John Mackey's health foods "store" was run out of a crumbling Victorian house in Austin, Texas that doubled as his residence. With just $5 in investment capital, then-recent college graduates Ben Cohen and Jerry Greenfield decided to go into the ice cream making business. Jim Koch simply discovered an old family recipe in his attic.
Though these names not all sound familiar, the companies attached to them probably are — Whole Foods markets, Ben and Jerry's ice cream and Sam Adams brewing company, respectively. Historian Nancy Koehn of the Harvard Business School, who has spent much of her professional career researching history's most successful (and colorful) entrepreneurs, discussed how these schemes have grown into billion dollar businesses while still retaining their original mom-and-pop shop feel.
"They almost went into bagels"
While consumers might be inclined to think that a successful product is the result of a connoisseur's long and painstaking process of refinement, the most important part of successful entrepreneurship is not so much creating something but what happens next.
"First you're going to have some animating flash that you're willing to refine for a long, long time," Koehn said. "Then you're going to have to have to do an enormous amount of man-on-the street anthropological research...to see what the market is like. None of this stuff came from an epiphany."
The only thing keeping Cohen and Greenfield from going into the bagel business, for example, was money — more precisely, their lack of it. As Greenfield told The Washing Post in May, "We actually priced out bagel-making equipment from a used-restaurant supplier, but we realized it was more money than we had between us. When we found out ice cream would be cheaper, we picked ice cream."
Most multinational corporations don't originate from a "eureka" moment. Instead, Koehn pointed out, entrepreneurs tend to begin with a concept that may be nebulous at first, but gets much more delineated over time through trial, error and a fair amount of making it up as they go along: Chocolate chip cookie dough, Ben and Jerry's ice cream flavor that catapulted the company to global fame when it hit the market in 1984, was concocted after the duo took heed of a customer's anonymous suggestion. The value of a little experimentation cannot be underestimated.
Understand Your Market (Or Create One)
The organic food and beverage market was worth $29 billion in 2012 when the Organic Trade Association released its most recent survey. In 1980, when Whole Foods first opened in Austin, Texas, there were less than a half a dozen natural foods markets in the country. Craft breweries have experienced a similar surge: In June, the national Brewer's Association reported that the number of American breweries had hit the 3,000 mark and the craft beer industry was worth $14.3 billion. In the 1970's, about a decade before Sam Adams went intro production, the number of independent breweries was less than 50.
"These people are pioneers in making markets that didn't exist," Koehn said. "They had good, social and economic antennae and were tuned into things."
Know When It's Time To Grow
In classic Business 101 fashion, the demand for these small batch products began to outgrow their supply. To safeguard against risk, Koch, Greenfield, Cohen and Mackey learned it was best to go slow: Koch has said he grew Sam Adams literally "bar by bar" through good, old fashioned word of mouth, while Mackey and his partner chose to merge with another local grocer in Austin before expanding.
There exists a kind of critical mass for economic growth with small, local shops, and Koehn said knowing how to manage increasing popularity is critical for the business's long-term viability. "Once a business has some traction, you have to figure out how to grow it while keeping the current business functioning. This is incredibly difficult."
Ben and Jerry's second act came in 2000 when it was sold to multinational Unilever due to legal reasons, Cohen told NPR in 2010. In spite of the bad press the duo received following the takeover — the sale was seen as more of a 'sellout ' — Koehn emphasized how carefully Cohen and Greenfield had made arrangements with their parent company to ensure their social mission endured.
"There are two men who are not corporate types," she said. "Unilever gave them a lot of control and promised to keep all their employees employeed for at least two years after the merger went through. Ben and Jerry had made their stores training grounds for employing disadvantaged folk, and a lot of that stayed in place during the merger."
To hear the complete interview, listen below: