The Inevitable Rise of the Entrepreneur

The survival of the fittest doesn’t always mean the survival of the biggest. Indeed, the natural life cycle of the American economy always eventually favors the entrepreneur.

From: Inc. Magazine, October 2003 By: Adam Hanft

A forced march to the bigger and blander. No matter who you talk to, that seems to be pretty much the dismal inevitability of American consumer life–and hence cultural life–today. It’s all a matter of the irresistible forces of homogenization and consolidation, they say. The giants are squeezing out (or sucking up) competitors wherever you cast your gaze. Choose your sector–retail, media, technology, publishing, package goods–it’s a winner-take-all world. Everyone has a favorite coffeehouse that was scrunched by Starbucks, a cozy bookstore juggernauted by Barnes & Noble. Pretty soon, every street in every city will look exactly the same. Stepford America.

Is that our fate? I don’t think it is. I believe–and I don’t think it’s wishful thinking–that the cycle of massive corporate accretion we are in today is just that, a cycle. A long, powerful, and strident one to be sure, but an episodic phenomenon nonetheless. I, for one, believe that a snap in the other direction has already begun.

There are, after all, natural limits to size and growth, whether of a nation-state or a corporation. Management failures, internal insurrections, and the chronic conditions of overbulk can’t, for the most part, be avoided. The inevitable rise of entrepreneurship is also impossible to stop. Goliaths create their own niche-filling Davids. Somewhere out there are today’s Bernie Marcus and Arthur Blank (who started Home Depot after getting fired at Handy Dan) and Andy Grove, Gordon Moore, and Bob Noyce (who started Intel after leaving Fairchild).

Finally, consumers are always on the lookout for something new. One current expression of this is the "No Logo" phenomenon. Another is the indie maverick Wind-up Records. Even as the record industry gasps for air, Wind-up shows that there are still plenty of consumers ready to buy the right music. It is making money on acts that the big labels mistakenly discarded, such as Creed and Evanescence. Interestingly, Wind-up is staffed by big-label refugees. Who better to know what went wrong?

McDonald’s and Burger King are struggling, but companies that smartly target the Hispanic market–such as El Pollo Loco and Qdoba–are blossoming. (Actually, their appeal goes well beyond that demographic.) Traditional supermarkets are also hurting, while Grocery Headquarters , a trade publication, points out that niche stores are growing.

In technology, the ultimate indie phenom is the open-source movement, as exemplified by Linux. Here, the challenge doesn’t just come from a smart competitor, but from one who employs a radically different model: throwing open the gates to innovation.

Of course, it isn’t going to be easy for independents to shift the balance away from economic gigantism. They need to define their niches, market aggressively, target weaknesses without mercy. Niches are the Achilles’ heel of giant businesses, which are organized for scale and volume. And since we are headed toward a world of more and more niches–demographic niches, idea niches, passion niches–the fundamental shape of market leadership can change in the years to come.

Harp’s Food Stores is an example. Harp’s is like those patients who smile and tell you that their doctors said they should have died five years ago. More than three-quarters of its stores are located within 100 miles of Wal-Mart’s corporate headquarters in Bentonville, Ark. Harp’s has survived through differentiation. It runs a "Where’s the butcher?" commercial that celebrates its guy in the bloody apron (Wal-Mart doesn’t have any butchers). It’s also not shy about calling attention to Wal-Mart’s union problems.

Americans are a complex people, not as psychologically flat-footed as the world often makes us out to be. By last count we worshiped at the altars of more than 1,000 different religions, so we express our need for choice in different ways. Tocqueville famously pointed out the many nests of civic organizations we organize and support. All of which means that today, unbridled bigness is a mixed bag for us. And that’s critical when our self-identities are created by our consumer choices more than by anything else. With two-thirds of the U.S. economy being driven by consumers, if even a small percentage of them consciously decide to shop small, the Era of Consolidation might need a Gibbon to chronicle its own slow coming apart.

Contributor Adam Hanft ([email protected] ) is president of Hanft Byrne Raboy, a Manhattan-based advertising and marketing firm.

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