Having followed the dull roar of the MR commentary on the future of marketing research (and having contributed to it in a minor way), I was fascinated by Adam Davidson's article in last weekend's New York Times Magazine, "Can Mom-and-Pop Shops Survive Extreme Gentrification?" Not because gentrification is terribly relevant to MR, but because of Davidson's reaction to the news that some Mom-and-Pops still exist happily in heavily competitive, booming Greenwich Village.
Davidson, of NPR's "Planet Money," can be heard on "Morning Edition," "All Things Considered" and "This American Life." He's well informed about economic issues, and both reliably insightful and entertaining. He also grew up in the Village when it was still "the Jane Jacobs ideal, a neighborhood crammed with small mom-and-pop stores."
Now, of course, with Wall Street money coursing through New York's veins, the "artists, weirdos and blue-collar families" that inhabited the Village of his childhood have been completely replaced by "guys in suits" and the Mom-and-Pops have been displaced by big, trendy names like "Marc Jacobs ... Magnolia Bakery ... Ralph Lauren, Jimmy Choo, (and) Burberry."
You can see where this is going, right?
I was sitting on my back porch on Sunday morning, coffee in hand, idly riffling through the Times when I suddenly realized that Davidson's tale of a trip back to the old neighborhood was giving off vibes about my own job and business. Mom-and-Pop marketing research firms have been disappearing lately into the acquisitive maws of both the multi-national organizations and the bankruptcy courts. Big name trendy firms, like Google, are suddenly seen around the old neighborhood. And the blogosphere is alight with a mixture of fear and cheerleading for the coming "disruptive" revolution.
So what was the secret of the successful Village Mom-and-Pops? Were they just the lucky the ones that suddenly found their old-fashioned wares in demand? Were they somehow chic because they were retro; fashionable because they were so nonchalant about fashion?
When Davidson asked the owner of "the oldest Village business (he) could think of" how his business had changed, he found stasis: "It's about the same ... We're not way richer or poorer ... We're about the same." The owner of another old-line business, a tavern, "put it more bluntly. He's surviving, he said, because he's not an especially ambitious businessman."
The best part of the article, for me, was Davidson's response to the news that a business hadn't changed or grown in a generation: "And this didn't bother him."
Adam Davidson, NPR economics guy, chronicler of the connected, digital, international economy, doesn't get to talk a lot to guys who aren't concerned with quarter-over-quarter growth, IPOs, or becoming billionaires. Guys who say stuff like this: "If I just cared about the money, I'd have closed a long time ago." Guys who will keep the business running "as long as the place is covering the costs."
"I wondered why Bowman, like her fellow proprietors, was disavowing economic theory and not trying to maximize her profits. Then I remembered one fascinating statistic about our economy. There are more than 27 million businesses in the United States. About a thousand are huge conglomerates seeking to increase profits. Another several thousand are small or medium-size companies seeking their big score. A vast majority, however, are what economists call lifestyle businesses. They are owned by people whose goal is to do what they like and to cover their nut. These surviving proprietors hadn't merely been lucky. They loved their businesses so much that they found a way to hold on to them, even if it meant making bad business decisions. It's a remarkable accomplishment in its own right."
All of this made we wonder whether our current view of the MR industry is so focused on the prevailing worship of not only maximizing profits but doing so on a scale unthinkable even a generation ago that we're no longer looking at the full range of the data. It also made me wonder about Dunbar's number.
Robin Dunbar, a British anthropologist, proposed back in the 90s, that there was a maximum group size beyond which social relationships could no longer be based purely on personal, individual relationships. Since then, Dunbar's number has become rather fashionable and influential. It's normally pegged at about 150 people.
"Mom and Pop" enterprises run by "lifestyle entrepreneurs" don't generally grow their workforce beyond Dunbar's number because, if they do, the "lifestyle" part is eroded by organizational issues. "Mom" or "Pop" find themselves spending more time and energy managing people than they can spend making shoes, selling coffee, tending bar, or ... doing research.
Let's assume - just for the sake of making a guesstimate - that an MR company has 150 employees. Let's say their average salary is about $75K, taking into account everyone from the receptionist to the account people, the senior analysts, the operational folks, and the execs, and that rent, benefits and overhead add 50% to that. The gross margin for the business (sales minus direct project costs) is something like 30%, and Mom and Pop will keep the business running as long they can cover their costs. At those rates they're going to need to do something like $50-55-million annually to keep the doors open.
Which means that any MR shop smaller than that may well be a "Dunbar enterprise," able to survive while ignoring the basic demand of modern economics - maximizing profits. They make poor blogging material - until an Adam Davidson writes a sentimental piece about them. "Nothing to see here. Move on" is not exactly SEO bait.
Maybe this is a good place to say that I'm not endorsing this approach. I came into MR over 30 years ago, and I've enjoyed the lifestyle of a Dunbar shop, but I'm also a technology junkie and a grow-and-change nerd. I find new methodologies, new communication technologies, new platforms, and new business models so much more interesting than the Mom-and-Pop lifestyle that I'd endorse their pursuit even if they didn't also promise much profit or growth. That would be my personal lifestyle choice.
But I'm also a research guy with a social science background and I can't ignore the countervailing view. Who is looking closely at the future of Dunbar enterprises in MR? What do the business models look like for businesses based on data collection and analysis as the neighborhood gentrifies? What customer segments will continue bringing their trade to the old line Village shops like McNulty's Tea & Coffee Co., Imperial Vintner, Tavern on Jane, and the other Mom-and-Pops? If you know anyone researching this or blogging about it, I'd love to hear about it.
Now the economics have changed. Any new operation needs deeper pockets and a stronger business plan, all of which will probably make it less interesting. ... There are still some passionate people with exciting ideas who are making really bad -- but entirely satisfying -- business decisions.