Академический Документы
Профессиональный Документы
Культура Документы
ENTREPRENEURSHIP
E
by Roger Brown
From the February 2001 Issue
ntrepreneurs wanted: Help grow an enterprise from scratch in an industry that offers no barriers to entry, chronically low
margins, massive labor intensity, no proprietary technology, few economies of scale, weak brand distinctions, and heavy
regulatory oversight. Serious inquiries only.
Not many people would respond to an ad like this. But it pretty much sums up the opportunity that Linda Mason, my wife, and
I decided to pursue 15 years ago when we founded Bright Horizons, our workplace child care and early-education company.
And despite all the challenges inherent in the industry, we succeeded. We now operate more than 340 high-quality child care
centers, serving 40,000 children and employing 12,000 people, and we have built a solid, profitable business.
While we’re proud that our company is growing and profitable, our goal was always broader than just building a good business.
Early in our careers, Linda and I had stints as management consultants, but we also had a great deal of interest and experience
in human services. We both left business school, where we met, to run a CARE-sponsored effort in Cambodia to help refugee
children. Later, we took leaves of absence from consulting to start a Save the Children relief program in Ethiopian refugee
camps and famine-stricken Sudanese villages. When we returned after two years and launched Bright Horizons, we set out to
/
create caring, educational environments for children that would give parents confidence in their children’s well-being. After
briefly examining and rejecting the idea of a nonprofit, parent cooperative model, we concluded that to realize this vision on a
national scale we would need to build a strong, profitable organization that would allow us to attract large amounts of capital.
And so it was that we got into the child care field. We didn’t take the plunge blindly. Before we set up shop, we took a long,
hard look at the industry’s weaknesses. And then we sat down and figured out a way to turn them to our advantage.
The author has raised the standards for providing child care and
early childhood education.
But we knew that in order to succeed we had to come up with a viable business model. Jack Reynolds, a friend of ours who had
been a colleague of mine at the consulting firm Bain & Company, gave us an idea. He pointed out that some innovative
companies, like the children’s shoemaker Stride Rite, were setting up child care centers at their work sites, and that these
centers tended to be of much higher quality than the ones run by the traditional chains. Why not, we thought, become an
outside operator of such centers? By viewing employers rather than parents as the primary customers, we could tap into the
financial and other resources of corporations and gain instant access to large pools of working parents. We could, in short,
invent a whole new model for the industry.
/
The first thing we did was recruit three industry experts to refine our ideas. We sat down with them at our kitchen table in
Cambridge, Massachusetts, to formulate a solid business plan. (Our house, incidentally, had good entrepreneurial bones. We
had purchased it from Mitch Kapor, who lived in it before he achieved fame and fortune as the founder of Lotus.) We quickly
saw that forming partnerships with employers offered several advantages. For one thing, we’d gain a powerful, low-cost
marketing channel. We wouldn’t have to sell our services to one parent at a time. More important, companies would view the
centers as a way to distinguish themselves in the eyes of current and prospective employees. By giving employees access to
convenient, first-rate care, they could increase the loyalty of their people and boost retention rates. Thus, our customers would
have a vested interest in helping us pursue our core goal: delivering high-quality care.
And employees themselves would be attracted to our centers. By having their children next door, they could reduce their
commuting times, enjoy greater peace of mind, and avoid the stress of fighting rush-hour traffic to reach a child care center in
time for pickup. Parents could drop by to have lunch with their children, and nursing moms could continue to breast-feed even
after they returned from maternity leave.
Our strategy, we believed, was solid. Only two things were missing: capital and customers.
We pitched our idea to Bain Capital, Bain’s newly formed investment arm. Its founding partner, Mitt Romney, expressed
interest, but he felt he needed a second opinion. Romney knew me quite well—I had reported to him at Bain—and he wanted
reassurance from a more objective investor. That led us to the offices of the venture capital firm Bessemer Venture Partners.
Bessemer’s partners were intrigued by our idea, but they, too, were a little nervous. They asked us to undergo a psychiatric
interview as part of the due diligence process, and despite the unusual nature of the request, we agreed. After all, Linda and I
were hardly the prototypical entrepreneurial team. We’d worked together in monsoon-soaked refugee camps in Cambodia and
built an emergency program that served 300,000 people in Sudan, but we didn’t have much experience starting up companies.
/
We also understood that the business world is littered with former husband-and-wife teams whose companies were torn apart
as their marriages failed. Thanks to a good session on the couch and a buyer’s market in the booming venture-capital industry,
we had our funding commitment in a matter of months.
Soon after, we signed our first customer, Prudential. The insurance company was in the process of redeveloping its Prudential
Center complex in Boston, and it was looking for innovative ways to demonstrate to the city that the project would be a boon
to the community. A partnership with Bright Horizons fit the bill, and in August 1987 we opened our first child care center. As
a bonus, Prudential’s public-relations team let the world know about the progressive model for child care that it was investing
in—and that we were providing. We were on the map.
Slowly, we built our customer base, and as our first centers opened their doors, the initial financial results looked encouraging.
We had developed two basic models for making money. In the first, we assumed the financial risk for the operation and earned
our profit margin out of the operating budget. In the second, the client simply paid us a management fee. In either case, the
employers supplied the capital, investing, for example, in building and outfitting the centers. The average center broke even
when it reached the 60% occupancy mark. When our first few centers filled up to capacity in just three months, we had proof
that our vision could work.
/
Bright Horizons’ founders faced a stark challenge. They had to enter
a business—child care—filled with structural disadvantages and
figure out a way to build a prosperous and caring company.
Our commitment to quality began to pay off as well. Our competitors in the late 1980s continued to think of the industry as a
commodity business. They crowed to investors about driving down labor costs, and they downplayed quality altogether,
usually meeting only minimal state licensing requirements. That approach created such dissonance between what was good for
shareholders and what was good for customers that it seemed destined to collapse. And just a couple of years later, it did, as
the largest traditional chain filed for bankruptcy protection.
We took the opposite approach, reasoning that no Fortune 500 company would risk its child care center to an organization that
paid its staff close to minimum wage, faced frequent violations of state licensing regulations, had high levels of parent
dissatisfaction, and could not achieve national accreditation. We viewed quality as our strongest source of competitive
advantage, and we knew that quality in child care begins with the employees. We surveyed the best centers we could find, and
we discovered that they paid teachers 20% to 30% more than the average compensation in the field. We matched that premium
and also offered comprehensive benefits, including health insurance, tuition reimbursement, 401K with a company match, and
child care support.
Our emphasis on quality didn’t end with employees. We committed to abiding by the strict accreditation standards set by the
National Association for the Education of Young Children (NAEYC) rather than simply adhere to local licensing requirements,
which vary widely from state to state. We also set out to create state-of-the-art learning environments for young children.
Drawing on the capital investments from our corporate partners, we customized the centers so that their design, hours of
operation, and age-group configuration matched the needs of our employer clients. And we developed a curriculum called
“World at Their Fingertips,” which outlined a course of study for teachers but gave them control over daily lesson plans so that
/
the curriculum would reflect the interests of the children in the classroom. Our curriculum marked a departure from those of
most traditional child care programs, which either lacked curricular guidance altogether or mandated strict, cookie-cutter
lesson plans. The creative curriculum reinforced a cycle of quality. It helped our centers attract the best teachers, who in turn
had the skills to fulfill and refine the curriculum.
Our commitment to quality delivers concrete benefits to our clients as well. It gives them the upper hand in the battle for
talent. Merck, for instance, found that its retention rates among employees with young children—a group that had been prone
to high turnover—improved dramatically. Chase Manhattan calculated that its center generated a 110% return on investment
through reduced absenteeism. And we don’t think it’s any coincidence that we’ve retained 99% of our corporate partners.
By 1990, some of our investors began to question whether we had enough “gray hair” and “scar tissue.” We had opened
approximately 30 centers and were launching several new ones each year, so the error in our center ramp-up model
compounded itself. The recession in our home base of New England exacerbated our problems. One board member in
particular questioned whether we knew how to eke out a profit in such a low-margin business. And several directors began to
question whether high teacher salaries and low teacher-child ratios were just an artifact of our idealism and whether they were
an essential element of our strategy.
/
A critical lesson Linda and I learned was that when the going gets tough, board members often give contradictory advice. At
first, we tried to respond to all their varied points of view—“focus on profitability,” “just keep growing,” “hire more
experienced managers,” “lay off staff to reduce costs.” But we soon saw that we were being pulled in too many directions and
that the vision for our young company was at risk. We had to take a stand. I wrote a long memo to the board arguing that the
whole enterprise was built around a quality-focused, employer-supported strategy, and that the only hope of real success was
to pursue it even more deliberately. Without such a strategy, we were doomed to be a second-tier player in an unprofitable
field.
After much soul-searching, the board agreed that Linda and I were still the right management team and that we had the right
business model. (That decision led one of the board members to resign.) At that point, we became completely focused on
managing our cash and ensuring that none of our centers lost money. We eliminated all distractions, such as several public-
policy initiatives and an international joint-venture opportunity that we had been investigating. We also changed our
expectations, projecting that new centers would become profitable in nine to 12 months instead of three and that they would
reach a mature enrollment of 80% to 85% in 18 months. But we did not reduce compensation and benefits, compromise our
teacher-child ratios, or otherwise retreat from our basic strategy of high quality. The new focus paid off. We soon posted our
first profitable quarter.
/
briar patch.” We saw the child care business as our briar patch—a niche that is inhospitable to competitors but quite
comfortable to those who understand its particularities. Our business model allowed us to methodically turn the following
industry weaknesses into company strengths:
Labor Intensity.
Good child care demands well-qualified staff and high teacher-child ratios. In our view, labor is not a commodity, it is a
competitive advantage—and that’s exactly how we treat it. Fortune and Working Mother have named Bright Horizons one of the
best places to work—an unprecedented honor for a company in the child care field. Being known as the employer of choice in
our industry has set us apart from would-be competitors. Clients want to hire us because they know they can put their trust in
our staff.
No Proprietary Technology.
We can’t rely on patents to protect us. Nevertheless, we’ve been aggressive in working with employers to develop innovative
technologies. Indeed, serving high-tech clients such as Cisco, IBM, Motorola, and EMC forces us to stay ahead of the industry
technologically. Some of our centers, for example, use Web-connected cameras that allow parents to watch streaming video of
their children from their computers at work. Centers send digitally scanned or photographed artwork to parents who are away
on business trips, and others post menus, calendars, and student assessments electronically. We’ve developed on-line student
assessment capabilities that let teachers and parents learn more about their children’s learning styles and upcoming
developmental milestones. We could never have afforded to invest in these technological innovations without our clients’
support and expertise.
We think other companies can learn from our approach. In fact, more and more industries are becoming like the child care
business in their competitive characteristics. Traditional barriers to entry are weakening as capital flows to new competitors
and technology upsets once-stable markets. Web-based purchasing and universal access to information are eroding economies
of scale. Specialized labor is in more demand now than ever. And superbrands are giving way to microbrands targeted to the
tastes of communities or even individuals. In the future, good strategy will probably have a great deal to do with making
strengths out of weaknesses—and finding a good briar patch to call home.
A version of this article appeared in the February 2001 issue of Harvard Business Review.
Roger Brown is cofounder and CEO of Bright Horizons Family Solutions, an international provider of workplace child care and early-education services
headquartered in Watertown, Massachusetts.