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248 ENTREPRENEURIAL STRATEGIES

But, as G.E. soon found out, the customer cannot pay for consulting
services. Under American law, the state public utility commissions
would have to allow such an expenditure. In the opinion of the com-
missions, however, the companies should have been able to do this work
themselves. G.E. also found that it could not add to the price of the
steam turbine the cost of the consulting services which its customers
needed. Again, the public utility commissions would not have accepted
it. But while a steam turbine has a very long life, it needs a new set of
blades fairly often, maybe every five to seven years, and these blades
have to come from the maker of the original turbine. G.E. built up the
world’s foremost consulting engineering organization on electric power
stations—though it was careful not to call this consulting engineering
but “apparatus sales”—for which it did not charge. Its steam turbines
were no more expensive than those of its competitors. But it put the
added cost of the consulting organization plus a substantial profit into
the price it charged for replacement blades. Within ten years all the other
manufacturers of steam turbines had caught on and switched to the same
system. But by then G.E. had world market leadership.
Much earlier, during the 1840s, a similar design of product
and process to fit customer realities led to the invention of install-
ment buying. Cyrus McCormick was one of many Americans who
built a harvesting machine—the need was obvious. And he found,
as had the other inventors of similar machines, that he could not
sell his product. The farmer did not have the purchasing power.
That the machine would earn back what it cost within two or
three seasons, everybody knew and accepted, but there was no
banker then who would have lent the American farmer the money
to buy a machine. McCormick offered installments, to be paid out
of the savings the harvester produced over the ensuing three
years. The farmer could now afford to buy the machine—and he
did so.
Manufacturers are wont to talk of the “irrational customer” (as do
economists, psychologists, and moralists). But there are no “irrational
customers.” As an old saying has it, “There are only lazy manufactur-
ers.” The customer has to be assumed to be rational. His or her reality,
however, is usually quite different from that of the manufacturer. The
rules and regulations of public utility commissions may appear to make
no sense and be purely arbitrary. For the power companies that have to
operate under them, they are realities nonetheless. The American
farmer may have been a better credit risk than American bankers of