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Lesson #1: Ensure Efficiency
What perhaps most set Rockefeller apart from his competitors was his precision. Whereas others might have left things to chance, Rockefeller believed that nothing was out of his control. No aspect of Standard Oil’s operations was guessed at nor was anything left uncounted or unmeasured. Down to the smallest detail, Rockefeller was obsessed with efficiency and economy. The precision and foresight with which he worked would become two of the cornerstones of his success.
In order to ensure that Standard Oil was acting at the most efficient level possible, Rockefeller took control over every aspect of its operations. He built refineries of higher quality and better planning than did his competitors, using only the best materials available. He owned his own barrel-making plant as well as drying facilities and hoop iron, which resulted in the reduced cost of a barrel by over $1.50. He also ensured that Standard Oil produced its own sulfuric acid for the purification process and created technology to recover it for re-use.
“I believe that thrift is essential to well-ordered living,” said Rockefeller. Wherever possible, Rockefeller made sure that the company had complete control over its operations in order to reduce costs. Standard Oil owned its own warehouses in New York City, its own boats on the Hudson and East Rivers, its own fleet of tank cars, and its own cart transportation service. They also built their own holding tanks near their refineries in order to efficiently store the oil and their equipment.
Whereas other refiners often dumped the waste products from their operations into rivers, Rockefeller was insistent on trying to reuse them for his operations. He began creating from the waste a lubricating oil that soon became the industry standard for lubricating machinery, replacing lard oil. He manufactured Benzine as a cleaning fluid, paraffin for candles, and Petrolatum for ointments (white petrolatum would later be marketed as Vaseline). He created Naphtha as a fuel for motors and shipped it to other gas plants and also began using gasoline as a fuel.
Rockefeller knew that the oil business was at times chaotic, but he did his best to ensure that he managed whatever he could. “Competition is a sin,” he said. In an industry with such low entry costs, Rockefeller saw the market as being filled with a high level of waste. He viewed free competition as inefficient and thus sought to buy out weaker firms. While his attempt to create a monopoly was questioned by many, Rockefeller saw it as simply another step in his quest for efficiency.
Standard Oil grew to the scale that it did not by chance, but by Rockefeller’s design. It was the result of a carefully formulated plan focused on efficiency and precision. By taking control over every aspect of the company’s operations, and trying to reduce wasteful practices in not only his own company but industry-wide, Rockefeller ensured his company would be an industry leader.
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