Each Monday I post the next section of my 2001 book, which was originally called (by the publisher) Hoover’s Vision but which I have now retitled The Art of Enterprise. I have posted over half of it already; click on the “Monday” column to see all the prior sections. The entire book can be downloaded as a PDF for $10 at http://www.scribd.com/doc/25085990/The-Art-of-Enterprise-by-Gary-Hoover-January-2010
Vision for Enterprises New and Old
Let’s take a few pages and look at some real-world issues: how you choose a vision for a new enterprise and how you create a new vision for an old enterprise, especially if that established enterprise is without a clear vision.
New Ideas and the Customer: the creation of new products, services, and companies
While I have studied more companies (thousands) than I have created (three), I have dreamed up hundreds of ideas in order to get to those three. Of those three, two worked and one did not. I have spent more hours working on the creation of new businesses than I have studying other businesses. I have a long list of new business ideas at all times. This is a very tricky pursuit, one that is in vogue right now (that’s good) but one about which there are a lot of myths (that’s bad).
Look for example at all the people in recent years who have wanted to start “Internet companies.” These include many of my friends and neighbors. People who want to start Internet companies or operations usually have one of three mindsets:
1. My neighbor or someone in an article got rich on the Internet, and I want to get rich too.
2. My competitor has a website, so I should too.
3. I have a burning desire to improve industry X, and the Internet is a great tool for doing so.
People motivated in the first two ways will likely be disappointed. If they have enough money and patience, they may survive the intense process that is a startup business. However, the people who are most likely to succeed are those who see the Net as a tool to achieve a goal of serving customers, of meeting real needs. If you have always wanted a better way to buy and sell used cars, or a better way to offer insurance, then the Internet might be the right tool for you. Hoover’s is a company with an intense desire to offer people information about companies – accurate, interesting, affordable. The books in which we first offered our company profiles could not be timely; the Internet can, so that’s where we are today.
I am always looking at business plans, helping people evaluate their new concepts. Too often, I hear things like:
¨ The venture capitalists told me this kind of idea is what they’d like to back.
¨ The stock market really loves companies like this.
¨ I think I can create this company and Intel or Cisco will want to buy it in a couple of years.
¨ I will create this company so it’s a thorn in Home Depot’s side and they will have to buy us out.
¨ I will create this company that will not generate revenue but it will get a lot of buzz so someone will want to buy it out.
¨ I have assembled a great team of people, so the idea does not matter that much.
¨ We have the cleverest name you have ever heard, and wait til you see our great logo!
All of these paths, and more like them, are dead ends. Because there is only one valid reason to start a business. No surprise here: the only valid reason is to provide goods or services to people. The most compelling explanation I ever heard of how to dream up businesses was also the first one I heard: find a need and fill it.
So where do you look for opportunities for new ideas, whether that be a new product or division, or a whole new company? Here are some of the most basic approaches, which can often be used in combination.
¨ Copy an existing idea in a new geographical territory. Every day, someone somewhere on earth seems to start a local version of eBay. I met the prosperous fellow who introduced “tilt-wall” construction methods in Australia, having seen them in the US.
¨ Copy an existing idea from one industry to another. When I first saw Toys R Us and read their annual reports, I knew their idea could be adapted to almost any category of merchandise. I picked books.
¨ Chain it up. Many industries remain highly fragmented, dominated by independent companies. Dalton and Walden were the first chain bookstores. Walgreen’s, Whelan’s, and Rexall did it in the drug store business. Quality Courts began to pull together independent motels; Best Western and Holiday Inn took the concept to the next level. Service Corporation of America went around buying up local funeral homes, and Coach USA consolidated local bus chartering companies. Today this approach is often called the “rollup.”
¨ Brand an unbranded field. Disposable pens were made into a branded item by Bic. Power tools were not seriously branded outside Sears before Black and Decker rose to prominence. Today even miniblinds are branded, and some of our most powerful brands grace the once-lowly sneaker.
¨ Split things into finer specialization. We have had sporting goods stores for a long time, but only in recent years have bicycle stores, outdoor stores, fishing stores, and running shoe stores come to the fore. We had general TV networks for many years before we had news, sports, and old movie networks.
¨ Make a dramatic breakthrough in a business or improve the way things are done. Hoover’s changed the way business information is distributed. Kmart took the discount store approach to retailing first pioneered by New York’s E. J. Korvette and others, and “perfected” it. Wal-Mart took the Kmart approach and further “perfected” it. There is always room for improvement, in any business, if you watch it closely enough. Especially if the business is dominated by old, profitable companies. I have been waiting thirty years for a department store to organize the men’s dress shirts by size (the way people shop for them) rather than by supplier (which is what the suppliers want).
¨ Invent a whole new business. Federal Express came from Fred Smith’s mind. WD-40 came out of nowhere. eBay came from even less. Metro Networks figured out how to build a company by offering pooled traffic helicopter reports to local radio stations. Kelly Girls met a need no one was focusing on.
The beginnings of success are not usually too complicated, as this excerpt from a Hoover’s company profile shows:
In 1918, 22-year-old John Jacobs opened a Chicago car rental business with 12 Model T Fords that he had repaired. By 1923, when John Hertz (president of Yellow Cab and Yellow Truck and Coach Manufacturing Company) bought Jacobs’ business, it had revenues of about $1 million. Jacobs continued as top executive of the company, renamed Hertz Drive-Ur-Self System. Three years later General Motors (GM) acquired the company when it bought Yellow Truck from John Hertz. Hertz introduced the first car rental charge card in 1926, opened its first airport location at Chicago’s Midway Airport in 1932, and initiated the first one-way (rent-it-here/leave-it-there) plan in 1933.