What You Can Learn from the Ice Business

Brand Strategy

Guy Kawasaki | March 17th, 2009 - 08:43 AM
(18) Found this useful. Do you? Yes

ice

In my last post, I discussed how to get the golden touch by producing a DICEE product or service. This advice was at the 2,000-foot level. Now I’d like to take you up 48,000 feet and provide a higher-level view of innovation by discussing the business of ice.

Ice 1.0. Did you know that there used to be an ice harvesting business in New England during the late 1800s and early 1900s? It involved “Bubba” and “Junior” cutting blocks of ice from frozen lakes and ponds. This was no cottage industry—in 1900, people harvested 10,000,000 tons.

Ice 2.0. The edges of the ice harvesting business started melting in the 1830s when Jacob Perkins of Newburyport, Massachusetts patented a machine that made ice by evaporation. The Louisiana Ice Manufacturing Company opened the first ice factory in 1868. Ice factories meant that people could make ice in any city during any season—a major technological breakthrough.

Ice 3.0. Fast forward to 1913, and the first electric refrigerator entered the market. Now instead of the ice man delivering ice to your house or going to the ice factory to buy ice, people started to obtain PCs (Personal Chillers.) These were tiny ice factories in people’s homes.

Here’s the interesting thing: none of the ice harvesters became ice factories, and none of the ice factories became refrigerator companies. I wasn’t there (I’m old, but I’m not that old), but I would bet that this is because the ice harvesters defined themselves as in the business of cutting ice from frozen lakes and ponds, and ice factories defined themselves as freezing water for pickup or delivery.

The lesson is that if you want to build a company that can take the heat, you need to define your business in not in terms of what you do (“cut blocks of ice”) but what benefit you provide (convenience and sanitation). Now ask yourself: What business is your company in?

Quiz: In 1850, a company started to bridge a seventy-six mile gap in telegraph service between Aachen and Brussels by using carrier pigeons. What is the name of that copmpany?

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COMMENTS

3/17/09 - Tim Longhurst Says:

Cool analogy! As a futurist, I get a lot of queries from companies at the trailing edge of communication – newspapers, paper mills, printing companies, printer manufacturers… It’s always interesting watching their responses when I show CEO’s what’s happening on the web and how communication is shifting…
3/17/09 - Sari Says:

I question the conclusion “none of the ice harvesters became ice factories, and none of the ice factories became refrigerator companies.” Your business lesson is based on the assumption that the above conclusion is true…The word “bet” is apt, because I think you are betting… The way I see it, people over many generations tend to stay in similar fields, though it can be hard to track…Winemakers still make wine & have kept it in the family…I will take the opposing bet, that ice people are & will always be ice people, & that the new face of ice is populated by the grand grandchildren of those ice harvesters…gentlewoman’s bet…My business lesson: stick with what you know…
3/17/09 - Jourlait Says:

Reuters was (and is) in the information distribution business: by pigeon, telephone line, computer network…
3/17/09 - christine purse Says:

This analogy is particularly important as the blocks we have come to expect (publishing, financial markets) erode and hopefully evolve. Thanks from a gal whose company turns up the heat!
3/17/09 - Sebastian Says:

Cool analogy!
3/17/09 - Juan Says:

Paul Reuter used the pigeons, founder of Reuters News Agency.

http://en.wikipedia.org/wiki/Paul_Reuter
3/17/09 - Reex Says:

in 1849, Paul Julius Reuter started a pigeon service to fly stock prices between Aachen and Brussels, a service that operated for a year until the gap in the telegraph link was closed.

But your little mention neglected two things:

1) It was a short-lived business
2) It was singularly meant for stock quotes (not just random telegraphs)
3) He had a mainstream stock quote service, so this was an adjunct to the business, not the main one.

Can you find a better analogy?
3/18/09 - No Fixed Office Says:

While it may be possible that their is truth in the fact that none moved from one business to another in this scenario (i will take your word, and would imagine it is actually quite true).

There are other examples, where a business does not necessarily pursue a trend to stay in the same business but changes their business to adapt to what is a demand product at the time. Nokia is a good example. They did not start out as a company that manufactures mobile phones, i do not remember the exact businesses but they were involved in at least 2 or 3 other business before going to mobile phones.
3/18/09 - Greg C Says:

Spoken like a true web2.0 guru, Guy. Your argument centers on paradigms that my small business clients don’t find relevant.

There are major factors that you don’t mention:

-ice harvesting and delivery is NOT a business model that transforms well into the design, manufacture, and support of machinery. Junior and Bubba were probably loggers and farmers in the warm weather and would not have had the ability to design, build, install or troubleshoot early compressor-based refrigeration systems. It’s like saying that these same companies should have built their own power plants too.

-Many of the original ice harvesting and factory operations still exist today. They leveraged their expertise in _distribution_ and customer service. An example is Leominster Ice and Oil in Massachusetts. Started as an Ice Factory in the early 1900s. Still sells bagged ice and home heating oil today.

-Ice 2.0 and 3.0 were emergent technologies that drove major changes in the world. But emergent technologies are always risky. There are several early refrigeration companies that failed. What if you bought an early model that had no parts or service available? Did you buy an Amiga computer? A Beta VCR? Ever hear of the mechanical television? Visicalc/Wordstar/WordPerfect/OS2/MS BOB? HD-DVD? Those all seemed like pretty good bets at the time.

There have always been emergent technologies that never made it. The people of the day don’t have hindsight at their disposal so their decisions can’t be taken in the same context.

The business lesson here: Don’t jump into something you can’t handle just because it’s the “next big thing.” Stick with your core competency and adapt to find your niche as the world changes. Or jump from “next big thing” to “next big thing” and either get rich quick or go broke trying.
3/27/09 - Brad Says:

Very helpful article, and some great comments. This is definitely helpful for Web businesses, whether you’re a service or product company. I won’t pretend to know whether this is helpful for any other sector, because that’s not my strength.

On the web, here’s the thing: Whether something transforms well or not, you better transform or you’re toast. The web is incredibly dynamic. This article reminds me of something Terry Matthews said at a recent talk: “You must evolve, or you will die.” According to Matthews, Nortel’s fatal flaw was their inability to embrace a collaborative business model. They rejected a partnership with Mitel, because they were stuck in an old [hierarchical] paradigm.

Some aspects of your business must remain constant however, for financial, operational, marketing, sales and branding reasons.

This presents a challenging, but critical problem: finding the balance between consistency and adaptability.

Thanks for getting my wheels turning.
4/18/09 - miconian Says:

The question of whether the ice companies should have gone into the refrigeration business calls to mind The Big Switch by Nicholas Carr, who talks about a similar series of choices for the companies that generated, provided, and distributed electricity.

Also, this post calls to mind The Mosquito Coast, a film and novel about a mad scientist who brings an ice-making machine to the Central American jungle, imagining himself a savior of the natives who have never seen ice. But the ice melts, the machine has to be destroyed, and the inventor turns out to be the one who needs help. Something to consider.