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The school of hard knocks remains a valuable teacher

The school of hard knocks remains a valuable teacher

Fred McKinney, president and CEO of the Greater New England Minority Supplier Development Council.

Some of the best business schools in the world are located within a 25-mile radius of the Boston Common. Students from around the globe come to attend classes and spend tens of thousands of dollars for tuition.  They are intent on acquiring the information taught in class and absorbing the culture of the educational environment. The prestigious degrees from these institutions will place the graduates in an exalted place in the business community.  Yet, much of the knowledge transmitted is available for a fraction of the cost for a businessperson inspired to learn by practical experience the art and science of managing people and resources.

However, the best business schools offer something that cannot be put into a book, and yet can make or break an aspiring entrepreneur or executive.  That is the network of alumni, fellow students, faculty and administrators who are connected to centers of power within the corporate and political landscape.  Minority entrepreneurs increasingly benefit from attending prestigious schools here and around the country, but most minority entrepreneurs do not have that opportunity and do not benefit from the information or the networks associated with these schools.  So the challenge for urban and minority entrepreneurs, then, is learning the required business skills while simultaneously developing a network of business contacts and supporters.  In that way, they can successfully build large enterprises without the help of business-school connections.

Minority entrepreneurs must learn the same way students in the best schools learn how to start and manage businesses — by looking at cases of successful and unsuccessful business models.  Observation, repetition and participation are how we learn most of what we learn in life.  The same holds true in learning how to grow substantial businesses.   

There are many established businesses in our community and many more aspiring entrepreneurs.  Last week I spent some time walking the streets of Dudley Square.  There are food stores, barbershops, hair and nail salons, dentists’ offices, physicians’ offices, day care facilities, clothing stores, banks, liquor stores, print shops, laundromats and cleaners, restaurants and other shops owned and operated by minority business owners catering to the needs of their customers and the community.  These businesses are the backbone of every thriving community.  The owners of these businesses have worked hard against innumerable odds, and, in many cases, are only able to eke out an existence for themselves, their employees and their families.  These entrepreneurs are the real contributors to the stability of Dudley Square and surrounding communities.   So what is the problem?

The problem is that many of these entrepreneurs lack the network, social capital and financial capital that are necessary for these businesses to build scale within the community.  For example, why can’t, or doesn’t, the most successful barbershop owner in Dudley Square go to his competitors and suggest a plan to bring all of these shops under one ownership — one organization?  The immediate answer might be that each of these shops has a unique culture and character, and, more importantly, an owner who has no interest in working for or with anyone else.  

Now think for a moment of Blockbuster Video.  When videotapes first came out, there were family-owned and -operated video rental stores in every community.  Along came Blockbuster, offering high-quality service, large numbers of copies of hot movies and an impressive inventory at competitive prices. The Blockbuster business model required large amounts of capital to purchase large quantities of videos. The Blockbuster model required large amounts of money to secure leases in valuable high-traffic retail space.  The Blockbuster model required large amounts of capital to pay for Super Bowl ads and advertising on movie screens and billboards.  Everyone today is familiar with the colors of Blockbuster stores and the shirts worn by their employees.  Branding investments can have tremendous benefits.  Wayne Huizenga, the founder of Blockbuster, built this business so fast and profitably that an investor who had invested $25,000 with him at the start would have made $1 million eight years later.  

What would it take to build a network of African American businesses geared to the personal care of African American consumers?  The answer is money, money, money — but, more importantly, vision and guts.  It does not have to be hair care.  As we have seen with Blockbuster, early success is no guarantee of a permanent spot in the wallets of consumers.  In recent years, DVDs, cable, video on demand, the Internet and cell-phone technology are making the original Blockbuster model obsolete.  But the important point of the Blockbuster case is that it was an entrepreneur who took the risk of organizing an unorganized industry that catered to consumers in communities across the country. Additionally, Huizenga developed an approach that worked with used cars as well as with garbage collection — two other unorganized industries.  Entrepreneurs do not have to invent a cure for cancer or a come up with a solution to global warming to build large-scale successful businesses.  Entrepreneurs need only meet the demands of consumers in ways superior to how those demands are currently being met.  There are many businesses in our community that could benefit from consolidation and organization.

It sounds so logical and easy — yet it is not; and it has not been done.  It may be logical, but it is not easy work.  And a fair question directed to me is, why don’t I do it if it is so clear to me that this is a profitable use of capital, resources and time?  My answer is that my role is to build awareness of the possibilities that are taught in schools of business in the region.  This is how these students view the world, graduate from these schools and go on and literally take over the economic world through their enterprises.  We need teachers of business in our community as well as entrepreneurs.  We do not have enough serious discussions in our community about strategies to establish large-scale businesses.  

There is no need to re-create the wheel, but we must study how the wheel was built.  This is what goes on in top-flight business schools, where there is also a supportive environment that encourages young people to take calculated risks in order to build wealth.  And we should remember that Huizenga, the founder of Blockbuster, Waste Management and AutoNation, did not go to one of those prestigious business schools.  He, like many in our community, graduated from the very reputable school of hard knocks.