For Whom the Penny Dropped

The skill of spotting an opening is one that the famous entrepreneurs through the years have had in plenty.

For many, the key point has simply been price. Sam Walton, owner of a couple of five and dime stores in rural Arkansa, did not actually invent the discount store: some sizeable people like K-Mart were already in business. But he perfected it by not just marking down a few leaders, but by selling every item cheaply, everyday. That’s how the Wal-Mart Chain made Sam and his family the wealthiest in America.

Sometimes, nationalism is the key, especially in smaller countries. General Motors swept Australia in the 1950s with a Six-cylinder car bearing the name of a local body-building company, Holden; it was years before they were seriously challenged, and then by Australian-built Fords and Chryslers. An Aussie called Kevin Weldon also cashed in on rising nationalism. He built his Sydney publishing business with a string of titles like the “Australian” book of this, or the book of “Australian” that – even when the skills involved, like crochet or photography, were actually international.

But the biggest operators down the years haven always seen the widest picture:

· Henry Ford saw the potential of mass production with a car made cheaply enough to sell to millions, including his own workers. Inspired by the production lines at Thomas Alva Edison’s core crushing mills, he developed the assembly line technique which made the US the world’s greatest industrial power.

· Away back in the 1890s, Frank Robinson was another who saw the potential of mass marketing. A brewer, then salesman and copywriter for the coca-cola company, he saw the limitation – too few potential customers – of promoting mineral waters as medical restoratives, as was then the vogue. Instead, he focused his ads on “delicious and refreshing!”, featured pretty girls with Coke bottles, and watched sales boom as coke became the fashionable drink across America.

· John D.Rockefeller saw the power of a cartel in controlling a market. Through manoeuvres which would be illegal today, he combined railroads and oil refineries to manipulate freight rates and squeeze rival refiners out of business. His Standard Oil Company also used predatory pricing – selling below cost in target areas to destroy smaller competitors.

· Marcus Samuel, founder of Shell Oil, saw the only way to compete with Standard: Globalization. He secretly bought Russian oil, built over-sized tankers and used secretly-built distribution depots to take on Standard at its own game. Nearly a century later, the Saatchi brothers saw a similar point: if many clients were world-wide, an advertising agency that was also global would amass much business. It did.

· Steelmaker Alfred Krupp spotted a novel way to get repeat business. Making armaments in an era when hostile alliances glowered at one another without actually going to war, this year he would sell a gun whose shells would penetrate any known amour. Next year, he would unveil an armour that was proof against any known shell, including last year’s model…

· Bill Gates saw a different route to a captive market. When desktop computers were introduced, he realized that the more popular a disk operating system was, the more software writers it would attract. And the more software that was available for a particular system, the stronger that system would become. He set the ball rolling by selling his MS-DOS operating system cheaply to IBM, then licensing it far and wide to IBM imitators. So Microsoft’s rather clumsy system became the industry standard. Most other systems, starved of software, vanished. And Bill Gates was on his way to conquering the world.

· Of course, new technology has opened the door for many inspired marketers. A very early one was W.H.Smith, who saw the potential of the 19^th century railway boom. Not to invest in railways, which mostly lost money(a point later lost on Eurotunnel investor), but to open bookstalls on the busy stations where commuters were. A century later, several innovators saw the same light: they cashed in on the computer, not by manufacturing it, but by using it to revolutionise the marketing of financial services. Hence the world –wide explosion of telephone banking and insurance. And in Australia, Kerry Packer became billionaire by spotting how the new color TV transformed televised sport, compared with the old black-and-white; world series “pyjama” cricket was just one result.

· Laura Ashley built her empire on a social trend. Leading a 1970s revolt against what she saw as the excesses of swinging 60s, her clothes, furnishings and wallcoverings precisely matched a mood of nostalgia for an earlier era. Aniata Roddick of the Body Shop did much the same – although her cosmetics industry – and cleverly exploited an underlying public revulsion against the cruelty of testing cosmetic on animals.

· Taking almost the opposite tack, James Goldsmith founded his fortune by seeing the potential of a product alternative – generic drugs. The owner of a tiny French pharmaceuticals company, he scoured the world for drugs to make under licence and tackle the know brands head-on. His banking and retailing empire was the ultimate derivative.

· Aristotle Onassis founded his shipping empire on the fortune he made importing tobacco into Argentina. His breakthrough; steering a men’s product into a woman’s market. Instead of the strong Cuban leaf tobacco which men then smoked, he imported the milder Turkish tobacco, then persuaded fashionable women to smoke – and promote his brand.

What can be learned from the successes of the pioneers? Just one thing: whatever business you set up, look for the way to do things differently. Once you have established the features that set you apart from the competition, you must, in Anita Roddicks’s word, “emphasise them, contantly restate them, and never be seduced into watering them down.”

But if you do have an innovative idea, do not expect instant applause. Akio Morita saw people struggling with heavy ghetto blasters on their shoulders and thought of a compact alternative. His, marketing people were sure that his innovation, based on the shell of a tape recorder and a pair of tiny headphones, would be a failure. His accountants couldn’t see it being produced for the price he insisted on. For a while, Morita felt quite lonely. The kudos only came later, when his sony walkman swept the world.

There may be a lesson here – persist.