Randy Picker Takes Another Look at Razors and Blades
In 1904, King Gillette — who names their kid King? — received two patents on razors, blades, and the combination of the two. As the patents make clear, Gillette had a clear vision of the markets that he would create: "Hence," stated the patent application, "I am able to produce and sell my blades so cheaply that the user may buy them in quantities and throw them away when dull without making the expense ... as great as that of keeping the prior blades sharp."
But Gillette did more than invent a new razor and a new blade. As Chris Anderson notes in his recent business bestseller, Free, Gillette invented an entire business strategy, one that's still invoked in business schools and implemented today across many industries — from VCRs and DVD players to video game systems like the Xbox and now ebook readers. It's pretty simple: invest in an installed base by selling a product at low prices or even giving them away, then sell a related product at high prices to recoup the prior investment. King Gillette launched us down this road.
Or did he? In a recent draft paper, I have looked at the early days of Gillette, and the actual facts from the dawn of the disposable razor blades market are quite confounding. Gillette's 1904 patents gave it the power to block entry into the installed base of handles that it would create. While other firms could and did enter the replaceable-blade market with their own handles and blades, no one could produce Gillette-style handles or blades during the life of the patents.