Instagram: The Entrepreneur's Dream

A Kodak moment for mobile apps.

It’s a story for these times. Young geek collaborates with Silicon Valley network to build simple but popular product. Engages customers with social media to get rapid market traction. Risk-taking venture capitalists provide cash while user base grows to 30 million customers. Within two years, with a total staff of 13 and zero revenues, the business is sold to Facebook for a billion dollars.

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Are you growing or ageing?

Strategy and the business life cycle.

As a young boy growing up in Sydney, my mother would take me on shopping trips to the city. We would visit at least two of the eight department stores that dominated retail. Housed in monolithic buildings, they had multiple floors of high-ceilinged departments, reached by ornate elevators driven by liveried humans.

 Shortly after, retail changed dramatically. Discount houses arrived; developers discovered suburban malls; big department stores either shut down or were taken over by competitors. Today, only two large players remain.

Some facades still stand. Heritage listed, they form quaint streetscapes at eye level. Look skyward and there are high-rise towers climbing out of the skeletons housing multiple stories of apartments or offices. Retail has left the building.

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The most powerful profit lever

We need to talk about prices

Price is the most powerful profit lever. The arithmetic is simple. If costs are $9 and you sell for $10, your profit margin is 10%. Raise your price 10% to $11 and your profit doubles to $2.

It’s also the loss lever. Cut that price by 10% and profit disappears.

Price is the quickest thing you can change in the margin equation. Reducing expenses requires careful planning and execution. Prices can be shifted overnight. Want to move idle stock? Put it on sale.

Price is also the most flexible marketing tool. It can be bundled with other offers. It can make a statement about your quality, attract customers or build loyalty.

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Starting up in the global marketplace

Staying realistic when all those around you are billionaires.

One statistic doing the rounds is this: to build an audience of 50 million, it took radio 38 years; for TV, it was 13; the net took four; Facebook was there in six months.

The drama is not so much the audience growth; it’s the speed with which new communication channels have become dominated by the few.

The early automobile industry consisted of thousands of producers. It was 50 years before it was down to a dozen or so global players. Once the assembly line forced up capital costs, the number of players started to shrink.

Not so with the internet. Most of us could set up an online presence in a few hours, probably for free. Yet a handful of large firms already dominate the space. Facebook. Google. Amazon. When it comes to delivering content, the new elephants are already in your living room.

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The Power of Doubt

To make better decisions, embrace uncertainty

In the 1990s, I was running a trading team in New York. When staff and clients arrived at our annual Christmas party, we would ask them to name one stock that would beat the market in the next year.

This was important information. After all, we are talking about highly educated fund managers, savvy traders, the smartest people in the room.

We also had a dartboard. We would plaster it with the share price lists from the Wall Street Journal. Then we’d get everyone to throw a dart. We’d keep a record of that too.

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