The Power of Paradigms in Jobs and Business: Apple, Microsoft, Google, Facebook, Walmart
In 1964, the Italian company Olivetti created a new paradigm when it invented the first personal computer. At the time, computers and the peripheral equipment to make them useful took the space of a couple of refrigerators. The Olivetti desktop computer was far too expensive for a large consumer market. However, the computer was a successful product for sale to businesses and universities.
Apple built on this paradigm to create the affordable personal computer. In addition to advances in technology, the difference between the Olivetti desktop computer of the time and Apple computers is the price. The Apple paradigm is to make the operating system and the hardware priced for a personal use.
For a period, Apple wandered from this paradigm and began to make and sell computer applications to schools.
The company suffered from this shift away from its original paradigm as a company that strictly made a personal computer company that ran on Apple OS.
Steve Jobs refocused the company on its original paradigm as an end-to-end device/OS maker. Apple sold its educational software division.
On Monday, Aug 20, 2012, operating under the original paradigm, Apple became the most valuable company in the world.
Companies that create and sell software applications for businesses and colleges have existed since the 1950’s. Bill Gates and Paul Allen used this paradigm to found Microsoft as a company that created software to sell to manufacturers of personal computers. Other companies made the hardware. Microsoft wrote the operating system. Although now Microsoft makes devices and online services, the company is still primarily a software service company.
Google’s paradigm is collecting data and selling advertising. Larry Page and Sergey Brin founded Google with a paradigm for creating a search engine that builds a database of user behavior and selling contextual advertising based on that user behavior. Other manufacturers have built search engines into a website. The Google paradigm extends the offer of payment and placement of the Google search engine and the Google advertising to any website publisher. The relationship between Google and its millions of publishers dynamically powers the essential collection of user behavior data and Google’s placement of advertising on millions of websites.
Facebook’s paradigm is enrolling middle-income shoppers in a membership website. Mark Zuckerberg founded Facebook with the paradigm for creating a membership site for college undergraduates. From this paradigm, Facebook built a membership site that targeted not only more highly educated members but also a group old enough to shop and soon to become higher-income wage earners. Then Facebook opened the site up to a general audience that rapidly grew from the college undergraduates to their friends and family members. With a base of college-undergraduate members, Facebook’s created a meeting place for people who are middle-income shoppers.
The people who go into a company and create a new paradigm are rare. Once a company is in place and has established ways of doing business, a person with a new paradigm creates risk to the established model.
Walmart’s paradigm is to increase profits through logistics. Sam Walton started as an employee of a variety store. He then purchased Ben Franklin variety stores and later founded Walmart. He changed the paradigm of the variety stores through deep discount purchases of non-traditional items for quick resale. He then opened large-scale deep discount stores.
However, other variety stores such as Kresge (Kmart) and Woolworth (WoolCo) had transitioned to discount stores. These retailers bought products at lower costs through volume purchases.
Choosing locations in rural markets where rent and labor was less expensive, Walton was brilliant at cutting costs and making wise product choices.
The new paradigm that Sam Walton brought to his retail stores was to perfect logistics. He could literally pay nothing for the products that he sold to retail customers, because Walton would receive and sell the products before having to pay the bill for the goods or store operating costs. As Walmart moved into more competitive markets, it was through logistics that Walton could sell at lower prices than less efficient local competitors were.
Today nearly every large company focuses on demand planning and logistics. At the Walton College, University of Arkansas, there is a Depart of Supply Chain Management. Walmart may still have the most effective supply chain system in retailing.