A SHORT HISTORY OF ENTREPRENEURIAL EVOLUTION DURING THE 20TH CENTURY: TRENDS FOR THE NEW MILLENNIUM
Looking at entrepreneurship from the economic-history context allows us to look at the flow of events in time and space such as inventions and innovations, the context in which they occurred and the impacts upon society these actions and events had. Looking directly at the biographies of historical figures can assist us in seeing the historical contexts of their efforts, innovations, or inventions. This may help us to understand how their insights occurred and opportunities were identified and exploited, showing us the reasons behind the trajectories these historical figures took with their inventions and innovations which impacted upon society’s future development path.1 Take for example the biography of Thomas Edison we can see the importance of systematic development work, self promotion, and having a workable and viable business model in mind to exploit any subsequent invention. These were paramount elements of his success. Many of the failing entrepreneurs of the dot.com bust of 2000 failed to see the necessity of having a workable and viable business model to exploit their ideas and could have well learnt from the lessons Edison gave us.
Many inventions, subsequent commercialization and acceptance by society have dramatically changed our way of life over the centuries. Electricity and the electric light, the aircraft and jet engine, the automobile and combustion engine, microchips, computers and mobile phones have all in different ways drastically changed society. These changes have led tofurther opportunities which entrepreneurs have been able to exploit. The transmission of electricity to homes allowed a host of other electrical devices to be invented, air travel led to air freight, travel agents, air terminal services, interstate, inter-regional and international business travel, and the building of hotels around the world, the automobile has led to automobile service stations, the invention of seat beats and other safety equipment, microchips have led to the invention of many items like digital watches, calculators, hand held GPS devices, and a host of other products. Computers and mobile phones have led to opportunities in software development and peripheral products and services. We owe the progression of our social existence to the invention of new technologies and ways of doing things, the creation of so many concepts and tangible things like alphabets, language, the wheel, farming techniques, cooking, social institutions, and the legal system, etc.
From the historical context it can be argued that innovation is governed by the period and place an entrepreneur resides.2 Thus innovation is a period and regional phenomenon3 and the great inventors through history were products of their environment spotting, and exploiting opportunities, rather than people with brilliance in isolation.4 The inventors and entrepreneurs only knew what their time and place allowed them to know.5Innovation is thus a situational phenomenon and therefore the time and space aspect of understanding opportunity is important.
Following on from the above argument, novelty becomes a relative concept to time and space. Something that is new to one location may have long time been accepted product or service in another location. McDonalds was accepted in the United States market before it was introduced into foreign markets, were it was novel in each new market at the time of its introduction. Pizza was long accepted in Italy and Greece before it was introduced into the United States in the early 20th century and rest of the world after the Second World War. This has been an advantage for many students from developing countries studying in developed countries, where they have been able to identify novel business concepts in countries that they studied in, and went home to apply these concepts in their home countries upon their return. For example, many new manufacturing, retailing or service business concepts were started in South-East Asia by returning students. The Econsave supermarket group in Malaysia was inspired and foundered by Malaysian students observing independent Foodtownsupermarkets in Melbourne, Australia.6
The nature of opportunity is such that it is ephemeral and transitory7through time and space. Opportunity can be equated to periodically opening and closing doors along a corridor. True opportunities may not exist because a piece of technology is missing. For example, the idea of tourists visiting orbital hotels for holidays will remain only a concept until low cost transportation from the Earth to orbit has been developed. Thus space holidays may be an opportunity for another time, although it is an idea today. Many ideas have to wait for technology to catch up. An opportunity may exist in one place but not in another. Opportunities may exist for high end cafes and coffee shops in densely populated urban areas and high volume passenger transport terminals like railway stations and airports but there may be no opportunity for the same concept in much less populous rural areas where incomes may be much lower and the “urban café culture”does not exist. This shows the importance of time and space.
2. Legacies from the 18th and 19th Centuries
The inventors of the 18th and 19th Centuries made great contribution to the development of Britain, Europe, and America, laying the foundation for these regions to grow at unprecedented rates over the next century. The American South was developed through the steam boats and the cotton industry established with the aid of inventions by Kay, Hargreaves, Arkwright, and Crompton. The American West was settled through the assistance of the railroads and innovation with refrigeration which allowed the cattle industries to supply the East with meat. Some of the most well known American brand names were created during this time from entrepreneurial start-ups aimed at exploiting an opportunity, with similar stories to those outlined in the last section (see Table 1). Mercantilism declined in at the end of the 18th Century and the whale industry around the middle of the 19th Century when petroleum became a substitute for whale oil, showing that opportunity is characterized with a limited lifespan.
Table 1 Some major companies founded during the 19th century
|Year Founded||Company||Founder||Major Products/Activities|
|1857||Bethlehem Steel Corporation||First organized by Augustus Wolle. Charles M. Schwab and Joseph Wharton assumed name in 1904||Iron mining, coal mining, steel production, ship building, and railroad car production. Suffered from more competitive foreign competition, domestic mini mill production and change to lighter construction materials and went into bankruptcy in 2001.|
|1887||The Coca Cola Company||Asa Griggs Candler purchased exclusive rights to John Pemberton’s formula.||Originally developed as a non-alcoholic drink during prohibition in Atlanta in 1886. Became Americas No. 1 selling soft drink by the early 1990s. Coca Cola followed the American war effort around the world and established franchising operations in numerous countries. The Coca Cola company has acquired many brands and is now a leading beverage brands company around the world.|
|1802||E.I. du Pont de Nemours and Company||Eleuthère Irénée du Pont||Originated as a gunpowder manufacturer, expended into dynamite, divested some assets due to Sherman Antitrust Act in 1912. Invested in Ford Motor Company in 1914, focused on materials science making a number of discoveries and commercializations. 1981 acquired Conoco and expanded into fiber and plastic manufacture. Now a major science based R&D company.|
|1901||Gillette Safety Razor Company||King Camp Gillette||Developed a safety razor in an era where people had to go to the barber or use a blade prior to this invention. The company developed a brand synonymous with shaving and personal care. The company was purchased by Proctor & gamble in 2007.|
|1907||Harley-Davidson||William Harley and Arthur Davidson||Started experimenting and making small motorcycles. First offered engines to do-it-yourself trade, then began selling motorcycles. Supplied motorcycles for US war effort, survived the depression. Motorcycles developed outlaw image during 1950s, almost went bankrupt. Revived in the 1980s with a retro-image and Harley motorcycles became sought after, in the“heavy bike” bracket.|
|1851||I.M. Singer & Co. (The Singer Company).||Isaac Merrit Singer & Edward Clark||Started as a manufacturer of sewing machines. In the 1960s diversified into navigation equipment through acquisition, but sold off in 1990. Sold off sewing machine division in 1989. Singer now produces a wide range of consumer products, including electronic sewing machines. Now owned by SVP Worldwide that also owns Pfaff and Husqvarna Viking Brands.|
|1873||Levi Strauss & Co.||Levi Strauss and Jacob Davis||Started a work pants manufacturing business with patented copper rivets, which grew to become an internationally fashionable denim leisurewear brand.|
|1857||New York Condensed Milk Company (Now known as Borden)||Gail Borden||Initially a publisher Gail Borden invented and patented a method of producing condensed milk. The business grew during the American Civil War. Still a dairy based company that diversified into fruit juices, flavored milk, cultured milk, and organic products.|
|1837||Proctor & Gamble||William Proctor and James Gamble||Started as a candle and soap maker, expanded into cleaning and personal care. Now the holding company of numerous household and personal care consumer brands.|
By the end of the 19th century and beginning of the 20th century governments had begun creating regulations and laws governing the railways, roads, banking, and business, establishing a stable business environment. Governments also began to realize their own fiscal and monetary abilities and began to manage their economies from a macro viewpoint. However the continued use of tariffs and protection was to hinder trade in the early 20th Century partly contributing to war and depression. Many entrepreneurs of the 19th Century set the tone of how invention and innovation would occur later in the 20th Century as individuals and corporations, i.e., industrial laboratories, skunk works, etc.Many of the industries started at the turn of the 20th Century were going to grow within massive industries as the century progressed, i.e., automobiles, aviation, steel, petroleum, electric power, communications, media entertainment, and processed products, etc. Entrepreneurship and innovation along the lines of the Schumpeter concept of creative destruction is what made society progress and this was best achieved when encouraged. Figure 1 shows a timeline for the second half of the 20thCentury.
Figure 1 Timeline for the second half of the 20th century
The first part of the 20th Century was chaotic for growth and development due to protectionism and national self interest. There were two world wars within a space of less than thirty years. Britain was still a colonial power; Japan was rapidly becoming the power of the East, South-East Asia still underdeveloped and entrepreneurship in America stifled by Roosevelt’s quasi-socialist new deal programs.8 Although the Second World War had a positive influence on new technology development, it was only in the post war years that entrepreneurs began to reemerge in perhaps the fastest thirty years of growth the world had ever experienced. A barrage of new industries based upon newly developed technologies was created and grew, rapidly changing society.
The United States played a major role in victories in both the European and Pacific theatres of war. Most countries within Europe were devastated along with Germany and Japan. China was still locked in civil war and was then to undergo more than 30 years of isolation under Mao’s communist rule. The United States was intact and still had occupation troops in both Germany and Japan. The United States under the Marshall Plan took some responsibility for the restoration of Europe and focused on preventing loss of what had been gained in the battlefield to the communist movement. The US war effort had mobilized the steel/shipbuilding, aviation, automobile, and created a host of new technologies with post war civilian applications, where no other country was in this favored position.
After the Second World War, peace and the likelihood of better times ahead, birthrates dramatically increased across the United States, Europe, and Australia. This lead to a boom in housing with millions of new homes built in the United States alone within the first decade after the war. Automobile sales soared giving Americans the mobility they had never had before. Great demographic changes were occurring in the United States where people in the north were migrating to the south and west. Cities like Phoenix, Los Angeles, Tampa, Orlando, Dallas, and Houston grew dramatically. Women who worked in the factories during the war to support the war effort now had their own incomes and drastically increased purchases of clothes, ladies fashion items, cosmetics, and other consumer items leading to a great growth in consumption that led to many new opportunities in the personal consumption and household products sectors. This drove an emerging banking and financial sector which grew on mortgage and business borrowings.
These changed conditions gave way to many creative opportunities for those who could see them. For example, after the Second World War there were plenty of experienced women that had idle time after their children had grown up. Many mothers wanted part time work and many businesses wanted temporary skilled workers. Russell Kelly saw this connection in 1946 and started finding temporary jobs for part-time workers on a temporary basis. In his first year of business Kelly had 3 employees, 12 customers, and USD $848 in sales (Eaton 1998). Today Kelly Services has more than USD 5.3 Billion sales9 and operates across 30 countries. It can be claimed that Russell Kelly created the temporary employee industry that is worth more than USD 40 Billion worldwide covering engineering, education, nursing, and other industries with many 1000s of large and small businesses following the Kelly business model.
The example of Amway also shows how innovation can also come from a new business model that is constructed to take advantage of the increasing affluence and spending power of a growing American middle class and recognition that personal relationships have a great influence upon consumer buying decisions. Jay Van Andel and Richard DeVos were close friends and participated in a number of ventures together as partners in the 1940s that included a hamburger stall, air charter service, and sailing business. In 1949 they were introduced to Nutrilite Products, a direct selling company founded by Dr. Carl Rhenborg. Nutrilite had the first multivitamin tablet ever sold in the United States and Van Andel and DeVos seeing the potential of this product signed up as distributors. After attending aNutrilite conference in Chicago a few months later Van Andel and DeVos decided to go into distributing Nutrilife on a full time basis.10 Later that year Van Andel and DeVos set up Ja-Ri Corporation in an attempt to add more products to the Nutrilite range they were selling by importing wooden products from South America.11 They introduced what is called the multi level concept of marketing where distributors would be given an extra commission on sales made by people they recruit in addition to the margins they make from their own sales, plus another commission based on the sales volume they and their recruited sellers achieve.12 By 1958 they had over 5,000 distributors.
Van Andel and DeVos with some other top distributors looked into how they could get more products to sell through their multi level marketing networks in addition to Nutrilite and formed the The American Way Association to represent distributors.13 Van Andel and DeVos bought the rights to manufacture and market a product called Liquid Organic Cleaner (LOC) and subsequently formed Amway Sales Corporation. In 1960 they purchased a 50% interest in the manufacturer of LOC, ATCO Manufacturing Company in Detroit and renamed it Amway manufacturing Company. In 1964 all the companies under the AMWAY banner were consolidated into Amway Corporation. Amway expanded into Canada (1962), Australia (1971), United Kingdom (1973), Hong Kong (1974), Germany (1975), Malaysia (1976), Netherlands (1978), Japan (1979), and to another 45 countries over the last 30 years. Amway is one of the largest privatively owned companies in the world today with sales of USD 8.9 Billion in 2009.14
3. The Post World War II Period
Within the first decade of the Second World War more than half American households owned cars, where Ford, General Motors, and Chrysler dominated the market. The automobile very quickly became a concentrated industry based at Detroit. This promoted the growth of specialist manufacturers like A.O. Smith, Bendix, Bosch, Electric Autolite, American Axle & Manufacturing Holdings, and Johnson Controls, etc. which carved out extremely narrow specialist niches. The automobile manufacturers also developed networks of dealers and service centers. The future role of the automobile as a means of travel was greatly enhanced when the US Congress passed the National Highway Act in 1956 to build four lane interstate highways across the United States. Just what the railroads did in the 19th Century, the automobile was going to do in the 20th century opening up the way for passenger and freight travel by road.
As the highways opened up travel between towns and cities, restaurants were needed for people to eat while traveling. Ray Kroc just quit his job at 53 as a paper cup salesman to sell a multiple milkshake mixer to restaurants around the United States. One of the restaurants he called upon was the McDonald’s brothers’ store in San Bernardino California in 1954. Mac and Dick McDonald’s drive-in store had an assembly line arrangement that handled fries, hamburgers, and beverages on a mass production basis which was very efficient and allowed the brothers to monitor quality. Kroc also saw that the restaurant was much cleaner than others around America at the time and had a family, rather than ‘hang-out’ type atmosphere that burger jointswere notorious for. Kroc envisaged that this model could work successfully all over the United States and negotiated a franchise agreement with the McDonald brothers.15 Within a year Kroc opened a test store in Des Plaines, Illinois developing procedures and checklists right down to how and when to clean rubbish in the car park. From the first store in 1955, Kroc opened more than 200 stores in the first five years and by the mid 1960s was opening more than 100 stores per year. Kroc opened the Hamburger University to train employees to the procedures of making burgers to operating a store. Today McDonalds Corporation is the World’s largest chain of fast food restaurants.
The automobile also changed the way cities developed, now families could live further away from their place of work in newly sprawling suburbs which drove the home construction industry. New suburbs would also create new opportunities for local businesses that supplied groceries and other staples and services to residents, greatly decentralizing retailing in the United States. The new suburbs encouraged the establishment of hardware, furnishing, plumbing, kitchen, white and electrical goods industries to grow. This saw the rise of General Electric consumer products, RCA radios, and Zenith televisions that rapidly expanded to supply increasing consumer demand. Utility companies supplying telephone and electricity became large corporations during this period with rapid increases in demand for basic services.
By the 1950s ordinary people in the United States could afford to travel and the emerging airlines around the world were picking up increased business. Aircraft could fly further in much less time. Aircraft navigation and safety had greatly improved. The Douglas DC 4 and later the much faster Lockheed Constellation were both capable of traveling across the American continent and across the Atlantic directly from New York to London. The development of tracking and weather radar allowed airports to control traffic much more efficiently. Flight was now becoming a common occurrence. This not only led to a growing aviation industry but also led to opportunities to create new tourist industries where locations had suitable vistas and spurred the growth of the hotel industry in major cities.
One entrepreneur at that time Kemmons Wilson saw that hotels around America tended to be dirty, had few conveniences and facilities and didn’t have enough space for children who they charged at the same rate as adults.16 Wilson traveled around the United States with his wife and children staying in many hotels to see what they had to offer. He concluded that people should expect familiar surroundings in the different cities that they stay in, thus a Holiday Inn should be standardized but at the same time have a local theme, clean, predictable, family friendly, and readily accessible to road travelers. He designed what he believed should be a good hotel, opening the first Holiday Inn in Memphis, Tennessee in 1952. By 1968 there were over 1,000 Holiday inns around the United States alone. The Holiday Inn chain set the benchmark and standards for hotels linking them with an international reservation system that later rivals Best Western, Quality Inns, and Ramada Inns had to match.
By the 1950s radio and television was becoming an important part of American culture. Radio during the war had kept everybody up to date with what was happening and radio took the mantle from newspapers as the most important source of news. Radio broadcast stations increased from 900 in 1945 to over 3,000 by 1948. The National broadcasting Company (NBC) and Columbia Broadcasting System (CBS) dominated the airwaves through their own and affiliate stations. Both networks fought to get the best personalities for their various children’s, drama, comedy, mystery, and news programs. Radio advertising became a powerful means to promote products and both networks competed strongly for the advertising dollars. Although experimental television broadcasts began in 1928, regular broadcasting only commenced in 1946 with DuMont Television Network, with NBC following in 1947, and CBS and ABC in 1948. By 1948 more than one million households owned television sets with about 30 broadcasting stations operating in 20 cities around the United States. NBC dominated the early television programming producing similar types of programs to what had been popular on radio. Ownership of television sets grew as they got larger, programming improved and color came in 1954. By the mid 1950s about half of American households owned television sets. Advertisers flocked to this new medium and television was to show Americans that their country was the most advanced technically in the world.
American industry supported by research and development during the war was set to provide a peace dividend to society. Technology affected all aspects of life. Homes ran almost completely on electricity with new inventions like electric garbage disposals in the sink, automatic garage doors and curtains, and a large range of new electrical appliances. Nuclear energy was going to be the power of the future where Lewis Strauss, Chairman of the United States Atomic Energy Commission stated that electricity in the future “would be too cheap to meter.”17 The USSR launched the first satellite Sputnik 1 in 1957 beginning the space race and new medicines and medical procedures were being developed that gave people confidence about the future. Within agriculture too, there were leaps and bounds in technology. Until the green revolution took place in the late 1940s,agriculture relied primarily on traditional methods of production, based on preventative measures and local inputs. Through technology advances during the Second World War, farm productivity improved dramatically. This was achieved through chemical based fertilizers, pesticides, and herbicides, based on petroleum by-products, ironically spin-offs from the chemical warfare programs. This lead to the growth the American chemical companies like Monsanto and Dow Chemical. In addition a number of labor saving and automation inventions and innovations such as the tractor and plough arrays and automated harvesters enabled the development of extensive farming on a much larger scale than ever before, making people believe that the World had food security.
International trade was growing but shipping was inefficient as every package had to be unloaded from a truck or railroad car and lifted by a crane into the hold of a ship and unloaded at the destination in the same way. Malcolm McLean had built up a trucking company from a single truck to a fleet of over 1,770 trucks making his company the second largest in the United States. He saw that the way goods were shipped was totally inefficient and saw great advantages if the whole load could just be lifted on and off a ship, truck and trailer. As trucks on a ship would waste space, McLean refined his idea to just lifting on and off standardized boxes or containers. At the time in the United States the owner of a trucking company could not purchase a shipping line due to antitrust laws. Mclean sold his trucking interests and purchased two shipping lines with the idea of converting the vessels to containerization. Mclean at first converted two old Second World War ships and commenced a container service between New York, Florida, and Texas in 1957. McLean’s company was renamed Sea-Land Service Inc. in 1960. Although the idea was initially resisted by the unions at the beginning, containerization gradually became accepted around the world by the end of the 1970s. Although the idea was not completely new,18Mclean had refined the concept and put it into practice, which eventually revolutionized the shipping logistics of world trade.
The 1950s came to a conclusion with a decade of continual growth. The American corporation brought a blissful existence to the middle class by employing and providing them with affordable television, entertainment, cars, fast food, and new urban lifestyle in carefully planned suburban situations around a nuclear family that brought conformity.19 The McCarthyism movement of the decade was allowed to grow out of this conformity and organizations became centers of belongingness and subservience to the greater corporate good, rather than individualism and non-conformism where creativity was a group pursuit. Thus during the 1950s the majority pursued a career rather than self employment and entrepreneurship. American business by 1960 dominated the world in so many fields automobiles, aviation, steel, entertainment, broadcasting, shipping, pharmaceuticals, and petroleum, where corporate American was unchecked by government, foreign competition, consumer movements, or class actions.
Prof. MURRAY HUNTER is one of the frequent contributors for The 4th Media.