During a conference hosted by National Instruments in London last week, presenter Francis Griffiths offered an interesting observation. NI’s conference theme was ‘Innovation in tough times – how to do more with less’ and Mr Griffiths pointed out to his audience that a number of companies, which went on to become huge and respected global brands had their origins amid a climate of general business failure at times of steep economic decline. He cited three notable examples.
Stanford University classmates Bill Hewlett and Dave Packard founded the company that bears their names in a Palo Alto garage towards the end of the Great Depression. Frederick W Smith scratched some venture capital together during the recession of the early 1970s and added his own inherited wealth to found what we now know today as FedEx. And Ted Turner created what is arguably the world’s first 24-hour, global news service, CNN, as recession bit once more in 1980. Prompted by Mr Griffiths’ illustration, I decided to do my own bit of research into the triumphs of entrepreneurship during a downturn.
Two corporate giants and globally recognised technology leaders – IBM and General Electric – had their origins in 1873, at the time of a US banking crisis that led to the so-called Long Depression. The Wall Street panic of 1907 was followed by a short lived, though severe recession in 1908. Nonetheless, in that year Henry Ford decided to launch his brainchild of 20 years – the Model T Ford – which subsequently went into mass production several years later and defined the way modern manufacturing industry works to this day. On September 25, 1928, Paul V. Galvin and his brother, Joseph, incorporated Motorola's founding company, Galvin Manufacturing Corporation, in Chicago, USA, again at a time of deep recession and just months before the 1929 Wall Street Crash.
During the year of the Crash, The Boeing Airplane and Transport Corporation changed its name to United Aircraft and Transportation Corporation and by the end of 1929 had expanded its operations to include iconic aviation brands, including Northrop, Sikorsky and Pratt & Whitney. However, US antitrust laws saw the break up of the organisation in 1934, with the Mississippi River effectively providing a dividing line between its eastern and western located manufacturing interests: United Aircraft Corporation (now United Technologies) and Boeing respectively. The 1930s was also a time when luxury consumer brands were launched. World famous cosmetics group, Revlon cheered its customers back in 1932 as the Great Depression took hold, by launching its first product – a nail enamel.
Many successful products, services, and pivotal ideas have been launched during an economic lull, according to Bhaskar Chakravorti, a senior lecturer at Harvard Business School, and a lead partner at McKinsey & Company. Good ideas are not hard to come by, he argues. The more complicated part is to harness the diminishing supply of capital.
But according to Mr Chakravorti, capital can still find its way to a credible idea. "The entrepreneurs who can capture the limited resources have the potential to do well. Shortage and adversity are powerful stimuli for focusing the mind."
Les Hunt
Editor