The world lost one of the great, unsung entrepreneurs of history this week: Charles Lazarus, the founder of Toys R Us, who passed away at age 94. His death came, coincidentally, as two other big business milestones happened:

First, the multi-billion dollar company he founded went into liquidation, meaning it's almost certain to close its doors. Second, Dropbox went public.

Does the second milestone seem unrelated? The connection might take a minute to make, but it has to do with something that both Lazarus and Drew Houston, the founder and CEO of Dropbox, accomplished--and that comparatively few other founders are able to do: taking their companies all the way from drawing board to IPO.

"Most start-ups now when they get to that size, founders like him get pushed aside for someone with a finance or management background. But he managed to stay there," Jeffrey Mann, a vice president at research firm Gartner, said of Houston, in a New York Times article marking his accomplishment.

It's not totally unheard of, of course: Founders of some of the biggest and most successful tech and Internet companies survived their positions through IPO--Apple back in 1980, Amazon and Facebook, for example.

But it's more common that founders eventually get pushed aside. Think of the founders of Google stepping aside for Eric Schmidt, or for that matter, the true founders of McDonald's who were pushed out of the way by Ray Kroc

Toys 'R' Us grew out of a small, child-focused furniture store that Lazarus started in Washington, DC in 1948, after serving in World War II. He'd been in military intelligence, and now he studied business intelligence. 

Specifically, as he said during an interview years later, he was looking at demographics--and the sheer number of his fellow veterans who said their plan after the war was simply to go home and start a family.

From there, it was insight, react, build--over and over and over.

First, he reacted to population changes, then he shifted his product category from furniture to toys, because families with more than one child often used the same crib and high chair, but they kept buying new toys for new kids.

He imitated supermarkets, adopted computerized inventory controls many years before his competitors, and became an expert at child-focused advertising, once he realized that children, rather than their parents, were driving purchases.

In short, he demonstrated an enviable combination of resourcefulness and resilience, throughout the history of his association with Toys R Us. 

There was one asterisk in the record books, so to speak, next to Lazarus's record as a idea-to-IPO chief executive. That's the fact that he delivered his company an exit in the form of an acquisition before the IPO--but later became CEO of the acquiring company.

Toys 'R' Us was acquired in 1966 by a company called Interstate Department Stores, which went public in 1978 with Toys R Us its most successful division by far. The acquiring company eventually renamed itself Toys R Us to reflect this, and Lazarus became its CEO.

He stayed in charge through the company's apex, leaving in 1994 when more toys were sold at Toys R Us than anywhere else in retail. Later, however, the company slid--being outpaced by WalMart and other general retailers, and ultimately displaced by the Internet and debt financing.

Now, almost eerily, the company is disappearing and Lazarus has passed away at the same time. But as we congratulate newer success stories like Houston and Dropbox, take a minute to remember a past master. 


 

Published on: Mar 24, 2018
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