PRINCIPLE 7

The Key Entrepreneurial Trait: Knowing How to Spot an Opportunity

How to spot an opportunity may be the key entrepreneurial trait, but you can’t do it on an island. You can’t simply wait for inspiration to strike and then suddenly realize “what the world truly needs is . . .” That is not how it works.

What do you do? You begin, in what you may think is an unusual place, by looking for opportunities to open your mind.

The longer you’ve been around, and the more successful you have been, the more difficult it’ll be for you to accept new and/or different ideas, especially if those ideas don’t correspond with the way you see the universe. When confronted with something that isn’t within your usual frame of reference, you are likely to say, “This will never work.”

You continue doing what you’re doing because “if it isn’t broken, why fix it?”

There are three problems with thinking this way, in addition to the obvious one—that you don’t have a patent on all knowledge that exists now or ever will exist:

1. Even if you’ve mastered your corner of the universe, there are still millions of needs that require solving just around the corner.

2. Success can make you lazy. If what you’re doing is working, there is little reason to think things could be performed better, faster, cheaper, or more efficiently.

3. Things change. To use an over-the-top example to make the point, it’s terrific that you know all there is to know about VCRs, but if the world has moved on to digital recorders, that knowledge doesn’t do you any good.

Here’s the bigger point. The way you think—especially if you’ve been successful—may have locked you into a tight little corner. I’m sure that, for the longest time, back when the world was urged to (and did) “make it a Blockbuster night,” the people at the video rental chain knew everything there was to know about renting movies. As a result, it never even occurred to them that someone could attack them (and their market) in a way they never thought of.

Netflix did, and the rest is history (as is Blockbuster).

The next time you’re tempted to dismiss a radically new idea out of hand, using the phrase “that will never work,” think of Blockbuster. Then examine that “wacky” new idea in detail to see if it just might work.

HOW TO INCREASE YOUR CHANCES OF
FINDING AN OPPORTUNITY

Notice what I didn’t say in that headline. I didn’t say, “By the time you are done reading this section, you are guaranteed to find an opportunity.” Nope, there are no guarantees. Also, I didn’t promise you that I’m going to provide a tried-and-true proven formula for spotting one.

First of all, the onus is on you to spot an opportunity that plays to your particular interests and strengths. Second, if it were all that simple and commonplace, everyone would do it. With all that said, here are some places you may want to look as you go searching for an opportunity.

First, start close to home. None of us is as unique as we think. If you—or your company—has a problem that needs solving, odds are that other companies and other people will too. Examples abound. Your little kids won’t eat vegetables, so you create a mold that turns them into funny shapes, and suddenly you have a business shipping your tiny plastic molds worldwide. Your company spends a lot of time going from website to website trying to figure out which overnight shipper is cheaper to use for a particular package, so you create a software program that does the searching—and calculations—automatically. Suddenly, you have a new profit center.

Second, challenge conventional wisdom. No matter what you do for a living, there are certain rock-solid, unshakable beliefs in your industry. (These are ways business has always been done.) There may be no better example than Southwest Airlines.

Before Southwest Airlines, everyone knew that if you wanted to be a successful airline, you needed to fly to and from major airports using a hub-and-spoke model, and you had to provide the customer with an assigned seat. Everyone also knew that flying was serious business. No one went out of their way to entertain the customer or make the flying experience fun.

Southwest and its president Herb Kelleher ignored what everyone knew. Southwest flies point to point, there are no assigned seats, and the flight attendants try to make things fun for you with silly quizzes and offbeat safety demonstrations. The airline has thrived as a result.

If you think about approaching the market differently, you might come across an opportunity. Here are some ways to do things differently:

Upgrade. Take a basic product and make it special, either by adding value to it or marketing it as a status product. Luxury automobiles, coffee (Starbucks), and gourmet cookies are examples of what were once pedestrian products that have been given cachet. In each case, the underlying concept remains unchanged; it’s just that the product’s image has been improved. It’s no longer merely a car, but a status symbol. Buying coffee becomes an experience, and cookies, once a simple, inexpensive treat, have become something worthy of an epicure. All that has really changed is the perception of these prod-ucts—along with their price tag.

Perhaps the greatest example of this is water. It’s hard to think of another product that has been upgraded in so many ways. (SoBe LifeWater, which comes in countless flavors; VitaminWater, the various flavored waters; etc.)

Downgrade. Take a product that has always been associated with status and reduce it to its underlying concept. Examples: Ryan Air in Europe eliminated all the frills that usually come with an airplane ticket. (Unfortunately, all the airlines are copying this model.) If you look on supermarket shelves, you now see everything from generic beer to house-brand cooking oil competing against Budweiser and Crisco.

Bundle. There are certain products or services that almost always go together. Instead of requiring people to pay for them separately, combine them. Most people have phones, Internet service, and TV subscriptions. And so the “triple play” packages from the phone and cable companies were born.

Unbundle. Just the flip side of what we discussed above. Ask yourself what products have been so gussied up that you can sell the individual components. Life insurance is a good example. It was common practice in the industry to combine the protection component with a savings element, which became the basic insurance policy. Term insurance, which eliminates the savings component and just provides protection, has become very popular.

Transport. If a product sells in one area, take it to another. Importer/exporters make their living this way. But you can go beyond just selling white wine from France in New Jersey. For example, Europe and California, for whatever reasons, tend to create new products and ideas ahead of the rest of the world. How about someone from Massachusetts taking a drive up and down the coast of California looking for new ideas in fast food, entertainment, whatever? Once you find what is working in Modesto, why not try it back home in Marblehead?

Mass-market. Take an idea that has been in one narrow area and see if it will work on a larger scale. This is what every company does when it takes a product “national.”

Narrowcast. We borrow this term from television. When cable television was in its infancy, its broadcasters realized they all shouldn’t try to reach mass audiences. For all their faults, the three networks did a fairly good job of that. The solution for cable operators was to narrowcast, or to gear shows on a given channel to a particular audience. Now you have channels that show nothing but sports or movies. There’s even an all-weather station and a history channel.

Think big. Instead of carrying just one product, carry everything related to it. Think of the home improvement stores like Lowe’s or Home Depot.

Think small. While huge stores, such as Lowe’s, can offer more merchandise, they can’t offer the depth of selection in each line that a true connoisseur demands. Also, they usually don’t have a trained staff to offer advice. Your small local store can succeed by offering more in a small field like cabinets, rugs, and tile while providing advice and expert service.

CASE STUDY: R.C. BIGELOW

PROOF THIS WORKS

Examining the history of the R.C. Bigelow Co., the large tea purveyor, reveals that for every opportunity you find, there is going to be at least one major problem to overcome.

At the start of World War II, Ruth Campbell Bigelow was a successful interior designer. As the war progressed, business slowed considerably, and she and her husband, David E. Bigelow, wanted to start a company that would be more stable. Ruth was a tea lover and had long been disappointed with the poor quality of tea in the United States. She had uncovered a recipe from the eighteenth century, for a blended tea that included orange rind and sweet spices. Ruth and David decided to develop this blended tea for sale.

Clearly an opportunity, right? Well, not an easy one to exploit. Five years in, sales were still hard to come by. Instead of looking at the negatives, the Bigelows looked for the positives. In examining what few sales they had, they realized a small gift shop in Connecticut was selling more of their tea than any other store. They visited the shop and saw that the owner had opened a canister of tea, allowing the customers to smell the aroma. Soon, a “whiffing jar” was included in every shipment to retailers. Sales soared.

The next move was into food services—that is, sales to restaurants, cafeterias, hotels, and university dining halls. While a logical extension, it did not go well. By the mid-1970s, food service sales were less than 5% of total revenues. The problem was that Bigelow only offered the food services loose tea, which was very hard to handle, or individual tea bags packaged in tins. Having the servers pick out the bags one at a time was not sanitary, and the tea tended to dry out, since people didn’t always remember to put the lid back on the canister. The solution? The company’s introduction of a sealed, individually foil-wrapped tea bag.

By the early 1980s, sales had stalled and costs were rising as two of the three suppliers of Bigelow’s packaging closed (the remaining supplier raised its prices dramatically). So the company started selling the foil-wrapped tea bags within cardboard boxes that could easily be stacked on the supermarket shelf. And the company introduced “flavored tea,” even though it was revolutionary! Could that work? You bet it did! The company now sells more than a billion tea bags a year.

WAYS TO JUICE YOUR THINKING

Knowing where to look is helpful, of course. Now, let’s talk about six different ways you can increase your chances of finding a market opportunity.

1. Necessity. The cliché is right. Necessity really is the mother of invention. It’s amazing how easy, when you’re out of work and the bills are coming due you suddenly find opportunities. The same thing is true when you have a pressing personal need. You need a special diet and yet you can’t find anything on the supermarket shelves that comes even remotely close to tasting good. You start creating meals for yourself and others like you, and all of a sudden you have a thriving company. Pepperidge Farms was started by a mother whose son needed bread made from natural sources.

2. Pay attention. That sage Lawrence Peter (“Yogi”) Berra put it perfectly: “You can observe a lot of things just by watching.” Simply by paying attention, if you were a woman of color back in the 1980s, you would have seen that cosmetic companies were ignoring the needs of black women, whose skin pigments were different from Caucasian women’s. Along came Flori Roberts, who started a successful cosmetics company that catered to black women.

3. Bring back the suggestion box. Some of you may not even know what a suggestion box is, so let me explain. In its most basic and traditional form, it is a receptacle with an opening; picture a rectangular tissue box. The box is used for collecting slips of paper with input from customers and employees about what can be improved. It was a wonderful idea: Why not have the people, who do the work, suggest ways it can be done better? I like to take this idea one step further. To make sure I get the absolutely best suggestions, I offer an all-expense-paid vacation for two to the employee who comes up with the best idea. One year, the winner suggested a detailed social media strategy for our company—we had been lagging in this area—which resulted in bringing in a large number of clients.

4. Think. I know I mentioned this before in a different context; but it’s amazing how many opportunities you can find if you just give yourself some time to think. I go for long runs (without wearing headphones) and do marathons and always carry a pen and paper with me to capture all the ideas that inevitably spring to mind. You don’t have to run long distances. Spend an extra five minutes in the shower; stare out the window for a while. Turn out the lights in your office and close your eyes and meditate after lunch. I don’t care what you do, as long as you create some thinking time.

5. No Negative Nellies. If you want your staff to come up with as many good ideas as possible, you need to support them. You don’t have to accept what they come up with—it’s your company, after all—but you can’t dismiss anything they suggest as “foolish” or “ill conceived.” The moment you do, you’ll never get a good idea again.

6. Study your competition. See what opportunities they’re missing that you can take advantage of and figure out what they’re doing right, so you can improve upon it.

PERCEPTION MATTERS

One of the things that people always say—whether you’re talking about cutting costs or looking for a different way to do things—is “It can’t be done.” If you believe that, you’re right. Your mindset will keep you from accomplishing anything new.

It really is an intriguing thing, because once somebody does what couldn’t be done, the floodgates open and suddenly everyone is doing it.

Think back to Roger Bannister and the four-minute mile.

For decades, people said it was impossible for a human being to run a mile in less than four minutes. They pointed to physiological studies that said it couldn’t be done. Everyone knew it couldn’t happen.

And yet on May 6, 1954, in Oxford, Bannister turned in a time of 3 minutes, 59.4 seconds. Even more interesting than the fact that Bannister did it was what happened afterward. His record lasted just forty-six days; and within a year, fourteen other people had run the mile in under four minutes. Indeed, today running a sub-four-minute mile is commonplace. (The current world record is 3:43:13, a full sixteen seconds, or 5%, faster than Bannister’s time.)

The point is that once someone destroys a myth, such as “It’s impossible to run a four-minute mile,” it becomes remarkably easy for new things to happen.

SOMETIMES IT HELPS
NOT TO KNOW ANY BETTER

There is a natural tendency for people to look for opportunities in a field they know. That’s the way most companies get started. You see an opportunity that your company is not taking advantage of, and when your boss tells you it is not worth pursuing, you decide to go off and do it on your own.

It doesn’t have to be that way. In fact, there are certain advantages in entering a field you know little about. You don’t know what the “rules” are, so you aren’t handicapped by them.

That was the situation we encountered when we started Blue Buffalo. We didn’t know much about pet food. But we did have expertise with distribution—thanks to the work done in developing SoBe. But, more importantly, we had spotted a need. Bill Bishop, the president, had lost his dog Blue to cancer and was passionate about developing a very healthful pet food that had anticancer ingredients that could help pets live longer. Pet owners were also looking for more healthful food to give Spot and Kitty. So, we set out to hire the smartest people we could, people who knew the industry and wanted to help change it. We offered them more responsibility, money, stock ownership, and a chance to help create a new company. Bill was very innovative and created a culture that encouraged employees to make suggestions and recommendations. We were able to attract very good people who made our company a success, even though we didn’t know much about the pet food business when we started.

CASE STUDY: THE TAYLOR MADE SALES AGENCY

PROOF THIS WORKS

The horse-racing business is an interesting one. Unlike many other industries where the primary motivation is to make money, racehorse owners buy their horses for a number of reasons:

1. They love sports, but don’t have the resources to buy a professional team.

2. They love the prestige of being an owner and going to the paddock to watch the horse saddled, talking to the jockey, and then going to the owner’s box.

3. They enjoy bringing friends to the racetrack to watch their horses compete.

4. They find it thrilling to watch the horse they have selected and named run in the racing colors they have chosen.

5. They love the opportunity to be able to have their horse win. And they enjoy receiving the trophy and possibly being interviewed.

6. They can compete on equal footing with princes and billionaires, even though they may be just a part owner of a horse.

7. They are fascinated with legal gambling.

8. Of course, there is also the chance to make money through the winning of races, sale of their horses, and stud fees.

While the majority of racehorse owners are not profitable, many of the people who run businesses that service those owners are. Joe Lannon Taylor founded Taylor Made Sales Agency in Kentucky in 1976 and, along with his four sons, Duncan, Frank, Ben, and Mark, realized early on that they would need to constantly remain ahead of the pack to stay profitable.

Here are a few of their secrets of success:

1. First and foremost, they are excellent and knowledgeable horsemen.

2. Their farm, one of the country’s leading thoroughbred consignors of horses, constantly experiments with adding new products and services. When the Japanese and Arabs became interested in the American horse-racing market, Taylor Made added employees who could speak these languages.

3. They were also one of the first to build state-of-the-art facilities to break yearlings and train young horses.

4. They equipped their barns with cameras so owners could always view their horses, no matter where they were.

5. They added staff who specialized in prepping horses so they would look their best at sales, and they used computers to keep track and become more knowledgeable about the habits of buyers (as a result, they notified their clients when Taylor Made was consigning horses that were related to horses their buyers had previously purchased).

6. They stressed customer service.

7. They treated customers and team members like their own family.

8. They gave their key employees a stake in their company so they felt like owners.

Taylor Made Sales has been in business for over forty years and continues to be North America’s number one sales agency. To fully understand why Taylor Made is successful, their mission statement says it best.

Good people. Good Horses. Good Horsemen. We build personal and lasting relationships through honesty and transparency in all dealings; living and practicing the philosophy of the Agency’s founder, Joseph Lannon Taylor, who inspired horsemen to always find a better way. We treat customers and team members like our own family; inspiring people to seek to be part of our culture which sees each person through an eternal perspective.

FOUR TAKEAWAYS FROM THIS CHAPTER

1. Be methodical about every part of your business, including how you go about spotting an opportunity. Don’t leave it—or anything else—to chance.

2. Devote a specific amount of time each day—every day—looking for opportunities.

3. As you look for opportunities, start close to home. If you have a problem that needs solving, odds are others will too.

4. Think differently. Examine the way business has always been done in the industry you want to participate in, and look for ways to challenge conventional wisdom.