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Winners Never Quit

Winners Never Quit

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Published by roger9523

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Published by: roger9523 on Mar 15, 2010
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09/09/2010

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 Staying in the Helicopter
!
-Winners never quit!
I used to race (poorly!) sailing dinghies and whenever I got into the position of being in the lead I discovered two important lessons:Firstly you must set your sights on the very highest objective – in this casewinning – and don’t for one second have doubts that you can do it, and thatyou deserve to do it, and that you will never be satisfied with being secondbest.Secondly if you spend your time looking at the guy who is second then thedistance between you will become less and less.It’s the same in business.If you operate in a market where there are one or two prominent players -perhaps many times larger than you are - it's very easy to get into the mindsetthat all you can do is chip away around the edges rather than take them onhead-on. The natural assumption is that if you do take them on head-on eitherthey will simply wipe you out with predatory pricing or the like or that youneed massive amounts of finance to be effective to do so. It’s then very easy toconvince yourself that it's simply too risky and a lot safer to stay as you are.
Well it's not true!
– the secret is to not only be bold but also innovative and, asMichel Robert put it in his book “Strategy Pure & Simple", force thecompetitors to play in your sandbox rather than playing in the theirs.To illustrate the point let’s have a look at three companies that have eachgrown from nothing to major players in industries where there where massive,dominant successful competitors such that they now have those competitorsseeking to play in "their sandbox". The three companies are Olam, Red Bull,and VirginI was privileged to share a speaking platform with Sunny Verghese, the veryimpressive CEO of Olam International and he told a fascinating story:The previous year Olam achieved an annual turnover of nearly £1bn and amarket capitalisation of £700m. They had 5100 employees in 42 countries andare known as "the brand behind the brands". They operate an integrated supplychain for 14 products including sheanuts, robusta coffee beans, cocoa, sesameand cashew nuts, from 12,000 collection points in 40 origin countries deliveringthese to over 3,300 customers in 50 destination markets.Olam is a world leader in many of these commodities with the overriding, and
 
unique, philosophy of "farm gate to factory gate".Without doubt Olam International is seen as a very impressive, highly successfulcompany – a winner.In 1983, however, Olam was seen very differently. It was an Indian basedimporter of cashew nuts with a turnover of £1.7m and a return on sales of 1.31%.Sunny and his colleagues however had a very clear vision for the futurepotential of the business and one in which they passionately believed and theywould never quit.Traditionally the market for agricultural commodity products was governed by,in the supplier countries, local buying houses and in the industrial usercountries the commodity futures markets. The result was generally poorreturns for farmers and poor continuity of supply to users. Sunny and hiscolleagues’ vision was to cut out both the local buying house and the futuresmarkets and to provide guaranteed supplies to the factory gate of industrialusers whilst at the supply end, dealing directly with farmers. In this way theybelieved they could ensure the quality and continuity of supply at acceptableprices for all.This was a brave vision – one which, if successful, would turn on it’s head thetraditional routes to market and be likely to upset well entrenched interests,including powerful people like third world governments and western Cityinstitutions!This then was the proposition that Olam started putting to finance providers allover the world. As you'd imagine they suffered a lot of rejection until finallyTemesek Holdings, the Singapore government investment vehicle, becameinterested and had the courage to invest in Olam’s vision.In the years that followed Olam has grown both sales and profits at a trulyremarkable compound annual growth rate in excess of 50% and their marketcapitalisation has been transformed from around £120k to over £700m.In February 2005 Olam floated on the Singapore stock exchange and theinvestors were able to realise an impressive return on their original investment.So what are the lessons we should learn from the story of Olam International?For me the belief, passion and courage of Sunny Verghese and his colleaguesshines through - their proposition was bold and transformational but carefullythought through and they never gave up in trying to convince finance providers
 
that it was both viable and exciting. Eventually they found an investor whowas also prepared to be bold and give them the support they needed. Bothparties have now been well rewarded for the risks they took.
Winners never quit!
Red Bull is an Austrian company and it’s product of the same name is marketedas a "high energy” drink (in fact it has just twice the caffeine content of normalcolas and the same as a cup of coffee) and is sold in cans significantly smallerthan their behemoth competitors Coke and Pepsi.Red Bull was formed in 1984 after Dietrich Mateschitz and Nina Avery travelledto Thailand and saw that the tuk-tuk (rickshaw) drivers drank a substance tokeep them energized throughout the day. After some alterations to the recipe,and a flavour modification for the public, Red Bull was born.Now over 2 billion cans are sold each year in over 120 countries and both Cokeand Pepsi have developed ‘me-to’ productsWhat Red Bull have succeeded in doing in a remarkably short period of time isto take on and beat - certainly in terms of contribution - two of the biggestbrands in the world. That is something that most of us would think impossible –or at least we would have only been possible by undercutting on price. In factthe reverse is true, Red Bull is close to FOUR TIMES more expensive that Cokeor Pepsi!
What’s stopping you from doing the same
– be a winner 
 
Finally Virgin. If you haven't read Richard Branson's autobiography "Losing myVirginity” I recommend it to you.Love him or hate him what he and his remarkable team have managed to do isto create a brand that is inherently trusted by a vast range of people - havingstarted with the music industry he's then gone into airlines, mobile phones,financial products, cosmetics, trains and many other markets. What otherconsumer brand would you trust so highly that you would give them your moneyto invest if they decided to go into financial services?When Virgin first moved into the airline business in the UK by far the dominantplayer was British Airways and it is now the stuff of legend that the thenChairman of British Airways, Lord King, dismissed Virgin as a serious competitorsimply because Richard Branson wore a jumper to work, not a suit! - A classiccase I think of sitting in the Room of Contentment in the Change House modelin my book!

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