Certain Habits

The kinds of business ideas that get all the attention, the ones we think of as real innovation, seem as if they spring fully formed from the creative genius of the individual inventor or entrepreneur. Thomas Edison stubbornly inventing multiple industries. Thomas Watson hurtling his company unstintingly toward the computational future. Steve Jobs whipping various teams at Apple until they realized his vision for iPods that put first a thousand, and then tens of thousands of songs in our pockets.

The trouble is the reality behind these stories isn’t as simple as it seems. Dozens, if not hundreds of brilliant inventors were working on electricity; Thomas Edison was but the most successful, and eccentric. (Even if Nicola Tesla was the more brilliant.) IBM out sold and outproduced its rivals, but much of the most important work was accomplished by others. Steve Jobs’ uncompromising standards, impeccable taste, and ability to negotiate contracts from incumbents that create new business models and different value chains for consumers deserve a great deal of credit. But Apple more often popularizes and perfects the innovative ideas of others.

It’s not just that these stories are misleading. The trouble is that they distract us from recognizing other even more effective forms of innovation. Completely new ideas are rare. (Some might even argue they’re rare to the point of nonexistence). But for every revolutionary new idea, there are thousands of ways to apply it. Indeed, one of the surest ways to profit is to take a successful concept that revolutionized one industry, and apply it in seemingly unrelated areas.

What’s more, these ideas need not be technologically complex. Consider, for example, Advanced Steel Recovery, a scrap metal firm owned by Nathan Frankel. They have built a successful business by applying a forty year old idea to the scrap metal business. This idea? Containerization.

Scrap metal isn’t the most innovative of industries, but we are pushing for change. For example, scrap yards have traditionally shipped their materials over land using customized, open-air trucks and rail cars. By sea, transporting scraps required hulking, break-bulk ships and special loading and unloading facilities, which are inefficient. To streamline the process, we are using cutting-edge steel drawers, which can hold roughly 47,000 pounds of shredded metal, to help fill standard-size shipping containers. This process saves dealers time and money.

Two things about that story amaze me. First, containerization is not poorly understood; most people intuitively understand how it revolutionized the shipping and transport industries. Nor is containerization unrelated to the shipping and transport of scrap metal. And yet, second, the attempt to apply the basic ideas of containerization to scrap metal met, not just with skepticism, but outright resistance.

It’s enough to make one wonder: how many other hidebound industries are there that could be profitably exploited with forty year old or older innovations? What are they?