tribal. The pluralism that is driving advances in the rest of the world is being resisted by American business. The rest of the world is increasingly multi-lingual, America is resisting that trend. Technology is advancing globally while a large part of the American population seems to be taking a distinctly anti-science and anti-engineering turn.
A good example is the emergence of what is being called the green wave. Alternative energy is undoubtedly the wave of the future. One way or another, the fossil fuel economy will collapse and be replaced by something else. While the rest of the world is surfing this new wave, Americans, and the American government, are increasingly seen as protecting the status quo.