Data is Free

Great article today from Hayagreeva Rao, Professor at Stanford Business School, via the McKinsey Quarterly. The premise is that market insurgents are the ones who create massive shifts in industry or create new niches. His new book is out too.



I want to respect the fair use doctrines, but this sums up what he is talking about:

Rebels in new markets: Cultural acceptance of the car

The car, a radical invention that promised to transform the experience of transportation, was an extremely hot cause. In 1895, when the automobile industry was just beginning, the gasoline-powered car was poorly understood, notoriously unreliable, and reviled by vigilante antispeeding organizations. Colonel Albert Pope, a bicycle manufacturer who went on to make electric cars, could not fathom why anyone would use gas-powered ones, asserting, “You can’t get people to sit over an explosion.” And a lawmaker in Massachusetts suggested that motorists fire Roman candles at approaching horse-drawn carriages to warn them of the arrival of the car.

Yet as early as 1906, commentator Frank Munsey noted that the “uncertain period of the automobile is now past. It is no longer a theme for jokers, and rarely do we hear the derisive expression, ‘Get a horse.’” Henry Ford is widely regarded as the man who established the automobile industry by automating production and driving down prices so the car could reach the masses. But it wasn't until 1913 that Ford installed the moving assembly line in Highland Park, Michigan, to produce the Model T—long after the car became taken for granted. What’s more, Ford benefited from laws licensing drivers and mandating speed limits—and he didn’t lobby or otherwise agitate for those rules.

Ford didn’t need to, because a social movement powered by automobile clubs comprising car enthusiasts played a central role in legitimating the automobile and presenting it as a modern solution to the problem of transportation. These enthusiasts (primarily doctors and other professionals) were rebels who flouted convention, abandoned the horse-drawn carriage for the automobile, and sought to popularize its use. Neither sponsored nor financed by car manufacturers, the clubs were both social in nature and focused on improving quality, shielding car owners from legal harassment, and promoting the construction of good roads. Club involvement enabled members to construct an identity built around a new consumer role. By 1901, 22 clubs had mushroomed in cities from Boston to Newark to Chicago.

In addition to working with state governments to draft laws licensing cars and mandating speed limits, automobile clubs organized reliability contests that pitted cars against one another in endurance, hill climbing, and fuel-economy runs. Each contest—a cool mobilization if there ever was one—was widely viewed as a test that proved to audiences that the automobile was reliable. The first reliability contest was in 1895; by 1912 the contests were discontinued because organizers recognized that the automobile had become a social fact.

Even Henry Ford needed to win a race in order to achieve the transition from engineer to entrepreneur. In a celebrated 1901 race, Ford, then an upstart producer, defeated the better-established Alexander Winton. Ford’s wife, Clara, later described the scene after Ford took the lead in a letter to her brother, Milton Bryant: “The people went wild. One man threw his hat up, and when it came down, he stamped on it. Another man had to hit his wife on the head to keep her from going off the handle. She stood up in her seat . . . screamed, ‘I’d bet $50 on Ford if I had it.’” The public acclaim that Ford received enabled him to create the Ford Motor Company in 1903.