Page 243 - ENTREPRENEURSHIP Innovation and entrepreneurship

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236 ENTREPRENEURIAL STRATEGIES

And the toll-gate strategist must never exploit his monopoly. He
must not become what the Germans call a Raubritter (the English
“robber baron” does not mean quite the same thing) who robbed and
raped the hapless travelers as they passed through the mountain
defiles and river gorges atop of which perched his castle. He must not
abuse his monopoly to exploit, to extort, to maltreat his customers. If
he does, the users will put another supplier into business, or they will
switch to less effective substitutes which they can then control.
The right strategy is the one Dewey & Almy has successfully pursued for
more than forty years now. It offers its users, especially those in the Third
World, extensive technical service, teaches their people, and designs new and
better canning and can-sealing machinery for them to use with the Dewey &
Almy sealing compounds. Yet it also constantly upgrades the compounds.
The toll-gate position might be impregnable—or nearly so. But it
can only control within a narrow radius. Alcon tried to overcome this
limitation by diversifying into all kinds of consumer products for the
eye: artificial tears, contact lens fluids, anti-allergic eyedrops, and so
on. This was successful insofar as it made the company attractive to
one of the leading consumer goods multinationals, the Swiss Nestlé
Company, which bought out Alcon for a very substantial sum. To the
best of my knowledge, Alcon is the only toll-gate company of this
kind that succeeded in establishing itself in markets outside its origi-
nal position and with products that were different in their economic
characteristics. But whether this diversification into highly competi-
tive consumer markets of which the company knew very little was
profitable, is not known.

II

THE SPECIALTY SKILL
Everybody knows the major automobile nameplates. But few peo-
ple know the names of the companies that supply the electrical and
lighting systems for these cars, and yet there are far fewer such systems
than there are automobile nameplates: in the United States, the Delco
group of GM; in Germany, Robert Bosch; in Great Britain, Lucas; and
so on. Practically no one outside of the automobile industry knows that
one firm, A. 0. Smith of Milwaukee, has for decades been making every
single frame used in an American passenger car, nor that for decades