How did you go bankrupt?”
Two methods. Progressively, then all of a sudden.”
Ernest Hemingway, The Solar Additionally Rises
Each disruptive expertise because the hearth and the wheel have compelled leaders to adapt or die. This submit tells the story of what occurred when 4,000 firms confronted a disruptive expertise and why just one survived.
Within the early twentieth century, america was residence to greater than 4,000 carriage and wagon producers. They have been the spine of mobility and the precursors of cars, used for private transportation, items supply, navy logistics, public transit, and extra. These firms employed tens of hundreds of staff and shaped the center of an ecosystem of blacksmiths, wheelwrights, saddle makers, stables, and feed suppliers.
And inside 20 years, they have been gone. Only one firm out of 4,000 carriage and wagon makers pivoted to cars.
Immediately, this story feels uncannily acquainted. Simply because the carriage trade watched the car evolve from curiosity to dominance, trendy firms in SaaS, media, software program, logistics, protection and training are watching AI emerge from novelty into existential menace.
A Snug Trade Misses the Flip
In 1900, the U.S. was the worldwide chief in constructing carriages. South Bend, IN; Flint, MI; and Cincinnati, Ohio, have been stuffed with factories producing carriages, buggies, and wagons. On the high-end these firms made superbly crafted autos, largely from wooden and leather-based, hand-built by artisans. Others have been extra fundamental wagons for hauling items.
When early cars started showing within the 1890’s — first steam-powered, then electrical, then gasoline –most carriage and wagon makers dismissed them. Why wouldn’t they? The primary vehicles have been:
- Loud and unreliable
- Costly and laborious to restore
- Starved for gas in a world with no gasoline stations
- Unsuitable for the dust roads of rural America
Early autos have been worse on most key dimensions that mattered to clients. Clayton Christensen’s “Innovator’s Dilemma” described this completely – disruption begins with inferior merchandise that incumbents don’t take significantly. However beneath that dismissiveness was one thing deeper: id and hubris. Carriage producers noticed themselves not as transportation firms, however as craftsmen of chic, horse-drawn autos. Vehicles weren’t an evolution—they have been heresy. And so, they waited. And watched. And went out of enterprise slowly after which rapidly.
Early Autos Have been Area of interest and Experimental (Eighteen Nineties–1905) The primary vehicles (steam, electrical, and early gasoline) have been costly, unreliable, and gradual. They have been constructed by 19th century mechanical nerds. And the few that have been offered have been thought of toys for different nerds and the wealthy. (Carl Benz patented the primary inner combustion engine in 1886. In 1893 Frank Duryea drove the primary automotive within the U.S.)
These early vehicles coexisted with an enormous horse-powered economic system. Horses pulled wagons, delivered items, powered streetcars, and folks. The primary automakers used the one design they knew: the carriage. Drivers sat up excessive like they did in a carriage once they needed to see over the horses.
For the primary 15 years carriage makers, teamsters, and secure house owners noticed no instant menace. Like AI at the moment: autos have been highly effective, new, buggy, unreliable and never but mainstream.
Disruption Begins (1905–1910) 10 years after their first look, gasoline vehicles grew to become extra sensible, they’d higher engines, rubber tires, and municipalities had begun to pave roads. From 1903 to 1908 Ford shipped 9 totally different fashions of vehicles as they experimented with what we might name at the moment minimal viable merchandise. Ford (and Common Motors) broke away from their carriage legacies and commenced designing vehicles from first ideas, optimized for velocity, security, mass manufacturing, and trendy supplies. That’s the second the automotive grew to become its personal species. Till then, it was nonetheless principally a carriage with a motor. City elites switched from carriages to autos for standing and velocity, and taxis, supply fleets, and rich commuters adopted vehicles in main cities.
Even with proof staring them within the face, carriage firms nonetheless didn’t pivot, assuming vehicles have been a fad. For carriage firms this was the “denial and drift” part of disruption.
The Tipping Level: Ford’s Mannequin T and Mass Manufacturing (1908–1925) The Ford Mannequin T launched in 1908 was reasonably priced ($825 to as little as $260 by the Nineteen Twenties), sturdy and simple to restore, and made utilizing meeting line mass manufacturing. Inside 15 years tens of tens of millions of People owned vehicles. Horse-related companies — not solely the carriage makers, however your complete ecosystem of blacksmiths, stables, and feed suppliers — started collapsing. Cities banned horses from downtown areas resulting from waste, illness, and congestion. This was just like the arrival of Google, the iPhone or ChatGPT: a part shift.
Collapse of the Previous Ecosystem (Nineteen Twenties–Nineteen Thirties) Between 1900 and 1930 U.S. horse inhabitants fell from 21 million to 10 million and the carriage and buggy manufacturing plummeted. New infrastructure—roads, gasoline stations, driver licensing, visitors legal guidelines—was constructed across the automotive, not the horse.
Early automakers borrowed closely from carriage design (1885–1910). Vehicles emerged in a world dominated by horse-drawn autos they usually inherited the supplies and mechanical designs from the coach builders.
– Leaf springs have been the dominant suspension in Nineteenth-century carriages. Early vehicles used the identical.
– There have been no shock absorbers in carriages, and early autos. They each relied on leaf spring damping, making them bouncy and unstable at velocity. Why? Roads have been horrible. Speeds have been low. Coachbuilders understood the right way to make wagons survive cobblestones and dust.
– Carriages used stable metal or picket axles; early vehicles did the identical.
Physique Development and Design Borrowed from Carriages
– Automotive our bodies have been wooden framed with metal or aluminum sheathing, like a carriage.
– Upholstery, leatherwork, and ornamentation have been additionally carried over.
– Phrases like roadster, phaeton, landaulet, and brougham are immediately inherited from carriage varieties.
– Excessive seating and slim monitor: Early vehicles had tall wheels and excessive floor clearance, like buggies and carriages, since early roads have been rutted and muddy.
End result: Early cars seemed like carriages with out the horse, as a result of they have been, functionally and structurally, carriages with engines bolted on.
What Modified Over Time
As speeds elevated and roads improved, wooden carriage design couldn’t deal with the torsional stress of quicker, heavier vehicles. Leaf-spring suspensions have been too crude for velocity and dealing with. Automotive builders started utilizing pressed metal our bodies (Fisher Physique’s breakthrough), impartial entrance suspension (launched within the Nineteen Thirties), lastly integrating the automotive physique and chassis right into a single, unified construction, reasonably than having a separate physique and body (within the Nineteen Thirties–40s).
Studebaker: From Horses to Horsepower
The one carriage maker who didn’t exit of enterprise and have become an vehicle firm was Studebaker. Based in 1852 in South Bend, IN, Studebaker started by constructing wagons for farmers and pioneers heading west. They equipped wagons to the Union Military throughout the Civil Battle and have become the biggest wagon producer on the earth by the late Nineteenth century. However in contrast to its friends, Studebaker made a collection of early, strategic bets on the long run.
In 1902, they started producing electrical autos—a cautious however forward-thinking transfer. Two years later, in 1904, they entered the gasoline automotive enterprise, at first by contracting out the engine and chassis. Finally, they started making your complete automotive themselves.
Studebaker understood two issues the opposite 4,000 carriage firms ignored:
- The long run wouldn’t be horse-drawn.
- The corporate’s core functionality wasn’t in carriages—it was in mobility.
Studebaker made the painful shift in manufacturing, retooled their factories, and retrained their workforce. By the 1910s, they have been a full-fledged automotive firm.
Studebaker survived lengthy into the auto age—longer than a lot of the early automakers—and solely stopped making vehicles in 1966.
Fisher Physique: A Coach Builder for the Machine Age
Whereas Studebaker made a direct pivot of their whole firm from carriage to vehicles, a case may be made that Fisher Physique was a derivative. Based in 1908 in Detroit by brothers Fred and Charles Fisher, the Fishers had labored at a carriage agency earlier than beginning their very own auto-body enterprise. They specialised in producing the automotive our bodies, not a complete automotive. Their key innovation was making closed metal automotive our bodies which was a significant enchancment over open carriages and wooden frames. By 1919, Fisher was so profitable that Common Motors purchased a controlling stake and in 1926, GM acquired them totally. For many years, “Physique by Fisher” was stamped into tens of millions of GM vehicles.
Durant-Dort: The Origin of Common Motors
Whereas the Durant-Dort Carriage Firm by no means made vehicles itself, its co-founder William C. (Billy) Durant noticed what others didn’t. See the weblog posts on Durant’s adventures right here and right here. 
Durant used the fortune he made in carriages to spend money on the burgeoning auto trade. He based Buick in 1904 and in 1908 arrange Common Motors. Performing like one in all Silicon Valley’s loopy entrepreneurs, he quickly acquired Oldsmobile, Cadillac, and 11 different automotive firms and 10 components/accent firms, creating the primary auto conglomerate. (In 1910 Durant can be fired by his board. Undeterred, Durant based Chevrolet, took it public and in 1916 did a hostile takeover of GM and fired the board. He received thrown out once more by his new board in 1920 and died penniless managing a bowling alley.)
Whereas his monetary overreach ultimately price him management of GM, his imaginative and prescient reshaped American manufacturing. Common Motors grew to become the biggest automotive firm within the 20th century.
Why the Different 3,999 Carriage makers Didn’t Make It
Most carriage makers didn’t have a William Durant, a Fisher brother, or a Studebaker within the boardroom. Right here’s why they failed:
- Technological Discontinuity
- Carriages have been manufactured from wooden, leather-based, and iron; vehicles required metal, engines, electrical methods. The talents didn’t switch simply.
- Capital Necessities
- Retooling for vehicles required large funding. Most small and midsize carriage companies didn’t have the cash—or couldn’t increase it in time.
- Enterprise Mannequin Inertia
- Carriage makers offered low-volume, high-margin merchandise. The automotive enterprise, particularly after Ford’s Mannequin T, was about high-volume, low-margin scale.
- Cultural Id
- Carriage builders didn’t see themselves as engineers or industrialists. They have been artisans. Vehicles have been noisy, soiled machines—beneath them.
- Managers versus visionary founders
- In every of the three firms that survived, it was the founders, not employed CEOs that drove the transition.
- Underestimating the adoption curve
- Early vehicles have been dangerous. However technological S-curves bend shortly. By the 1910s, vehicles have been clearly higher. And by the Nineteen Twenties, the carriage was out of date.
- How did you go bankrupt? “Two methods. Progressively, then all of a sudden.”
By 1925, out of the 4,000+ carriage firms in operation round 1900, practically all have been gone.
The tragedy of the carriage period and classes for at the moment
What does an early 20th century disruption need to do with AI and at the moment’s firms? Loads. The teachings are timeless and related for at the moment’s CEOs and boards.
It wasn’t simply that carriage firms did not pivot. It’s that they’d time and clients—and nonetheless missed it. That very same sample occurs at each disruptive transition; they have been led by CEOs who merely couldn’t think about a special world than the one they’d mastered. (This occurred when firms needed to grasp the net, cellular and social media, and is repeating at the moment with AI.)
Carriage firm Presidents have been tied to gross sales and rising income. The menace to their enterprise from vehicles appeared far sooner or later. That was true for 20 years till the underside dropped out of their market with the speedy adoption of autos, with the introduction of the Ford Mannequin T. Immediately, CEO compensation is tied to quarterly earnings, not long-term reinvention. Most boards are filled with risk-averse fiduciaries, not builders or technologists. They reward share buybacks, not AI moonshots. The true drawback isn’t that firms can’t see the long run. It’s that they’re structurally disincentivized to behave on it. In the meantime, disruption doesn’t watch for board approval.
In case you’re a CEO, you’re not simply managing a P&L. You’re deciding whether or not your organization would be the Studebaker—or one of many different 3,999.
Filed beneath: Company/Gov’t Innovation |