Entrepreneurial History: A Conceptual Overview
Part of this article investigates how entrepreneurs have translated their own insights and inspiration into enduring, strategically effective connections with consumer and best of class organizations during moments of great technological, managerial, demographic and perceptual transition.
This article addresses two questions:
* Why did these individuals succeed while so many others failed?
* What kinds of organizational capabilities did entrepreneurs develop to learn about consumers and to earn their trust?
Each built highly successful organizations that anticipated and then satisfied buyers’ changing preferences.
Building Markets through Connections with Consumers
Josiah Wedgwood had ambition, experience, and imagination, but virtually no cash and few business contacts.
The other five entrepreneurs developed tools that included rigorous quality control measures, focused employee training policies, innovative selling and distribution methods, and strong brands.
Creating a meaningful identity for their products was a vital connection to potential customers – a most important strategic asset. Howard Schultz at Starbucks provided that connection through high-quality products, a powerful brand and an appealing in-store “experience.”
Each listened carefully to customers’ opinions, assessed reactions to specific new products and brand attributes, and reacted appropriately. They used technological and managerial innovations to produce offerings that met emerging, often-nebulous customer desires.
Building markets and credible identities for new products was costly for each of the six. But each was willing to outspend his rivals in time, energy, and money, on brand creation, quality control, employee training, and innovative sales and distribution methods.
Building a set of organizational capabilities that was tailored specifically toward exploiting demand-side possibilities was a daunting challenge. Rigorous quality control measures and innovative marketing was employed along with an efficient managerial infrastructure.
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Wedgwood developed a management system and employee training program that was surprisingly modern.
Despite his poverty and shame from prior business ventures, Henry Heinz founded another food processing venture. His experience highlights the formidable odds against entrepreneurial success, the power of failure, the importance of resiliency and the importance of one’s ability to learn from mistakes.
Marshall Field established and organizational and financial structure based around the departmental buyer, who not only selected merchandise for a given line of goods, but also had P&L responsibility for the line, to stay in close touch with consumer tastes and to keep asset utilization high. To help ensure that salespeople offered courteous, effective service, Field’s developed its own hiring criteria and training programs. His store was one of the first retailers to employee female clerks.
Estee Lauder’s facility for hands-on selling, her innovative use of sampling to interest women in her products, and her ability to listen carefully to consumers, using their suggestions to improve her formula and sales technique.
Lauder used stringent quality control measures, ongoing product introductions, limited department store distribution, and imaginative marketing to build one of the strongest brands in the beauty business. They also invested in specific organizational capabilities, creating a research department, an international division to coordinate overseas sales, and financial and management systems.
Schultz built Starbucks through the development of premium products, rapid expansion of company-owned stores – each with attractive retail enviros and responsive customer service – and creation of a strong brand. Additionally, he focused on the company’s relationship with its employees, the significance of vertical integration in ensuring quality control, and how it managed its growth.
Schultz’ progressive human resource policies and employee training programs impacted employee turnover, service quality and consumer perception of the brand.
Michael Dell’s entrepreneurial vision came from the demand side of the market – how a product was marketed was sometimes as significant as how it was manufactured. Dell created a powerful brand and organization around his direct sales model, particularly his market segmentation strategies, customer service provision, product support, executive recruiting, and the use of consumer feedback.
Why did these six succeed while so many others working in their respective industries failed? Five reasons:
* Deep knowledge and personal experience of their product or service.
* Learned quickly from mistakes and made quick adjustments.
* Created meaningful brands, distinguished their offerings, and responded to consumers’ changing preferences.
* Initiated a two-way process of reciprocal learning with their customers.
* Constructed a range of organizational capabilities that delivered on the promises of their respective brands.
When each of the six began to scale up production and sales, each depended heavily on word-of-mouth personal communication networks.
Schultz invested in employee development and benefits in order to provide a distinctive coffee bar experience and to develop a productive organizational culture.
Dell personally trained company sales people and customer support reps to offer responsive, knowledgeable service over the telephone – in part as a way to distinguish the Dell brand from all others.
Schultz used almost no mass advertising to promote the Starbucks brand. He increased customer awareness by constructing more stores, relying on word-of-mouth, and forging alliances with business partners such as Barnes & Noble and Nordstrom. His underlying strategy of rapid bricks and mortar expansion depended on sophisticated point of sale information systems to link between management, suppliers and among stores.
Wedgwood created org initiatives to train existing staff and new hires, created the position of foreman to oversee employees in individual workshops and an elaborate system of rules, regulations, rewards, and fines to motivate workers’ behavior.
Schultz encountered org challenges as the company expanded. He organized by geographic markets, with district and regional offices, a managerial hierarchy, and sophisticated information systems. Each employee had clearly delineated responsibility and rigorous training, believing that increasing the firm’s capabilities at every level made good strategic sense.
Dell maintained a strong connection with consumers through knowledgeable, courteous and responsive salespeople and service technicians. He dealt with all of the customers when his firm began. To continue that level of service, he invested heavily in employees, establishing a range of programs to train the field-based sales force, telephone reps, service and support staff. These training sessions covered not only issues such as how to field questions, customize orders and suggest other products. They also included instructions on how to listen effectively to consumers’ comments – laudatory and critical – and convey the information back to appropriate place in the company. A collective talent for listening became one of Dell’s salient organizational capabilities.
An important source of competitive advantage flowed from org capabilities developed to support their brand, making most of the possibilities on the demand side, spanning virtually all company functions from operations to marketing to finance. Taken together, they functioned as a vital system of interdependent activities that frequently proved difficult for competitors to emulate.