Friday, 13 September 2013

Committed to His Ideas and Very Smart with Implementation: The Great Entrepreneur Robert Taylor

Serial entrepreneur Robert Taylor passed away from cancer on August 29, 2013.  The NY Times and many other news sources discuss Mr. Taylor’s life, and all of the stories I’ve read are built around Mr. Taylor’s development of SoftSoap (although he created many products/brands/businesses) (here, here and here).   His SoftSoap is ubiquitous in the U.S. (indeed, it is in my bathroom) and I think it is a great product, but until his recent death I was unaware of the story behind the product. 

Like a lot of great ideas, Mr. Taylor’s idea for liquid soap in a small bottle with a pump was conceived after being confronted with a problem: a bar of hand soap makes a mess near the sink—in a dish or not (and seems very unhygienic).  Mr. Taylor apparently tested soap formulas in his home in the bathtub and at least one obituary states that occasionally the soap would “explode.”  Eventually Mr. Taylor chose a formula for his soap, and then he decided that he needed to obtain some competitive advantage over larger businesses that could easily replicate his idea before he could build goodwill (and obtain a reasonably large market share apparently to justify his investment).  Mr. Taylor's strategy was a simple one (brilliant)—he purchased 100 million small bottles with pumps from the only two U.S. manufacturers that made them.  This move guaranteed him a one to two year advantage over his competitors which allowed him to secure sizable market share (there was also $7 million spent on advertising).  As one obituary points out, Mr. Taylor’s strategy was chosen by Inc. magazine as one of the three shrewdest business moves (ever).

The first mover advantage can be a real one and some may say that the first mover advantage may provide a pretty good incentive to invent.  Some may even say that patents may be unnecessary in many industries because the first mover advantage (which includes trademark protection) and trade secrecy, provides more than enough of an incentive to invent (and perhaps commercialize?) without the costs of a patent (the supracompetitive price, the actual cost of obtaining patents, and the costs of maintaining the system that we have).  Once you go down that road, often the next point is, well, why don’t we have a patent system that is industry specific—if a first mover advantage and trade secrecy is good enough in this particular industry then patents are not necessary.  But, the story of Mr. Taylor implicitly recognizes that him getting to the market first even with a great, useful idea and $7 million in advertising with a clever trademark was not enough (including the time necessary to reverse engineer his soap).  Mr. Taylor needed something else to give him a competitive advantage—or at least ensure that his investment in his idea was worth taking a risk on.  And, that something else was purchasing one to two years-worth of bottles from the only sources of those bottles.  The first mover advantage by itself may not have been enough to get him to invest the time and effort in bringing the “SoftSoap concept” to market—even in a relatively simple business/product such as liquid hand soap in a small bottle with a handpump.  I know that Mr. Taylor, apparently, could not have obtained other IP protection to try to secure his investment (or make it a better bet), but this story seems to show that claims of the benefits of a first mover advantage by itself may be a little overblown, perhaps.  (I suppose he could have tried to sell his idea to Proctor & Gamble).  If the liquid hand soap formula was particularly difficult to reverse engineer or suitable bottles were not easy to manufacture, there may have been more time available for Mr. Taylor to recoup his investment in creating the idea, so perhaps his idea wasn’t that great (not novel or nonobvious to patent the combination)  But, it surely is useful and if commercial success is any judge—Mr. Taylor did very well.

One other thing to think about is whether Mr. Taylor’s idea of obtaining one to two years of an advantage by purchasing one to two years inventory of packaging (although is the bottle really packaging or the product—or at least creates so much demand for the product that it is essentially the product) can be replicated effectively today.  I suppose it depends.  What do you think? 

Mr. Taylor was a great entrepreneur and his contributions will be remembered. 

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