Business Evolution – Lessons from business history for entrepreneurs

by Leadership

Right from when services and goods were traded in the early civilizations to date, people have always thought about business. Over time specialized producers emerged and money started being used as a means of exchange.

These developments created opportunities through which societies and the individuals in them could gain what we call in modern times –a business edge and led to one of the greatest leaps in the evolution of business.

Business evolution can be understood by looking into the origin, growth, and continuous development of businesses as they expanded into different sectors of the economy. The importance of studying and analyzing the history and evolution of business is to learn from it and apply it to modern times.

The writer and philosopher George Santayana once quipped that “Those who cannot remember the past are condemned to repeat it.

The ancient Greeks, the Egyptians, the Romans, and the Mayans all understood the importance of wealth creation through the mechanism of commerce. They knew how fundamental it was to the acquisition of power, and this formed the base upon which modern civilization would prosper.

The lessons learned by these early traders are still applicable even today. The concept of Specialism led to the benefits of economies of scale where production costs fall as more goods are produced.

The creation and use of money as a measure of value gave rise to the concept of value addition—selling goods and services for more than it cost to produce them. Today’s companies may use different technologies and trade on a global scale, but the essence of business has changed very little in centuries.

The great divide in business history

Dr. Alfred Chandler in his 1977 publication-The Visible Hand, divided business history into two periods: pre-1850 and post-1850. He observed and argued that before 1850 the businesses that dominated were local, family-owned firms.

With most of the economic activities being done on a relatively small scale, there was little thought given to the expansion of businesses beyond the once local area.

The onset of two great changes i.e. the growth of the railroads in the mid-1800s, shortly followed by the Industrial Revolution, acted as catalysts for businesses to grow beyond their immediate surroundings among family and friends and to expand beyond their immediate locale.

To thrive in this new increasingly global environment, businesses needed to employ different, and more rigorous, structures and processes. The sheer geographic scale and ever-growing size of these changing businesses needed new levels of communication and coordination. This gave birth to a new concept—that of business management.

Managing production in business

The initial focus of business management was solely on production.  As manufacturing evolved from relying on individual craftsmen to the use of machinery, with an ever-increasing need for scale, theorists such as Henri Fayol began to examine more efficient ways of operating.

Scientific Management theories emerged, chief among them Frederick Taylor outlook on production. At the heart of his theories, he suggested that businesses needed to find the -one best way- of performing a task.

As a result, businesses were organized to follow precise routines. These ranged from a set opening to closing time (the 8-5 as we now know it) and reducing the role of the worker to simply supervising and “feeding” the machines, as though they were part of it.

The introduction of production lines in the early 1900s resulted in mass production and standardization of goods. Henry Ford’s Model T car is seen as one of the major accomplishments of this period of industrialization.

However, that Ford himself once remarked “Why is it every time I ask for a pair of hands, they come with a brain attached?” is a testament to the role the worker had been reduced to during this period.

The output increased greatly, but as it did, so too did the conflict between the staff and management. Working conditions became increasingly poor and businesses ignored an important sociological context of work -resulting in productivity mattering more than people.

Studying people as a critical component of business

Just around 1920, there emerged a new way of business thinking. This was in the form of the Human Relations Movement of behavioral studies. Psychologists Abraham Maslow and Elton Mayo’s work influenced businesses to start recognizing the value of human relations.

Workers were now seen in a new light. They were no longer simply cogs in the machine but were seen as individuals, each with their unique needs. The managers were still focused on increasing efficiency. However, they realized that workers were more productive when their emotional and social needs were taken care of.

For the first time, workplace environments, remuneration, job design, teamwork, and other nonfinancial benefits were now considered important to motivate the staff.

In the period that followed World War 2, there was a shift in business practices. The innovations during the war had resulted in significant technological leaps that could be applied to business.

Through the use of the computing power of machines, managers began to utilize quantitative analysis to help them solve operational problems. Although the human relations aspect was not forgotten, managers were glad that measurability returned to the core of business.

The rise of International brands

The period after the war saw the growth of conglomerates and multinationals -businesses with diverse multiple interests across the globe. The war had made the world seem smaller; a global village emerged and paved the way to the global brand.

These newly emerging global brands grew rapidly as a result of a media revolution. The use of television, newspapers, and magazines, gave businesses the means to reach a mass audience.

Businesses had for a long time advertised to inform customers about their products and to persuade them to buy. However, that advent of mass media provided the platform for a new, and much broader, field —business marketing.

Around the 1940s the value of a Unique Selling Proposition was promoted by US advertising executive Rosser Reeves. In the following 20 -30 years, businesses changed their marketing methods from simply telling customers about their products to listening to what customers wanted, and then adapting products and services to suit that.

But no new concept lacks its critics. In the early 1960s, the hype about new products became more important than quality in most businesses.

The customers quickly grew dissatisfied with empty claims. This, alongside competition from Japanese manufacturers, made Western companies embrace a new form of business thinking. The age of Zero defect management and Total Quality Management (TQM) was born.

The Holy grail of Product Quality

Quality was now seen as the responsibility of the entire company, not just those on the production line. This was supported by management theorists, such as Philip B. Crosby and W. Edwards Demming in their numerous studies of production and quality.

As a result of combining the customer-focused approach of marketing and Human Relations thinking, many businesses soon adopted the Japanese philosophy of kaizen: the continuous improvement of everything, by everyone.

Staff at each level was tasked with improving processes and products through their quality circles. While Total Quality Management is not as popular as it once was, quality still remains important.

The modern quality control model of Six Sigma borrows heavily from the TQM. Six Sigma is an approach to process improvement that was developed in 1986 by multinational telecommunications company Motorola.  It was later adopted by Jack Welch at General Electric during his time as the CEO.

The rise of the Digital Age

Just as mass media and television had done before, the growth of the Internet in the 1990s and early 2000s gave rise to a new era for business. Early hype led to the failure of many e-commerce start-ups in the dot-com bubble between 1997 and 2000.

However, those who were successful laid the foundations for a business landscape that would be dominated by innovation.

From high-tech garage start-ups—such as Hewlett-Packard (HP), Microsoft and Apple— to the mobile apps, websites, and social-media forums of the modern business environment, technology has increasingly become vital for business.

The start and explosion of new businesses thanks to technology also helped to increase the availability of finance. Between the 80s and 90s, finance had grown into a distinct discipline.

High-profile takeovers and corporate mergers and became a way for businesses to grow beyond their operational limits. Leverage was now an integral part of management alongside marketing and strategy.

Access to capital and online resources

The late 1990s gave birth to venture capital -the funding of small companies by investors seeking profit. Today, the risk of starting and running a business is still present, but the opportunities presented by easier access to finance and technology have made taking the first step a little easier.

With the support of online communities and networks of likeminded people giving business advice and access to microfinance, there has never been a better time for the entrepreneurial spirit. Recent business thinking has brought both social responsibility and diversity and to the fore.

Businesses are now encouraged and even required by law, to act in an ethical manner and to employ people from diverse backgrounds, wherever they operate in the world. Businesses giants such as Adidas and Nike and require their suppliers to prove that labor conditions in their factories meet the required standards.

The concepts of diversity, sustainability, and environmentalism have entered business thinking alongside risk and strategic management.

What next for our Future

If business thinking has seen drastic changes, so too has the nature of business itself. Where companies were once restricted by their locality, today, the opportunities are available on a global scale. Globalization, however, means that the business world is more competitive than ever.

As emerging markets creating new opportunities so do new threats emerge. The developed counties may now be able to outsource production to low-cost countries, but as their economies grow, these emerging nations are breeding new competition.

As the global recession of 2007–08 and ongoing economic uncertainty amid the COVID-19 pandemic have proven, business in the 21st century is increasingly more interdependent and more challenging than ever before.

Starting a business might now be easier, but for entrepreneurs to not only survive but thrive as well they will need great determination to take an idea to market, Business skills to get a profitable enterprise from a good plan, and financial skills to maintain their success.


For thousands of years political, social and technological factors have forced companies and individuals to create new ways of doing business. From the bartering of goods between neighboring villages to business giants built around online social networking, business thinking has evolved to reflect the needs and wants of the customer. It exists to serve the societies whose wealth it creates.

Sometimes, such as during the 2008 financial crisis, business failed in its efforts. In other instances such as the ever game-changing Apple’s products, for example, companies have been exceptionally successful.

Business is quite a fascinating subject.  It is all around us and affects us all the time. A simple walk down your home street, a wander around your local store or an Internet search on almost any topic will reveal the extent of business in its many and varied forms.

At its core business, however, is, and always has been, about our own survival and surplus. About the improvement of self and the society we live in.

As the UK entrepreneur, Anita Roddick, aptly put it: “Business is not a financial Science, it’s about trading—about buying and selling.”