America's Corner Store: Walgreen's Prescription for Success

America's Corner Store: Walgreen's Prescription for Success

by John U. Bacon

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Overview

Praise for America's Corner Store

"Who would have thought the story of a drugstore chain could encompass so much vital and fascinating American history? With superb storytelling skills, John Bacon gives us a vivid and insightful chronicle of matters both large and small, from the birth of the milkshake to the rise of America's consumer culture. America's Corner Store is a genuine treat."
-James Tobin
the National Book Critics' Circle—Award winner, and author of To Conquer the Air: The Wright Brothers and the Great Race for Flight

"Run the business with your head. Lead the family with your heart. Walgreens' history is filled with good values, strong principles, and immense courage. A family business classic."
-Howard "Howdy" S. Holmes
President and CEO, "Jiffy" Mixes

"John Bacon has crafted a thorough, insightful, readable, and fascinating account of the development of Walgreens: one of the world's most compelling examples of the creation of shareholder value in conjunction with good corporate governance... all in a company run in a highly unique fashion as a 'family' business. As the store that everyone knows, Walgreens has become the envy of corporate America and the darling of shareholders, consistently producing investor returns that place it at the very top among its peers. This book will be required reading in my private equity class at Michigan Business School."
-Professor David Brophy
Director, Center for Venture Capital and Private Equity Finance, University of Michigan Business School

Product Details

ISBN-13: 9780471426172
Publisher: Wiley
Publication date: 05/03/2004
Pages: 255
Sales rank: 916,483
Product dimensions: 6.30(w) x 9.35(h) x 1.00(d)

About the Author

JOHN U. BACON has written on a wide variety of subjects for Time magazine, Fortune magazine, and the New York Times, among other publications, earning several national honors for his work. A former feature writer for the Detroit News, he has also authored Blue Ice: The Story of Michigan Hockey, ghost-written several business bestsellers, and currently hosts a weekly radio show. He lives in Ann Arbor, Michigan.

Read an Excerpt

America's Corner Store

Walgreen's Prescription for Success
By John U. Bacon

John Wiley & Sons

ISBN: 0-471-42617-2


Chapter One

from humble beginnings

the apple and the tree

There was little about Charles Walgreen's childhood that would have led you to believe he would become a success story, let alone a multimillionaire who would transform an entire industry. Walgreen never seemed cut out for the pharmacy business-and there was no shortage of pharmacy owners ready to tell him this. They might have been right. Charles never longed to become a pharmacist or a businessman (as confirmed by his checkered career bouncing around at least a half dozen stores in his twenties). But his fastidious attention to detail, coupled with his engaging personality, commitment to customer service, and surprising willingness to defy conventional wisdom on how to run his business, proved to be an unusually potent combination-a combination to which his son and his grandson have adhered, even as the industry did several flip-flops over the decades.

But the fact is Walgreen was a solid but uninspired student and a positively desultory employee. Another twist: Walgreen did not descend from a line of Walgreens but was the first Walgreen born, by name, a Walgreen. Because Swedes traditionally took the first name of their fathers for their last names (adding the familiar "son" as a suffix, as in Johannson), military units suffered endless confusion with so many peoplesharing the same surname. In the 1780s, Charles's great-great-great-grandfather, Sven Olofsson, adopted the surname "Wahlgren" during his military service, a family fact passed down over the generations. When Walgreen's father, Carl Magnus Olofsson, arrived in America, he decided-for reasons lost to us now-to change the family name to Walgreen. (The original name would resurface years later when Charles Walgreen decided to give his company's "Pure Norwegian Cod Liver Oil" the fictitious family moniker, "Olafsen's.")

Carl Magnus Olofsson grew up in Bola, Morlunda, Sweden, in a solidly middle-class family. Nonetheless, Olofsson decided to leave home for the New World in 1859, changing his name to Carl Walgreen when he arrived. He started a family with Anna Louise Cronland, but after bearing two children, she died from complications in childbirth. In 1871 Walgreen married the former Ellen Olson, who grew up in a small town north of Stockholm. Although Olson's family lived comfortably there, her father, like Olofsson, decided the future lay in America. So he led his wife and nine children on an arduous four-week trip across the Atlantic to find out if he was right. Since the family never returned, we can safely conclude their father's belief in America's future was vindicated. Ellen raised Walgreen's first two children and two more of their own, including Charles, who was born on October 9, 1873.

Walgreen grew up on a farm near Rio, Illinois, 14 miles north of Galesburg-in other words, in the middle of nowhere. But it made for a safe, contented childhood. When Charles first met his future wife, Myrtle Norton, as she recounted in her autobiography, Never a Dull Day, he told her that he had had "a happy home"; and all signs suggest it was true.

Walgreen's parents were typical Swedes-stoic, with an understated sweetness. They spoke Swedish at home-a language Charles spoke and wrote his entire life-"but never in anger," he said. His father was firm but fair, unquestionably the family patriarch. He might have admired his adopted country's democratic form of government, but he made no pretense of practicing it at home. What Carl said, went. Carl's authoritarian streak-hardly uncommon for the era-might explain why Charles so often bristled years later when taking orders as a store employee.

In the 1870s, the entire "educational system" of Rio, Illinois, consisted of a one-room schoolhouse. But for at least one year, it was lead by a special teacher named Maggie Phillips. Walgreen never forgot her. And as a result, Walgreens' employees never did either. Every day, Miss Phillips would write an inspirational quotation on the blackboard and have the students memorize the phrase.

Her methods worked. Some five decades later, during the Great Depression, Walgreen shared one of Miss Phillips's quotes with his thousands of employees through the company newsletter, The Pepper Pod.

True worth is in being, not seeming, In doing each day that goes by Some little good-not in dreaming Of great things to do By and by.

It is safe to say that Walgreen, and the vast majority of his employees, took those words to heart. The company has been characterized by an almost religious devotion to substance over style, to this day.

Miss Phillips's tutelage aside, however, Walgreen's father believed his son would need a bigger, better school system to reach his full potential; and he felt he found one 60 miles northeast in Dixon, Illinois. Walgreen's older half brother Edwin was attending classes there at the five-year-old Northern Illinois Normal School and told his father, "This was the place."

When the Walgreens moved there in 1887, Dixon still had muddy roads and wooden sidewalks, but its location on the Rock River guaranteed continued growth. Established in 1830 when John Dixon set up a ferry service there, the spot became known as "Fort Dixon" during the Black Hawk War of 1832, which started when Chief Black Hawk roused the local Potowotami and Winnebago tribes to take back the land. The war drew hundreds of Union troops, including a host of future famous Americans, among them Jefferson Davis and Abraham Lincoln-the presidents involved in the Civil War. The outnumbered and overpowered tribesmen stood little chance; and after just a few months of fighting, they were forced to surrender. "The Rock River was a beautiful country," Chief Black Hawk said. "I loved it and I fought for it. It is now yours. Keep it as we did." (Chicagoans honored the warrior a century later when they named their NHL hockey team the Blackhawks.)

The Black Hawk War literally put the tiny settlement of Dixon on the map and, having introduced the soldiers from around the country to the area, served to spread the word about the area's appeal. Lincoln returned to Dixon's Nachusa Hotel, where he had boarded during the war, for business trips and campaign stops decades later. (A century later, another U.S. president, Ronald Reagan, grew up in Dixon, serving as a lifeguard on the Rock River and as a caddy for Charles Walgreen Sr. on the Dixon Country Club golf course, which Charles Sr. saved from bankruptcy in the 1930s by purchasing 100 memberships. Like Lincoln, Reagan returned as an honored guest while campaigning for president, staying at the Walgreen family's Hazelwood estate.)

Dixon looked pretty good to Carl Walgreen, so he sold his two farms in Rio to set up a real estate office in downtown Dixon in 1887, when Charles was 14. The community might not have been much by today's standards, but it must have been exhilarating to young Charles, moving from miniscule Rio to Dixon, a town with 5,000 people, electric lights, and even, in a few prosperous businesses and homes, telephones, "the lazy man's friend," in the words of the Dixon Evening Telegraph.

Dixon also had what Carl Walgreen most wanted: a good high school for his son, with a planned, new, state-of-the-art building. Charles did well in his studies, but it was sports, not school, that thrilled him. He played baseball and swam all summer, hunted in the nearby woods each fall, and skated on the frozen Rock River in winter.

Charles thrived on the freedom that came with growing up but chafed under the additional responsibilities. At age 16, at his parents' urging, he entered Dixon Business College but stayed only a year. "When I asked him how he liked business college," Myrtle Walgreen wrote in her autobiography, "he just shrugged." In his early years, indifference marked Walgreen's reaction to work in almost any form.

Fortunately, "Accuracy was a kind of passion with him," Myrtle wrote, so Walgreen was able to find work as a bookkeeper for the I. B. Countryman General Store, Dixon's largest. He performed passably well, but once he recognized that his daily duties would hardly change before he died an old man, he quit again. "He didn't think it'd be too good to run a bookkeeping operation the rest of his life," Chuck recalled.

(Walgreen might have ditched the bookkeeping job, but he remembered the lesson: If you don't give your employees a chance to advance, you'll lose them. Providing its employees opportunity for growth based on ability, not merely on longevity, has been a pillar of Walgreens' policy to the current day.)

Leaving the white-collar world for a job at the Henderson Shoe Factory in town, Charles Walgreen soon learned that manual labor also had its downsides, especially in 1889. As he toiled at one of the stitching machines one day, he caught his left middle finger in a sharp steel tool and watched the contraption chop the top joint off. A local doctor named D. H. Law treated the wound and told him he wasn't even to hold a book until it healed. But Charles was not about to put off his love of sports just because of a little finger injury. When Law caught him playing baseball with his buddies the very next day, he scolded the young man. He then asked Charles if he would like to work in a drugstore instead of the factory.

"Charles did not care for the idea at all," Myrtle recalled, simply because he preferred playing baseball to any job you could name. But Dr. Law persisted, asking Charles every day he saw him playing outside if he wanted to reconsider his offer. Finally, albeit grudgingly, Charles agreed to take the job that Dr. Law had set up at the biggest of Mr. David Horton's five drugstores, which sold the "finest perfumes, pure drugs, medicines, toilet articles, shoulder braces, homeopathic remedies, cigars, soda water, and lamp goods," according to the ads in the local paper.

Not surprisingly, the work at Horton's didn't appeal much to Charles, but the princely sum of four bucks a week was certainly attractive. More important, however, unlike the factory, the drugstore offered the amiable young man lots of social contact. Although Charles was initially apprehensive about waiting on customers, he quickly discovered he had a knack for it, the one part of the job he actually enjoyed. (Genuinely friendly customer service has also been a Walgreens' hallmark from the start.)

Like all of Walgreen's jobs, however, this one would be short-lived, lasting only a year and a half. "One nasty winter day, [Mr. Horton] told me to get the snow and ice off the front sidewalk while he was out to lunch," Charles recalled about 10 years later. "I thought he ought to have a porter for such jobs when we were busy, but I really did intend to shovel the snow." After Walgreen's boss left for lunch, a friend stopped by to chat, which interested Walgreen far more than shoveling snow. The time flew by, and Mr. Horton returned to find the snow and ice still stuck to the sidewalk and his clerk inside with the shovel in his hand, chatting up his friend.

"I caught the look on his face," Walgreen said, "and remembered the ice fast enough to blurt out, 'I've quit!' Mr. Horton said I couldn't quit; I was fired!"

Thus began the single greatest career in the pharmacy business. Having been unceremoniously let go from a decent job by a decent man, another 18-year-old might have felt guilty or dejected, but Charles Walgreen took his untimely dismissal instead as a long-awaited invitation to see the world beyond Dixon, Illinois. He borrowed a $20 bill from his sister Clementine, who worked as a stenographer in the Dixon Circuit Clerk's office, then hopped on the Chicago and Northwestern railroad line for Chicago.

His timing could not have been better. When he arrived at the Northwestern station in the winter of 1893, the architects and organizers were working furiously to put the final touches on the World's Columbian Exposition just a few blocks away in Jackson Park, on the city's South Side, in time for the May opening.

The stakes were enormous, for both the city and the country. Chicago's 1893 fair followed Paris's incredibly impressive 1889 World's Fair-which introduced the Eiffel Tower, among other attractions-and had to redeem the United States for its embarrassing, half-baked displays in Paris. Chicago also had to wow its countrymen to prove that it was no longer a vulgar, Western outpost fit only for doomed cattle.

It is impossible to talk about the history of Walgreens without discussing the history of Chicago. The two have been intertwined since Chicago's eighty-sixth year and Walgreens' first. Their personalities are very similar. They share a hard-working, no-nonsense mindset, yet both are utterly unafraid of great challenges.

For the company's first 10 years or so, Walgreens was based almost entirely in Chicago, and the values of that city and its people have stamped the company, even as Walgreens has spread across the United States. In a real sense, Walgreens remains a Chicago company that happens to have outposts in 44 states in the country. As former chief executive officer (CEO) Dan Jorndt said in 1981, when Walgreens had a mere 150 stores in Chicagoland (compared to today's 350-plus), "We know Chicago better than anyone. This is our home, where it all started."

Eastern capitals like Boston and New York were already major cities in the seventeenth century, and even "Western" enclaves like New Orleans or St. Louis were established outposts by the early nineteenth century. But Chicago didn't even exist on any map until well into the nineteenth century. What this utterly forgettable landscape did have, however, was a seemingly minor river running through it-and that made all the difference. Columbus left the Old World to find a passage to the Orient-and failed. Lewis and Clark left the East Coast to find an easy waterway to the Pacific Ocean-and failed. But when French missionary Jacques Marquette and his traveling partner, explorer Louis Joliet, set out on the last leg of their North American journey from the Great Lakes to find the Mississippi River in September 1673, they succeeded. The answer to their riddle was traveling the tiny Chicago River (Chicago being a bastardized version of an Indian word for skunkweed, or wild onion, which covered the river banks), followed by a short portage into the Des Plaines River, which runs into the Illinois before joining the Mississippi.

Marquette and Joliet's discovery went largely ignored for 157 years, however, because it was too impractical to exploit. That changed dramatically in 1830, when government planners working for the 12-year-old state of Illinois decided to dig a canal between the Chicago and Des Plaines rivers, ending the need for the troublesome portage, with two small towns-Ottawa and Chicago-planned for either end of the canal.

Continues...


Excerpted from America's Corner Store by John U. Bacon Excerpted by permission.
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Table of Contents

Preface ix

Acknowledgments xiii

1 From Humble Beginnings 1

The Apple and the Tree 1

Sweet Home Chicago 7

The State of the Profession 14

Walgreen Does Chicago 22

To Live and Almost Die in Cuba 25

Walgreen Returns 27

The Most Important Merger 30

Diving In—Together 37

2 The Start of Something Special: 1910–1929 43

On His Own 43

The Secrets of the Second Store 44

I Scream, You Scream 47

The Hot Lunch Program 48

Cultivating Leaders 50

Growing Like Topsy 52

The Pepper Pod 55

Steppin’ Out 59

Chicago in the Roaring Twenties 61

On the Lighter Side 65

Fundamental Values 69

Putting Out Fires 71

The Walgreen Creed 74

The Knight Report 75

“Absolute Dominance” 82

If They Can Make It Here 83

Read All about It 86

Chain Fight 88

The Good Life 92

3 Nothing to Fear: 1929–1945 95

Facing Fear Itself 95

Better Days Are Coming 96

Helping the Mom-and-Pop Shops 101

Walgreens’ Own: From Coffee to Corn Remover 105

Getting the Word Out 109

Damn the Depression, Full Speed Ahead! 111

Finding Time for Fun 117

The Son Also Rises 119

The Accidental Benefactor 122

Charles’s Demise 126

Defusing a Palace Coup 129

There’s a War On 134

Where Everyone Meets 137

4 The Postwar Era: 1945–1970 139

The Power Era 139

Mergers and Acquisitions 141

All Power to the Pharmacist 144

Partners in Health 145

Battling the Bargain Stores 149

The Self-Service Revolution 151

The Shopping Center Is Born 159

The Four-Way Test 161

Chuck’s Legacy 163

5 Reinventing the Corporation: 1970–1990 167

State of the Company 168

Looking for a Few Good Men 171

Walgreen’s Wingman 174

The Turn-Around Team 177

Killing Off Their Little Darlings 182

The Systems behind the Smiles 187

Walgreens Goes High-Tech 189

Vindication 191

6 Poised to Pounce: 1990–Future 193

“This Is Dan Jorndt, How May I Help You?” 193

Plain and Prouvéd of It: The Anti-Enron 197

Getting the Right People Ready 207

A Good Corner Is a Good Corner 211

Passing the Torch 215

Hello, My Name Is Dave 217

Constant Competition 220

Walgreens’ Advantages 223

The Future Is Now 224

Appendix A

Walgreens Financial Facts 227

Appendix B

Historic Highlights 229

Notes 233

Index 249

Customer Reviews