Page 248 - ENTREPRENEURSHIP Innovation and entrepreneurship

53231_Innovation and Entrepreneurship.qxd 11/8/2002 10:50 AM Page 241

Ecological Niches 241

service and the latter around specialized knowledge of a market.
Otherwise, they are similar.
Two medium-sized companies, one in northern England and one
in Denmark, supply the great majority of the automated baking ovens
for cookies and crackers bought in the non-Communist world. For
many decades, two companies—the two earliest travel agents,
Thomas Cook in Europe and American Express in the United
States—had a Dractical monopoly on travelers checks.

There is, I am told, nothing very difficult or particularly technical
about baking ovens. There are literally dozens of companies around
that could make them just as well as those two firms in England and
Denmark. But these two know the market: they know every single
major baker, and every single major baker knows them. The market
is just not big enough or attractive enough to try to compete with
these two, as long as they remain satisfactory. Similarly, travelers
checks were a backwater until the post—World War II period of mass
travel. They were highly profitable since the issuer, whether Cook or
American Express, has the use of the money and keeps the interest
earned on it until the purchaser cashes the check—sometimes months
after the checks were purchased. But the market was not large enough
to tempt anyone else. Furthermore, travelers checks required a world-
wide organization, which Cook and American Express had to main-
tain anyhow to service their travel customers, and which nobody else
in those days had any reason to build.
The specialty market is found by looking at a new development
with the question, What opportunities are there in this that would give
us a unique niche, and what do we have to do to fill it ahead of every-
body else? The travelers check is no great “invention.” It is basically
nothing more than a letter of credit, and that has been around for hun-
dreds of years. What was new was that travelers checks were
offered—at first to the customers of Cook and American Express, and
then to the general public—in standard denominations. And they
could be cashed wherever Cook or American Express had an office or
an agent. That made them uniquely attractive to the tourist who did
not want to carry a great deal of cash and did not have the established
banking connections to make them eligible for a letter of credit.
There was nothing particularly advanced in the early baking ovens,
nor is there any high technology in the baking ovens installed today.
What the two leading firms did was to realize that the act of baking