On a personal level and in global economics, oftentimes what appears to be a setback or a loss, when properly understood, paves the way for the most promising opportunities. Jeff Piersall and Josh Field, the founders of SCB Marketing, launched into this business when their corporate careers were floundering.
Had Henry Ford II not fired Lee Iacocca in 1978, a year Ford posted a $2 billion profit, Chrysler Corporation, which hired Iacocca as CEO, probably wouldn’t exist.
In a recent interview I did with Mark Mohler (pg 38), he cited a fascinating blog by economist Daniel Eisenberg that appeared in the Harvard Business Review. Eisenberg illustrated how, around the world, when corporate giants tumble, that often becomes seedbed for an entrepreneurial resurgence. The illustration he uses is something called “whale fall.”
He writes, “When a whale dies, the 30-100 ton body slowly, silently sinks to the ocean bottom where it becomes the wellspring of a complex new microcosm of seabed flora and fauna that can thrive for well over half a century. These new ecosystems, with their hundreds of species from flesh-eating sharks to sulphur-metabolizing worms, also include ‘innovative start-ups,’ previously undiscovered new sea animals that have naturally selected to flourish in the unique ecosystem.”
An entrepreneurial environment needs large corporations to thrive. Had the company Bill Hewlett and Dave Packard started in Packard’s garage in 1939 not been in Palo Alto, Calif., along with Xerox’s R & D center, it is unlikely that the company Steve Jobs and Steve Wozniak founded in Jobs’ parents garage 37 years later, in nearby Los Altos, would be one of the most recognizable and innovative companies in the world.
Eisenberg points out a symbiotic relationship between thriving multi-national corporations or major universities and the rise of entrepreneurial enterprises. What is equally true, according to his research, is that when they stumble or die, the resulting layoffs or dispersal of talented and inventive former employees causes innovative enterprises to come to life. It resembles new trees springing from the floor of a rainforest when a towering hardwood tree falls.
There Are Several Examples
In 1987, under unrelenting pressure from the U.S., the Israeli government cancelled the Lavi fighter development project, a competitor to the F-16. The aircraft carried the same national prestige as the NASA program. The closure of the multi-billion dollar project cost thousands of jobs. But after the project was grounded, Israel’s entrepreneurship surged in the late ’80s and early ’90s as Israel’s best and brightest engineers started companies or joined startups.
In the 1970s, IBM was the industry leader in supplying mainframe computers to the public and private sector. In India, where they had operated freely, Big Blue was confronted with new government regulations about national ownership and began exiting the country. As a result, thousands of IBM-trained indigenous executives helped to cultivate numerous young BPO (Business Process Outsourcing) providers, and some started their own software companies.
Something similar happened in Boulder, Colo., which is now considered a vibrant entrepreneurship ecosystem. One observer commented, “In the Boulder area, the early layoffs of talented IBM employees played a large role in supplying individuals to start ventures or to be hired by other start-ups.”
The efforts of the local colleges and universities are outstanding in nurturing new business ventures, along with those of the EDC to relocate businesses to our community. But perhaps it is the “whale fall” of the Shuttle program and the defunding of NASA, which many viewed as a death sentence, that will do more to transform this community into a cutting edge entrepreneurial environment than any other factor.
Eric Wright is the editor of i4 Business and SpaceCoast Business magazines.