How To Profit From Scarcity

I found 'How to Profit from Scarcity' via http://hbswk.hbs.edu/item/5776.html interesting and insightful.

Ted Turner

To be happy in this world, first you need a cell phone and then you need an airplane. Then you're truly wireless.

I liked this one.

The Art Of Profitability

Good Books/New Business Models: (via Emergic) I enjoyed reading Adrian Slywotzky’s The Art of Profitability. It's the pocket Bible on how to grow profits. Adrian shows 23 business models. I liked the conversational format (between an extraordinary teacher (David Zhao) and a senior executive (Steve, from a company called Delmore) ); it was fun reading + it packs a lot of thought into its chapters. Like the Bible concept, the author recommends to read one chapter a month, and then play with the ideas discussed. It's theory + practice + if executed/delivered properly = near success to success. It's a good book + fun tweaking with the concept (s).

From the book’s description:
What do Barbie dolls, Nokia phones, and American Express credit cards have in common? They all represent a powerful business model called pyramid profit. How about Intel, Microsoft, and Stephen King? They all exploit another model called value chain position profit. The Art of Profitability reveals the invisible but important governing principles that can mean the difference between business failure and success. Writing with wit and provocative insight, bestselling author Adrian Slywotzy tells the story of eccentric strategy teacher David Zhao and his young student. Each of the book's twenty-three chapters presents a lesson from the exuberant and always challenging master-and a profit paradigm that will open your mind to the many ways to make profit happen. You'll understand-from a different perspective-how your company and your competitors generate profit...which business models can be best applied to your profit-making strategy...what specific actions your organization can take in the next ninety days to improve its bottom line...and more. With scores of examples from today's global marketplace, a weekly assignment, and an eclectic business reading list ranging from Obvious Adams to Einstein's Dreams, THE ART OF PROFITABILITY invites anyone in business to engage in the lively exchange between mentor and protege. Enter the classroom. Discover the art. And learn which form of profitability will help your company succeed today and grow tomorrow.

Slywotzky was interviewed by the CEO Fresher about the book. Here are some excerpts from the interview:

What exactly is a profit model?
Wherever there is profit, you can find the essential forces that cause it to happen in a particular situation. Ohno at Toyota always said, "Ask 'Why?'" five times. By the fifth time, you'll start getting close to the real answer." You have to treat profitability as a puzzle and find out how it can happen for your business. I've chosen 23 profit models for this book and used illustrations and stories to show readers how they work.


What's the biggest mistake that companies are making that is preventing them from making a profit?
Profitability has to be understood by each company on its own terms. They can't just copy a profit model that worked for another company. They have to choose the right model after carefully analyzing their business, their customers, and their competitors.

How can a company stay profitable if their competitors keep coming in with copies of its products at lower prices?
Several ways. Intel uses a "time profit" model. When they are first to market with a new product, profits happen in the first four or five quarters and then drop down very quickly to almost zero after that. To make a profit, Intel must work hard to maintain a two to three-year lead over its competitors. Diffusing the product as instantly as possible helps extend their period of profitability.

Why does a company like SMH, makers of Swatch, bother selling all those low-profit margin plastic watches when the majority of their profit comes from their luxury lines of watches? Isn't that keeping the company less profitable?
You're right that the plastic Swatches made by the parent company SMH have low profit margins, but actually they are just as important to SMH's profitability as the high-margin watches. By producing the plastic watches, SMH builds a firewall against competitors who may try to produce cheaper imitations. They won't be able to develop the economics to move up the pyramid. This is called a Pyramid Profit Model because the profit-generating watches are at the top of the pyramid and the defensive plastic watches at the bottom. It turns out that 70% to 80% of SMH's profit is from the top of the pyramid, but the base of the pyramid is just as important.

I can see how you can sell the same product to different levels of customers at different prices, but can you sell the same product to the same customer at different prices?
It happens all the time. Coca-Cola, for example, sells you a soda for 8 to 10 cents per ounce in a vending machine, 10 or more cents per ounce at a restaurant, but only 2 cents per ounce at a grocery store. All of us as customers behave differently in different situations; therefore, to maintain profitability, prices should reflect different price sensitivities in different environments.

In an interview with the Wharton Journal, Slywotzky said:
Someone recently told me that if you want to understand leadership and you are in an organization, don't look up. Look in the mirror. And so, I think the first step is to understand that anybody with the right ideas can play a leadership role. I think the second thing is to have the right content and the right agenda. And I think a fantastic way to begin is to start asking the series of questions that are posed in The Art of Profitability. 1. How does profit happen? 2. How do we get everybody in our organization to understand it and act on it? 3. What's our next profit model? No profit model is forever. And no. 4 is the greatest achievement doesn't happen very often but it is phenomenally valuable. It is to ask the question, can we create a unique way of being profitable? Dell has done it. Starbucks has done it. Toyota has done it. It is most important to understand how profit happens and get everybody aligned behind it. But it is exceptionally valuable to ask the question; can we develop a unique profit model in our industry, so that we can compete differently from the others? And the rewards of that are just phenomenally high.

Wyeth’s World

Deidre Stein Greben profiles Andrew Wyeth + the artfulness and the ability to connect with familiar subjects + other viewpoints @ http://artnews.com/issues/article.asp?art_id=1904

You Must Meet Goldfinger

2007: Joseph Goldfinger is from a different generation + an iconic figure in the diamond industry. I can imagine what was it like running a diamond business in the good old days. There are lessons to learn from the old fashioned diamond dealers because they had the intuition + special skills to be quiet international superstars of the diamond world. They knew how to mix and match the magic combination of relationship + transaction concept + luck in every deal. It's an art + gift from the gods.

(via International Diamond Annual, Vol.1, 1971) A N Wilson writes:

Tel Aviv, London, New York, Tokyo—or somewhere else

“But you must meet Goldfinger,” they told me in London, when I said I was going to New York.

“But you must meet Goldfinger,” they told me in New York, when I said I was going to Israel.

“But you must meet Goldfinger,” they said in Antwerp, when I told them I was on my way to Tel Aviv.

Frankly, I thought they were all pulling my leg. For I had met Goldfinger through Ian Fleming some years ago: and Ian Fleming and I had had a bit of an encounter when he was writing his book about diamonds—but that’s another story. Anyhow I thought all my advisers were confused about the Ian Fleming books and that somehow Goldfinger had got mixed up with diamonds.

When I arrived in Tel Aviv I told my friend, Jona Hatsor, about Goldfinger, and Ian Fleming. “Of course, you must meet Goldfinger,” said Jona, “and he’s thoroughly mixed up with diamonds.” Quietly and patiently Jona explained that Mr Goldfinger was Israel’s Mr Diamond—a real, live Goldfinger who got a lot of fun out of the probability that when Ian Fleming wrote his book about diamonds he heard about Joseph Goldfinger and noted the name for yet another James Bond story. All this means that the real Joseph Goldfinger has a high sense of humor: for he is certainly not a prototype for a Fleming villain. He is different sort of person altogether.

In the end I did not meet Joseph Goldfinger. He’d gone off on one of his many peregrinations—from Tel Aviv to London, from London to New York, from New York to Tokyo and goodness knows where else. And so I had to ask somebody else to write and tell me something about Joseph Goldfinger of Tel Aviv, London, New York and the other places. This proved far more difficult than one would think, for when my special writer was in Tel Aviv, Joseph Goldfinger was in Tokyo or somewhere else. And so the pen-picture of this modern Gulliver, which I had so much wanted, reached the International Diamond Annual as the last article it was possible to include before the printing press started rolling: and even then, Mr Theodore Loevy, editor of ‘Israel Diamonds’, to whom we are indebted for this profile, wrote to say: “It has been rather difficult to write this article because….Mr Goldfinger was not in Israel when I returned from my trip.”

Joseph Goldfinger is a busy man (writes Theodore Loevy). And he shuns publicity. But that is not the reason why he has been rushing around the world since that day in early May when you asked for ‘a piece’ about him. It is his business that takes him round the world several times a year.

For Goldfinger is one of the truly international diamantaires of Israel. He’s got an astonishing brain. It can think on several different levels at one and the same time. For Joseph Goldfinger’s diamond business is on several different levels—and he has the truly wonderful capacity of being able to think about all these different levels simultaneously in relation to making overall dispositions and detailed orders for coordinated activities in several different parts of the world.

As an importer and dealer in rough diamonds—he is the third biggest customer of the ‘syndicate’—he has to assess the general market position and the state of the diamond industry as a whole; as the owner of polishing plants in Israel and in America, he must view these circumstances also from the manufacturing viewpoint; and as an exporter—with the whole world as his market place—he must balance trends and tendencies and fluctuations and bring them into a coordinated business strategy. And within that strategy he makes tactical dispositions at each level of his business.

Joseph Goldfinger is a businessman par excellence. He will work from morning to late evening in his offices—spacious and luxuriously furnished—on the thirteenth floor of Diamond Exchange in Ramat Gan. Cables, telephone calls and visitors stream into him from all over the world. Managers of his different enterprises come frequently to talk over specific problems. And almost ceaselessly he is examining parcels of polished diamonds with his quick, expert, appraising eye, while another level of his mind applies itself dictating letters or issuing instructions.

After a full day Joseph Goldfinger will seek his rather modest home—for essentially he is a modest man—and there his other personality emerges. He sips his glass of after-dinner tea while his visitor he serves with something ‘stronger’, as preferred. He will have glanced through the evening paper and will be ready to discuss the current issues of Israel and the world. He brings a benevolent but not uncritical viewpoint to such matters, for he has a keen sense of tradition and an appreciation of the eternal values derived from his religious upbringing. These strongly influence his actions and his thoughts.

As a young man Joseph Goldfinger studied at Yoshiva in Lithuania. When a little later he came to Palestine, he continued to attend religious institutions while earning a living as a teacher. In 1944, when the diamond industry came to Palestine, he found work in the trade. Two years later he became one of the first diamond industrialists in the country but his initial operations were on a very small through lack of adequate raw material. But vigor, courage and optimism won through and in 1949 he was able to obtain his first sight. He continued to expand his business with hard work and ingenuity: he started importing rough from a variety of sources—not merely for his own manufacturing operations but also for reassortment and sale to other manufacturers.

With the development of this side of his business he came to be included in the list of syndicate’s dealers. This was in 1962—the real turning point in his career. Now his interests extended to every phase of the diamond industry and trade—from the import of rough to polishing to exporting. Progressively his business developed its many-sided character: and, of course, its strength lies in this very ‘spread’, which is an effective insulation against the fluctuations that do arise in different sectors from time to time.

At the same time—and this is another aspect of his strength as a businessman—he is always looking for new business ventures, for new opportunities , for new outlets—maybe, off the beaten track. He likes facing challenges, especially new challenges.

“There are no bad times in the diamond business,” he stresses. “There are always new possibilities. But you have to look for them. You have to try new ways. You have always to balance possible risks against prospective gains.”

When he talks about his business policy, Joseph Goldfinger becomes animated. His face lights up, his eyes shine—and he is the essence of the venturesome pioneer to whom success come naturally.

“In this business one has to be cautious and yet enthusiastic—innovative and imaginative,” says Goldfinger. “Cautious, yes; but not in the conventional way.”

Joseph Goldfinger believes strongly in his own assessments. Much of the diamond business involves credit. Where credits are involved, Goldfinger relies on his own personal impressions of the man or the company he is dealing with. He sizes people up. He recalls that there have been not a few cases of his having given credit to people who had been refused credit by others. And he says, he has never been disappointed. “Bad debts in my business are practically non-existent. I’m a cautious risk taker.” What Goldfinger finds out is not only whether the man is honest and knows his trade, but also something about his personal life, his family life, even about his customer’s wife. Mr Goldfinger wisely comments that a man’s wife is certainly a dominant factor in the business behavior of Mr Everyman.

Goldfinger extends his spirit of ‘cautious risk-taking’ to his activities as a buyer. Diversification has enabled him, for instance, to purchase the whole output of one supplier without having to adapt such purchases to his immediate needs. He is able to take calculated risks.

At least once a month Joseph Goldfinger is ‘on the road’. The DTC offices in London are as familiar to him as his own offices in New York, where his business is in very good hands. With the growing importance of the Far East, Goldfinger travels frequently to the Orient. This is, he says, ‘the new and coming America.’

Gold Diggers Of 1933

Greatest Opening Film Lines (Gold Diggers of 1933 - 1933):

Gone are my blues and gone are my tears. I've got good news to shout in your ears. The long-lost dollar has come back to the fold. With silver you can turn your dreams to gold. So...

Shooting The Messenger

Chaim Even-Zohar writes about the emerging national debate between diamond manufacturers and unions in Botswana + the media reactions + other viewpoints @ http://www.idexonline.com/portal_FullEditorial.asp

A House Without Right Angles

Aleksandra Shatskikh writes about Konstantin Melnikov + the way he translated his innovations of the visual artist (s) into architecture + Russian art tradition + other viewpoints @ http://artnews.com/issues/article.asp?art_id=1903