When Lerner started out, in 1983, he hardly expected to sell 10 million of his "Baby on Board!" signs. "I suppose I could have just gone with the fad and taken the profits until they dried up," he recalls. "But I wanted to be more than a flash in the pan."
One imperative became clear: extend the product line. He would have to exploit the national distribution he had won with his first runaway product to roll out others. So he assembled a product-development staff to explore new ideas and identify trends. "We gathered lots of data about where child fatalities and injuries occurred," Lerner says. "We even wrote a book about child safety and began to build a line of products around it."
Innovative pricing and packaging allowed Lerner to mass-market once-specialized products through the national chains. Retail buyers gradually bought in as products blew off the shelves.
Adamant about growth, the company has continued to expand into other categories. "Of the 50 new products we're rolling out in January, half of them are nonsafety," says Lerner. Now a major vendor to several national chains, Lerner notes, the company had to "reach the right maturity and avoid taking on new lines before we were ready."
-- Alessandra Bianchi, Michael P. Cronin, and Anne Murphy contributed to the reporting and writing of this article.
MASTER ENTREPRENEUR
George P. Mitchell
Mitchell Energy & Development Corp.
The Woodlands, Tex.
* * *
Each year our judges choose one national Master Entrepreneur. The Master award is designed to honor a company founder not just for recent accomplishments but for a lifetime of entrepreneurial success. It is meant for the entrepreneurial legends.
Without question, that description fits George Mitchell, the 73-year-old founder, chairman, and president of Texas-based Mitchell Energy & Development Corp., #402 on this year's Fortune 500. Mitchell's company is one of the nation's largest independent energy companies, with fiscal 1992 sales of $874 million and pretax operating income of $154 million. The company is also an innovative real estate developer.
Diversification and long-term vision are the two keys to Mitchell's success. He started the forerunner of Mitchell Energy in 1946 with his brother and a family friend, a trio of wildcatters looking for new Texas oil wells. Mitchell credits his early success in finding oil and natural gas to luck and to an education that combined geology and engineering.
That early success was critical; one north Texas area Mitchell and company began drilling in 1952 has so far yielded nearly 4,000 wells. But his initial good fortune has been augmented by his shrewd business sense and exceptional long-term vision. Consider the last several years, which have been dismal for the natural-gas industry. Although it hasn't been a good time for Mitchell Energy, either -- the company cut 1,000 employees from the payroll in the mid-1980s -- Mitchell has done comparatively well, in large part because the company has diversified wisely. For example, 42% of Mitchell Energy's fiscal 1992 operating earnings came from natural-gas liquids, processed products extracted from natural gas. As a result, Mitchell Energy is somewhat buffered from the cyclical nature of the energy business; when natural-gas prices drop, costs fall in another area of his business. In addition, Mitchell has protected the company from price shocks by setting up long-term contracts for much of its natural gas. He has also diversified into the pipeline business.
But Mitchell's most significant -- and risky -- diversification was into an unrelated field, for reasons that weren't just business ones. In the 1960s he had visited urban areas like Bedford-Stuyvesant and Watts. What he saw made him fear for the future of America's cities. "The white flight was destroying the cities," he says. "The tax base leaves and they shut the gates . . . and the less advantaged can't manage the urban core."
Most CEOs would have left it at that -- or at best written a check to some worthy nonprofit. With the optimism and daring that perhaps only a successful Texas entrepreneur could muster, Mitchell instead decided his company could do something about the problem -- and make money at it. "I said, 'Why can't we do better?' " he recalls. " 'How do we really make an important contribution to urbanization?' " His answer was the Woodlands -- a Houston-area real estate development that for years was ridiculed by the investment community. By gradually buying up 25,000 forested acres north of Houston and developing them into a carefully planned, carefully landscaped mixed-income community, Mitchell hoped to create the kind of atmosphere that people in other cities were seeking in the suburbs. Yet he made sure the city of Houston got the right, sometime in the future, to annex the subdivision and thus acquire the tax base. To enlarge that tax base, Mitchell started a Woodlands venture-capital firm and launched the Houston Advanced Research Center, aimed at fostering collaboration among local universities, government, and the private sector. His aim: to create in the Houston area the same critical technology mass that he saw leading to innovation and job generation in places like North Carolina's Research Triangle.
For years Mitchell took flak about the Woodlands. Today he appears to have outlasted the skeptics: in calendar year 1991, for the second year in a row, the Woodlands was the best-selling residential community in the Houston area; an Arthur Andersen survey of home sales said it was one of the five best-selling master-planned communities nationwide. (In our 1990 Metro Report, Inc. featured the Woodlands as a prime example of a thriving entrepreneurial neighborhood.) In the midst of a dismal national economy, in fiscal 1992 builders sold 925 new homes in the Woodlands, and the community is said to have added nearly 1,500 new jobs, bringing its population to 33,000 and its nonconstruction-job count to more than 10,000. Meanwhile, the real estate division of Mitchell Energy had fiscal 1992 operating earnings of $23 million on revenues of $131 million.
