Inventing a New Industry Vs Improving Existing Business

Most of the time people probably came up with a new brilliant idea when it is least expected. In 2005, Malcolm Gladwell wrote the book “Blink” which proposes that “spontaneous decisions are often as good as—or even better than—carefully planned and considered ones.”. He pointed out that when a person has too much information to digest, he may get into a state known as “analysis paralysis”, or may even make the wrong decision.

Even then, it is quite hard to wait for the “blink” to get the killer business idea.

In the book by Helzberg, What I Learned Before I Sold to Warren Buffett: An Entrepreneur’s Guide to Developing a Highly Successful Company, he wrote the following points for entrepreneur-to-be:

• You need not invent a new industry or business in order to be successful

• Consider doing things far better in an existing type of business

• Existing businesses enable you to do deep due diligence in that industry

• The level of risk can be far less when going into an existing industry because of your ability to research

• The option of buying an existing business does not exist if you want to originate a new one

• Talk to customer, suppliers and potential competitors in the industy. Ask and learn like a sponge.

• Keep a diary of all you have learned.

• Write down conclusions as you go through this process

• Learn on the other guys’s nickel

• Pioneers are people with arrows in their backs.

The points that struck me the most are the first few points, afterall, not all great businesses are necessary pioneers in their industry. Dell was not the first to invent the computer, Nokia did not invent the mobile phone, and Google did not invent the first search engine on the web. Helzberg wasn’t the first to discover diamonds either, but he built nation-wide jewelry chainstores that are good enough to go into Warren Buffet’s portfolio. But that wasn’t easy either – as it took 3 generations of effort to build 143 stores from 1915 to 1994. By 2003 when the book was published, there are more than 245 stores.

Warren Buffet is known to prefer traditional businesses that are well managed, but these businesses take a long time to build. On the other hand, there are also great rewards that can be reaped within a shorter time period especially in the technology sector. We have heard the interesting stories of how Dell and Amazon had to move their offices regularly to keep up with the exponential sales in the late 90s.

I don’t believe that those days of rapid-growth are gone. Ofcourse, its hard to start a new Dell or Amazon and expect the same results. Some copycats (or clones) make it, because they are a “better” copycat that improve on an earlier idea. Designs can be patented, but ideas can’t be patented.

The internet remains a strong communication tool, that given the right idea and product, there would always be a chance to achieve exponential growth by virial marketing or social networks. There are simply too many products and ideas that are being generated everyday, but it just takes one to make it.

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