I hear great business ideas in Australia every single day, as well as some absolute shockers. One thing I always question when someone comes to me with an idea is, “What is your competitive advantage, and what is the value ad to your customers?”
If someone can point out a clear competitive advantage and a clear benefit to their customers, then I think they have an idea which can be very quickly turned into a successful business.
If you name me any successful business, I will be able to very quickly tell you their competitive advantage and how they benefit their customers.
I sometimes see people six months after they tell me their idea, and I ask them how their business is doing. They give me a strange look and ask, “What business?” I think this is the main problem with turning an idea into a business. There are so many people in Australia with great ideas but who struggle to turn them into action.
I got the idea to start Kogan on a Wednesday afternoon. By Friday, I had given in myresignation letter at Accenture (I had a corporate job working as a management consultant). By Sunday night, I had a website up and running and the Kogan business was born.
This was against the advice of many people. No one in my family had ever run a business. My family did not want me to quit my job. My mum was saying things like, “You’ve studied so hard, you have excellent qualifications and an excellent job, and now you’re going to be a TV salesman?”
When I told all my friends and any senior business people I knew that I was about to start a website that will sell LCD TVs online, they told me I was crazy. They would say things like, “As if anyone will buy a TV online without seeing it first.” I also heard, “Buying online is for products like books and CDs.”
I pursued my idea with conviction. I knew that smart shoppers would be able to look at the Kogan offering, look at the features and specifications side-by-side to any other competitor’s product, and make an educated decision.
I knew if I backed my brand with transparency and participated in blogs and online forums, allowed customers to leave feedback and reviews, then people would feel confident to make a purchase online.
I also knew people would see it as a risk. I knew there would need to be incentive for them to take these sort of risks, and Kogan offered the incentive of selling the best value consumer electronics in the market from day one.
If you look back in history, radical ideas aren’t always received very well. When Galileo suggested the world was round, he was nearly killed for his theory. When Moore said that the power of computers will double every 18 months, people thought he was crazy. The resignation letter had been given in – I was fully committed to my idea that very few around me agreed with.
A few days into the venture, after I had given in my resignation letter, every factory in China told me they had no interest in working with me. Even though they thought my business might be successful, the time and effort required to produce my small order was not worth it for them. They said they had customers in Europe and America that were placing orders for 40 containers at any given time.
Disheartened by this news, I lost a few nights of sleep thinking about what I could do to overcome this. I know a lot of people would have seen this sort of roadblock as an opportunity to quit. My advice to any entrepreneur is to have the mindset that anything is possible and that you can always find a better way.
I am a huge believer in incentives. I believe there should be incentive and value at both sides of a transaction. From this notion, I had a brilliant idea. I stayed up one night and rewrote all the marketing material for the factory I wanted to work with.
As some of you know, when you deal with Chinese factories, much of the promotional material is in Chinglish, and pricing quotes and sheets are using various sizes, fonts, and ugly in general. It looked horrendous and not respectable to any Western businessman.
I stayed up late and fixed all of their marketing material and sent it to them in the morning. I said, “I really want to work with you, and the incentive from working with me isn’t from the small profit you will make from a single container order. There is additional value I can bring to this relationship.”
They replied the next day, accepting my order for a great price and thanking me for what I had done. They sent me an email a week later, telling me they had won a huge account from America due to their promotional material being more professional than any other factory.
I’d hate to think where I would be if the initial rejection from the factory was a showstopper. I think it shows that you must enter a business with true belief in your idea. You must know that there is value add to the customer.
Once you commit to your idea, there’s no going back. There are all sorts of challenges and hurdles you must overcome. Each challenge you overcome will make you a better and smarter businessman and it’s a great learning experience. What I described was just the first challenge for Kogan. In the last four years there have been many more. The saying is so true: whatever doesn’t kill you only makes you stronger.
All in all, my best advice to anyone who wants to turn an idea into a business is to look at what Nike prints on its t-shirts: Just Do It.
Ruslan Kogan is the founder and CEO of online technology retailer Kogan – www.kogan.com.au