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Frugality as business strategy

January 26, 2007

Google was recently named Fortune’s best company to work for because of all its great perks; free massages, organic meals, play rooms, etc, but Google is a far cry from the workplace conditions of the average internet start-up.

The San Francisco Chronicle has an interesting report on one of the big differences between the last internet boom in 1999-2000 and the latest, fiscal discipline. The article highlights how companies are going to great lengths to avoid any unnecessary costs. All the money goes into building the technology.

They are “using ingenuity to minimize the cost of turning raw ideas into viable businesses.”

Examples of this new frugality include:

1. Relying on buzz, rather than Superbowl spots

2. Not using recruiters for new hires

3. The money they raise is not “funny money”, it’s survival money

4. Outsourcing a lot of the work to places like India

5. Not throwing flashy parties, instead having pizza and beer in someone’s backyard or holiday parties that comprise chips and soda in the company parking lot

6. Getting your users to do some of the work

7. Cramming people into office space and sharing it with other start-ups

8. Hiring interns who value experience over hard cash

9. Building your first server yourself from spare parts from your school?s computer center

10. Scavenging old office equipment from business partners and friends

One entrepreneur interviewed for the article summed up the attitude perfectly, “If you have an idea you really believe in, you’re willing to do whatever it takes to make sure that overhead and expenses don’t get in the way.”

Can larger companies and brands tap into this idea of low-cost inventiveness and ingenuity to benefit their businesses? Will they create their own in-house start-ups?

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