What Happened When American Express OPEN Realized It Was Targeting The Wrong Demographic

Moving away from startups, the company started giving existing, recession-suffering small businesses a hand.

American Express OPEN has made a name for itself--as well as a healthy revenue stream--by focusing on small businesses. Small Business Saturday was its brainchild, and its OPEN Forum was created as a place where small-business owners can come for resources and conversations.

But last year, the company recently realized it was focusing its efforts on the wrong kind of small-businesses: startups.

Given the sluggish recovery of the economy, we wanted to better understand the levers for rapid entrepreneurial growth so we could develop programming,” says Dayna DeSimone, director of OPEN Live at American Express.

DeSimone’s team uncovered research indicating that startups don’t create opportunities for a region at the same level growing ventures do. In fact, the vast majority of new jobs--92%--come from the expansion of existing businesses; startups only account for around 7% of net new jobs in the past decade, according to the National Establishment Time Series, a database of regional industries and economies.

Switching Gears

The majority of OPEN’s programs had focused on new companies, so it switched gears to create programming that would help existing businesses scale up faster.

In April 2013 it partnered with Babson College professor Dan Isenberg to launch a program called OPEN for Enterprise: Coalitions for High-Growth Entrepreneurship. One piece is Scale Up Milwaukee, a pilot program modeled after Isenberg’s work with small businesses in Colombia, Brazil, and Denmark through the Babson Entrepreneurship Ecosystem Program.

Milwaukee As A Test Case

The Wisconsin location was chosen due to its potential, says DeSimone: “There is an urban revival in Milwaukee, and it’s a great hub for entrepreneurs,” she says. “It was a great place for us to start and get our toe in the water.”

Twelve businesses with market-tested products or solutions and annual revenues of at least $500,000 were chosen to participate in intense workshops designed to foster rapid growth. DeSimone says they looked for entrepreneurs who had soft qualities, such as passion and an openness to try new things.

Training included methods to expand existing accounts, cross-sell current customers, and expand operations to support additional customers. The results of the micro-experiment have been great. “The folks who are participating project that their 2014 revenue will increase an average of 25% above their initial projections as a direct result of their training,” says DeSimone.

Collaborating with Tom Barrett, the Mayor of Milwaukee, OPEN is spreading attention beyond the dozen participants to other growing companies in the area, as well. In addition to Scale Up Milwaukee, the program has brought together 200 area corporations and entrepreneurs to show how they can partner for mutual benefit.

Currently, there aren’t concrete plans to launch similar programs in other cities, says DeSimone, although it remains an option. “We’re going to stay focused on getting these existing business to scale and help these entrepreneurs get more customers,” she says.

But OPEN may test other programs. The company does a biannual temperature check with entrepreneurs around the country. “Every fall and spring, we take a poll on things like business optimization, growth plans and cash flow,” she says. “This trend data gives us the pulse of entrepreneurs around the country and helps us decide on future offerings. In fact, Small Business Saturday came from this methodology.”

DeSimone says OPEN will maintain an innovative outlook at ways to get to their new end goal: helping existing businesses expand.

Bottom Line: “Just because there is a popular approach to entrepreneurship--focusing on startups--doesn’t mean it’s the only approach,” she says.

[Image: Flickr user Brian Jelonek]

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