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Alfred P. Sloan, Inventor of the Modern Corporation

"His ideas were so clearly correct that we have forgotten that they were an invention." These are the words Dr. Schein of MIT's Alfred P. Sloan School of Management uses to sum up the contributions of Alfred Sloan. Sometimes inventions that come in the form of ideas are so significant to our society that we actually forget they were invented at one point in time. Alfred Sloan's conception of the modern American corporation is one of these inventions.

Alfred P. Sloan, Inventor of the Modern CorporationWhile growing up in suburban Connecticut in the 1880s, Alfred P. Sloan spent much of his time in the study and analysis of the world surrounding him. While other kids spent time playing outside, Sloan preferred staying indoors and preparing for school. He was one of the youngest people to enter the Massachusetts Institute of Technology (MIT), and he was the youngest in his class when he graduated in three years with a degree in electrical engineering.

After college, Sloan began to study business intensively when he went to work for a floundering ball-bearing manufacturer in New Jersey. He convinced his father to purchase this company and Sloan then revived it in just six months. He ran the business for seventeen years before convincing General Motors to purchase it.

After successfully selling his company and making it a part of General Motors, Sloan became a part of the upper-level management in GM. For about the next five years, he scrupulously studied the company. Then he was ready to revamp the business and presented his management ideas in a long discourse. Sloan's ideas included how to break down GM into smaller divisions – something we see in almost all companies today. This includes our own company, InventHelp®, which has an inventor trade show division (INPEX®) and an invention licensing division (Intromark).

Alfred Sloan created structure so people could be more creative with their time and have it be well spent. He also came up with the idea that senior executives should exercise some central control but should not interfere too much with the decision making in each operation. It is difficult to describe many of Sloan's ideas because most of them would seem like common concepts of a business, yet they were new and innovative at the time. Largely due to his invention, GM became the pioneer in market research, public relations and advertising. Before Sloan, people had totally different conceptions of these common parts of the American corporation.

Sloan soon became chairman of GM and then took over as president in 1923. At that time, GM had less than one-fifth of the U.S. auto market share while Ford had more than half. By 1931, GM achieved the almost unimaginable by surpassing Ford once and for all. Through Sloan's three decades of innovation, leadership and guidance, GM became the world's largest industrial corporation. Even today after many changes, mergers and acquisitions, GM continues to be the largest auto company, and it is the world's third largest corporation behind Wal-Mart and Exxon-Mobile.

Ford dominated its market with the invention of the assembly line. Then Sloan invented new business models and management methods that catapulted GM into the top spot. All that remains to be seen is which auto maker embraces innovation enough to eventually overtake GM for the coveted title of largest car manufacturer. To read more about Alfred P. Sloan, visit the MIT Entrepreneurship Center.


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