How much is a proprietary business advantage worth? In 1907 Milton Hershey began selling ‘Kisses’, the now-familiar teardrop-shaped milk chocolate confection. His new treat would become a world-wide phenomenon that continues to generate increasing sales today more than one hundred years after the product launch. The initial introduction of Hershey’s Kisses required the development of specialized machinery that could extrude a very accurate amount of molten chocolate onto a moving steel belt and then cool the resulting shape before gravity caused it to deform. This machinery, created under Hershey’s own hands and direction, enabled the production of the candies, but it wasn’t enough to secure the market.
Kisses were wrapped in a simple square of tin foil. A candy-buying consumer couldn’t tell the difference between a genuine Hershey’s Kiss and any other teardrop-shaped chocolate confection wrapped in foil. Imitations soon began to appear, and Hershey responded by beginning work on yet another new piece of candy manufacturing technology: an automatic foil wrapper that inserted a paper strip that extended out of the wrapping through the top, like the stem of a cherry. On the little strip of paper the words “Hershey’s Kiss” were printed. The company secured a trademark on this label, and imitators began to fall by the wayside.
Although it isn’t often cited as an example of the advantages of investment in proprietary technology, the food business is one of the best illustrations. Food is messy. It comes in all sorts of shapes, sizes, and textures, and a changing market constantly demands additions to this variety. Many of the best-known and most durable brands required the development of proprietary technology to get off the ground. If you decide to produce Twinkies, you can’t just go out and buy a twinky-stuffing machine to get the cream inside, because they don’t exist. If the machine were available off the shelf everyone would be making Twinkies. The same can be said for cream-filled cupcakes, frozen appetizers, fresh-brewed ice teas, and any number of other things we now take for granted.
Not that the food business has a corner on the market for innovation. Many companies small and large have, over time, developed proprietary advantages in their markets by inventing new production technology. I once worked at a small manufacturer of urethane roller skate wheels, and recall the owner-engineer working in a little shop late at night, trying to perfect a home-brewed machine that inserted the steel hubs accurately onto a little stand in the center of a mold. There was a time when the average U.S. business person was like that guy, I think; or at least a time when there were more like him. Now we’ve become a nation of managers, and at least in the case of software, the business of virtual machinery in which I work, we generally think just about any effort is too much to bear.
“This project is too expensive” are words I hear often. Well, then don’t build it. Maybe one of your competitors will. Or perhaps you don’t need it at all. Not every business requires new custom machinery, of the soft or hard varieties, in order to prosper. But if you think you do, i.e. you have identified an advantage that will add market share or some other value to your business, then suck it up. New one-of-a-kind machinery is expensive. Its design, development, and production time lines are uncertain. You’re going to have to take some risks, like Mr. Hershey. He could very well have stuck to the caramel business, which was doing fine before he sold it and built his factory for kisses. Fortunately for generations of kids and chocolate lovers, he didn’t.