Entrepreneurship

Sears and Kmart

Sears, Roebuck (according to Sears Archives, http://www.searsarchives.com/history/history1886.htm) began because a railroad station agent in North Redwood, MN had time on his hands and, to fill it, did some minor dealings in lumber and coal. A jeweler in nearby Redwood Falls refused a shipment of watches in 1886. The young Richard Sears, the agent, bought the watches from the seller and sold them to other agents up and down the railroad line. This little venture having been successful, Sears bought more watches. Eventually he started selling the watches in a catalog of his own. The company was then called R.W. Sears Watch Company. Sears needed a watchmaker to support this business and hired another young man, Alvah Roebuck, using an ad in a Chicago paper. One thing led to another. Sears was not the first catalog seller to the then predominantly rural U.S. population. One of his innovations was to make the Sears catalog smaller than that of the dominant Montgomery Ward. Sears argued that, being smaller, the catalog would always end up on top. "Small is beautiful," you might say. Kmart also began small—as a dime-store founded by Sebastian Kresge, a category now equivalent to so-called "dollar stores." Kresge's innovation consisted in exploiting the low-price end of retail goods and concentrating on them.

McDonald's

The "golden arches" had their start because Ray Kroc, McDonald's founder, sold milkshake blenders to drugstores and eateries. In 1954 he discovered that a hamburger seller owned by the MacDonald brothers was far and away the most popular in Southern California and had developed a method for serving customers in record time. Eight milkshake blenders were running at the little shop continuously. He proposed to the brothers that they open several more shops—thinking that he could sell them blenders. The brothers wondered who could open these stores for them. Kroc then said, (according to McDonald's web site, http://www.mcdonalds.com/corp/about/mcd_history_pg1.html) "Well, what about me?" The first golden arches rose a year later in Des Plains, IL. Ray Kroc himself had, by that time, already shown his entrepreneurial spirit by investing his savings and a second-mortgage on his house into the milkshake blender distributorship—which in due time led to his fortune. In this case the desire to sell more blenders resulted in the establishment of a national and now international "fast food" category.

Apple and the Macintosh

Apple began when two Steves, Steve Wozniak, the technical innovator, and Steve Jobs, the entrepreneur, got together to make circuit boards for hobbyists—who, in turn, would use them to make homegrown computers. Thus Apple did not begin as a computer maker. When Jobs attempted to sell these boards to a local computer store, Paul Terrel, the owner, told him to make finished computers and promised to buy 50 of them for $500 each. Financing was a problem, but Jobs, armed with the purchase order from Terrel, managed to persuade a electronics distributor to let him have the components on credit. Thus Apple was born—financed by a sale-in-hand. This history illustrates the limited visions of the start-up enterprise and the effect of tenacious enterprise. Jobs, however, had a vision when, some eight years later, in 1979, he toured Xerox's Palo Alto Research Corporation (PARC) and there saw, for the first time, an experimental visual interface and the computer mouse. Xerox, clearly, was miles ahead of anyone in technological innovation, but the people at Xerox PARC could not persuade their managements to commercialize the ideas already present in physical demonstration. Apple, however, independently developed the concepts and thus created the Macintosh. Visual interfaces became standard after that—and everyone now uses a mouse. This bit of history illustrates Hawken's notion that institutionalization stifles and entrepreneurship creates change.

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