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How to become a Business Tycoon?

Sun, Mar 22, 2009

Published (English)

 

“Please give me a glass of sugarcane,” I asked the shopkeeper of the fruit shop.  I was thirsty while walking in the sun.  Before I would I go to a café and ask for a coke.  However lately with the rising evidence that carbonated drinks are not good for our well being as they wash out our calcium through the urine according to certain authorities, I shifted to another alternative: fruit juice. 

 

This spun in me an idea.  Could fruit juice be the next big industry?  Like I made the shift from one product category to another, what if another million took the same leap?  How would I tap into this gold mine? 

 

The business tycoons, the richest entrepreneurs and the most celebrated CEO’s are those who:

  1. Found out a new industry or sector of unfulfilled or shifting needs (N),
  2. Took the most strategically profitable position (P),
  3. Attracted (A) other players to fill the gaps and
  4. Designed an intricate web (W) that directed certain proportions of whatever money was made in various transactions back to them. 

 

If you too want to be the ‘next big thing’, apply the same formula (NPAW).  Let’s learn how. 

 

Finding the true gold mine (N)

 

In the history of the America, one time there was something called ‘gold rush’. Some people had found gold there and now every body wanted a piece of it and become overnight millionaires.  Now that is what the normal men heard and acted upon, leaving their homes to join the gold rush. 

 

However there was a group of intelligent people who knew better.  Tens of thousands of people are going to settle in a place that has nothing. They will need food, clothes and shelter.  In this way this group found out a new sector at that time: basic amenities.  The hardest part was the distribution: buying from manufacturers and wholesalers in cities and taking it to that god-forsaken land.  This group was good at that.  In order to pull this industry off, someone had to take care of the distribution and many people would have to open outlets where gold-diggers would shop.  So this group opened the first shop and encouraged others to open too assuring them they would supply them the products.  In this way whatever was sold through other outlets registered a cut in their books since no one else was getting in the products. This was because no one had the capacity to and because back then no one had such an understanding of business.  That became their brand image.

 

At the end of the gold rush, who do you think made the most money?  Was it the gold diggers, the ‘group’ or the people who opened outlets?  Most of the gold diggers exhausted whatever funds they had bought in their upkeep and either died in the process or returned broke.  The shopkeepers did a bit better.  But the ones who made the big bucks was the group. They never went out for the gold but they reaped the biggest prize.  How?

 

They used the above formula (NPAW).  They found a new sector with unfulfilled needs (tens of thousands of gold diggers).  They took the most strategically profitable position (distribution).  They attracted other players (shopkeepers).  They designed an intricate web to make sure whatever was sold by whichever outlet was supplied by them (using their brand image). 

 

This group was lead by the founder of a big chain of departmental stores, which is now a household name in America and a Fortune 500 company. 

 

So what appears to be the illusionary gold mine may in fact hide the true gold mine. If you want to be a tycoon you will need to develop this knack of sniffing the true gold mines. 

 

Choosing your position (P)

 

China is going to host the Olympic games 2008.  As a businessman, I am neither interested in the politics of the game nor who gets the gold, silver or bronze.  I ask myself, who is going to make the most money? 

 

To answer this question you must first answer another question.  Where is the money?  First it would come from the people who are going to attend the games by being physically present.  They could be hundred of thousands.  Second the money would come from advertisers who want to show their ads to the hundreds of millions viewers watching on TV, listening on radio and interacting on the internet. 

 

So we have identified two glaciers of money that give rise to the Ganges of income.  The closer your business is to the source, the more money you will make.  The government of China is closest to the source since it can tax (W) for every transaction that takes place during the games from the planes that land to the electronic transmissions that leave the towers to the rest of the world.  Using the NPAW formula, the government lobbied for the rights to host the Olympics thus creating a need for the world to come to its door (Need). It took the obvious position of organizer (Position). It attracted contractors, MNC’s and local entrepreneurs for building infrastructure, running the games, broadcasting, taking care of visitors (Attract). Finally it made use of the already existing tax collection system (Web). 

 

The players will make money if they win.  The contractors will make money if they complete job. The MNC will make money if visitors buy their services and products.  The audience will just be spending money.

 

Outside China, TV channels will have to buy the rights to broadcast the images of the Olympics.  That will be expensive.  But they will make money by selling commercial advertisement time.  Some of the crumbs of this opportunity will go to advertising agencies.  Some money will again trickle down to models. At this level, what would you rather be?  The one who bought the owns the images, the TV channels where ads will be aired, the advertising agencies making the commercials or the model posing in the ads? 

 

Again in order to answer this question you must answer another question.  What resources, expertise and network do you have? 

 

Let us look at the negative side.  What if the games fail and don’t happen at all?  Who will make the biggest loss?  Will it be the organizer, the players, the contractors, the service providers, the broadcasters, the advertisement companies or the models?  The answer is quite obvious it is the organizer that will take the deepest dive into red ink.  The contractors will be paid anyway.  The service providers will look for other customers.  The broadcasters will look out another ‘breaking story’, the advertisement company will bill the clients for the ads they already produced and so will the models.

 

Following the principle that the higher the risk the higher the returns, the one who will make the most money is the organizer.  The advertising agencies and models are the ones who will make the least amount.  Service providers like airlines, hotels and shops will become fat too.  Contractors would be the second highest earners because they are doing the hardest job of putting the infrastructure in place. 

 

Using this analogy of the Olympic games in the case of my training industry, I have positioned my business as a contractor and player.  Other companies organize the shows, I provide the technical know-how and become part of the show.  We could also use the analogy of the film industry.  Someone is the producer.  Another is the director and the behind the scenes people.  Then there is the hero, heroine and the cast.  After the film is made then there are the distribution channels, the promoters, and the cinema halls.  I might like cinema, but where would I fit in?  The choice depends on the resources, the expertise and network you have.  If you have access to a million rupees, have worked back stage and know a few distributors, you could opt to become a producer.  If you have no money, but know acting and are flamboyant and you know a producer, you would choose to be a hero.  If you have a big crew of people around the country and world, you know which movies sell and which don’t, know many producers and cinema hall owners, you would opt to be a distributor and promoter. 

 

The point is that in order to make it big, you have to take most profitable position taking into consideration your nature, aspirations and status. 

 

Don’t be greedy to give opportunities to others (A)

 

Once you have secured a position in which you are strongest, it is time to let others in the industry you created. 

 

Now suppose I went ahead with my ‘fruit juice industry’ idea. From a survey I would administer, imagine I found out that one million Nepalese would shift to fruit juice if:

  1. The juice was guaranteed fresh and made in front of them
  2. The price was affordable
  3. The sitting place was consistently clean everywhere
  4. It was available anywhere they needed
  5. There was a take-away system consisting of ‘nice’ cups
  6. It was glamorous thing to consume like Coca Cola or Pepsi

 

In the current scenario there are fruit shops scattered all around the country.  They all have the same products and they belong to one association that fixes the price for them.  In this way wherever you go you get the same product in similar settings and same price.  However the existing product offering and mode of service will not be able to pull the millions seeking to shift their preference from carbonated drinks to fresh juice because only the first two of their expectations is being met.  In order to meet the remaining four requirements a new industry would have to be spun. 

 

Somehow the brands Mango Frooti and Rio created a new industry by fulfilling the three last conditions.  And using the same formula (NPAW), they made tons of money. The group that introduced this product found a need for alternative of cokes and fruit juices (N).  They decided that the most profitable position to take was that of the manufacturer (P).  Why not since they had the resources, expertise and networks?  They could take care of distribution and selling only from their outlets but they were not greedy and instead they invited others to do those parts that would jump-start this new industry (A). 

 

However the third condition in the above list is fulfilled neither by the fruit shops nor Mango Frooti/Rio. There are millions of potential consumers that would emerge if the fruit juices were available in a fast food restaurant setting style. 

 

The rise of Star Bucks, the coffee shop chain emerged in a similar way.  It is found at all the corners of streets around the major cities of the world.  The coffee is made in front of you. It comes in varieties.  The sitting arrangement is relaxed, cozy and friendly.  The prices are reasonable.  There is a glamour element to drinking in such a shop or to carry a cup taken away from there to the office.  This group also could own everything in the supply chain and value chain.  They could open a few shops, then integrate upwards in the supply chain and own coffee fields.  They could integrate downwards in the value chain and own the furniture manufacturing facility that made their great lay outs.  However this group took care only of one part of the supply chain which was to source for the best coffees around the world and one part of the value chain which was to glamorize the coffee drinking at Star Buck.  By doing this they attracted other people who wanted to take their business model and copy in their streets and cities.  So Star Bucks grew by franchising.  The group sets the standards and the rest of the franchisees follow.  This has created an industry worth billions of dollars.  Mind you it is not the coffee’ s brand that is the basis of this industry it is the outlet’s brand.  You can’t buy a Star Buck coffee at a departmental store, you have to go into a Star buck. 

 

Had they been greedy, the Star Buck group could not have created such an empire.  As a result so many people in their supply chain and value chain became millionaires, and their franchises too. 

 

All successful empires like McDonald, Nanglo and UFO grew using this formula (NPAW). 

 

Ask ‘Show me the money’ (W)

 

Growing a business and spinning it into an empire sounds and is exciting but make sure that you don’t forget to get paid.  Altruism is not a good business habit. 

 

A CEO of an IT firm was supplying to a NGO billions worth of computers.  One day the director asked the CEO, “We have taken so much from you.  Doesn’t your company have a policy to donate computers?” The CEO replied, “Well, our parent company won’t entertain such a request but I will arrange to donate to you hundred computers.” The director was elated. The CEO was then asked by his chairman, “Show me the money.” The CEO replied, “Well, see in the next tender I marked up the price a bit and the director did not bother.  This covered the cost of the hundred computers we donated.  In addition I went to the parent company and told them what we were doing and they slashed down the price of these hundred computers.  In this way we actually made a profit on this charity!  Still this act of charity will guarantee us future deals from this party and others who hear of our actions. So here is the money, boss.” 

 

There are so many ways to get paid.  Don’t be in rush to complete the three steps to build an empire unless you are well versed in the art of making mechanisms in which any of your business actions will yield some kind of income directly and indirectly to you. 

 

The best example of this principle is the Multi-Level Marketing companies like Amway.  That industry has the best system (W) to maximize the return on your labor.   You recruit, train and motivate one person and he too does that and so on up to say hundred layers of people.  What happens it that you still get paid a cut of the profit the company makes when the 101st person sells.  That sounds so cool to be a member of the MLM company, isn’t it. But again who is makes the most money?  A percentage of the labor of the hundred of thousands of members will always go to the producer or owner of the system.  How smart!  He bears no cost of advertising, doesn’t have to pay split profits with layers of wholesalers or give commissions to agents. He created a perpetual money making machine just by focusing on the fourth component of the formula, NPAW.  

 

Business Tycoon Intelligence within every body’s grasp

By understanding this formula (NPAW), you now have the tool to weave your empire.  No doubt other personality traits, mental models and knowledge are needed.  But what we explored is the fundamental intellectual block that leaders of industry have used.  A brief super-imposition of this model (NPAW) on the business history of these men and women will show a close parallel in all cases.  Now that you got the mental framework of tycoons in your grasp, go for it and become one. 

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