We generally tend to think that a great company needs a ‘great business or product idea’ to make its foundation. This may seem hugely correct. But in the hindsight, this is probably one of the greatest myths of business world.
It was far way back in 1937, when two fresh graduate engineers who had no meaningful prior-business experience wanted to start a new company. They had no idea about what this company would make. They only wanted to start a company with each other. That was it. They had only one thing with themselves, the degree in Electronics Engineering. They tried their best to find good initial product ideas and market possibilities, but they had no compelling ‘great idea’ to make foundation and inspiration of their new company. Yes, we are actually talking about Bill Hewlett and Dave Packard who made a decision to first start a company and then, they tried to figure out what they would make. To start with, they only wanted to come out of their garage which was all their company and to pay its electricity bills. They didn’t have any plan as such—they were simply opportunistic for what they would make. They had a meager capital of $500 and tried to make whatever someone thought they might be able to make.
They made bowling foul-line indicator which was not a success. They made automatic urinal-flushers, those were also not a success. They also made fat-reducing shock machines, which were not success either. Their company in fact took one year before it could get its first big sale, that was eight Audio Oscilloscopes to Walt Disney for his movie ‘Fantasia’. Even after this their company continued its totally unfocused ways, sputtering and tinkering with a variety of products, until they got a boost from war-time contracts in the early 1940s. Factually, HP didn’t start with a ‘great idea’.
Neither did Sony. Sony was founded in August, 1945 and its founder Masaru Ibuka had no specific product idea. He started his company and hired 7 initial employees, and then they had a brainstorming session to decide what product to make. For weeks they continued to think and discuss what kind of business this new company could enter into. They considered a wide range of possibilities, from sweetened bean-paste soup to miniature golf equipment and slide rules. You know what was their first product attempt? A simple rice-cooker. But this rice-cooker failed to work properly. After sometime, their another significant product attempt was a tape-recorder. Don’t try to envisage that this would have been a huge success? In fact, it was a failure in the market and had not much buyers of it. They were forced to stitch wires on clothes to make crude, but sellable, heating pads in order to survive.
In same way, Sam Walton also started without a great idea. He started business with nothing other than the desire to work for himself and he had a bit of knowledge of retailing. He didn’t wake up one morning and said, “I’ve this great idea around which I’m going to start a company.” No. He started in 1945 and took a single franchisee store of Ben Franklin in a very small town Newport, Arkansas. Walton built incrementally, step by step, from that single store until the great idea of ‘rural discount stores’ popped up in his mind as a natural evolutionary step. But this idea happened almost two decades after he started his business. What company did he create? Wal-Mart, of course. But this idea took 20 years in making. Sam Walton didn’t open his first rural discount retail store until 1962; until then he had simply operated a collection of small, main-street variety stores.
These three instances of HP, Sony, and Wal-Mart put a large dent in the widely held mythology of corporate origins—a mythology that paints a picture of a far-seeing entrepreneur founding his or her company to capitalize on a great product idea or great market insight. This mythology holds that those who launch highly successful companies usually begin first and foremost with a brilliant idea—technology, product, market potential– and then ride the growth curve of an attractive product life cycle. The mythology is all compelling and all pervasive, but it was not necessarily the reality in case of some great companies.
J. Willard Marriott (the founder of Marriott chain of hotels) also had no clear idea of what business to be in; he only wanted to be in business for himself. That’s all. He finally decided to start his company with the only viable idea he could think of: To take out a franchisee license and open an A&W root-beer stand in Washington, DC.
John Nordstrom also had no idea about what business to be in; he only started as a small, single-outlet shoe store in downtown Seattle. From that first shoe store grew the Nordstrom retail empire.
The pharma giant Merck also started merely as an importer of chemicals from Germany. Procter & Gamble also started as a simple soap and candle maker. Motorola began as a struggling battery eliminator repair business for Sears Radios. Philip Morris began as a small tobacco retail shop on Bond Street in London.
Like Sony, 3M also started as a failed corundum mine, leaving 3M investors holding stock that fell to the bar-room exchange value of 2-shares for one shot of cheap whiskey. Not knowing what else to do, they started making sandpaper. 3M’s start was so pathetic that its second president didn’t draw a salary for the first eleven years (not eleven months).
Bill Boeing’s first airplane failed and his company Boeing faced such difficulty during its first few years of operations that it entered into furniture business to keep itself aloft.
Walt Disney’s first cartoon series ‘Alice in Cartoon Land’ languished in theaters.
Even the company like GE found itself on the wrong foot soon after of its founding, as they were pursuing Thomas Edison’s DC model of electricity which eventually lost its battles to its rival Westinghouse’s AC electricity system.
Also, Henry Ford didn’t have the breakthrough idea of ‘Model T’ to start his company Ford and it was not like that he decided to start a company around that idea. Just the opposite, Henry was able to take the full advantage of Model T concept, because…..because he already had a company in place as a launching pad. Yet his company was one of those 502 companies which were founded in America to make Automobiles in those times—hardly a novel concept at the time.
Contemporary researches have shown that there is a negative correlation between early entrepreneurial success and becoming a great company. The long race goes to Tortoise, not to the hare.
It can encourage us to lift from our shoulders the burden of the ‘great-idea’ myth. Because,
the great-idea approach shifts our attention away from seeing the company as our ultimate creation.
We should shift from seeing company as a vehicle for the products to seeing the products as a vehicle for the company. Let’s catch the difference. George Westinghouse’s greatest creation was the AC power system; but Charles Coffin’s (the first president of GE) greatest creation was GE itself—the company.
Be prepared to kill, revise, or evolve an idea, but never give up on the company—it’s your ultimate creation.
Bill Hewlett and Dave Packard’s ultimate creation wasn’t the audio oscilloscope or the pocket calculator. It was the Hewlett-Packard Company and its HP way. Similarly, Masaru Ibuka’s greatest ‘product’ was not the Walkman or the Trinitron; it was SONY the company and what it stands for. Walt Disney’s greatest creation was not ‘Fantasia’, or ‘Snow White’, or even ‘Disneyland’; it was the Walt Disney Company and its uncanny ability to make people happy. Sam Walton’s greatest creation was not the Wal-Mart concept; it was the Wal-Mart Corporation—an organization that could implement retailing concepts on a large scale better than any company in the world. Paul Galvin’s genius lay not in being an engineer or inventor himself (he himself was self-educated but twice failed businessman with no formal technology education), but in crafting and shaping of an innovative engineering organization that today we call and know as the Motorola. Much in the same way, William Procter and James Gamble’s most significant contribution was not hog-fat soap, lamp oils, or candles; their primary contribution was a highly adaptive organization with a ‘spiritual inheritance’ of deeply ingrained core values transferred to generation after generation of P&G people.
Thus the message is clear. If you and me get involved in building and managing a company, then we should be spending less time thinking about specific product lines and market strategies, and spend more of our time thinking about organization design—harnessing its ability to continually change and evolve beyond existing product life cycles.
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