2. The first million is the hardest to achieve

The first million is the hardest to achieve

September 10, 2018 - Lesezeit: 10 Minuten

It is often said that earning the first million is the hardest. The ones after that are easier because you have the financial leeway to invest sensibly. That's true, because many people could handle money if they had some. But due to a lack of capital, they never get the chance. That's why I grabbed the biography of a Selfamade billionaire entrepreneur and analyze his ascension phase. Every aspect is examined that seems important to me as a tactical step. First of all it meets Mr. Konosuke Matsushita - the founder of Panasonic. In Japan he is called the "God of Management". The author of his biography calls him the most successful entrepreneur of the 20th century.

An up-and-coming industry chosen

In 1910 Matsushita was 16 years old. At that time electricity was on the rise. It was a completely new technology that some people were sceptical about. Not so Konsuke. His goal was to gain a foothold in this field as quickly as possible. He was convinced that this technology would revolutionize the country and open up enormous opportunities. His second application to the Osaka Electric Light Company was finally successful. He was hired as a wiring assistant. I think this step was wisely chosen. In fact, it plays a big role whether you become the hundredth plumber, master carpenter or painter in a city, or whether you enter an industry that is about to completely change society. A new technology does not only pull numerous new products behind it, but a whole chain of suppliers. If you have electricity, you will eventually need lamps, refrigerators, fans, batteries, etc. All these products require components that did not exist before: wire, capacitors, coils, etc.

Innovations sometimes create completely new industries. If you are involved right from the start, then career opportunities arise simply because you are one of the few people familiar with the new technology. Furthermore, it is possible to find a specific niche for a product or service that is completely unknown to others. The automotive industry would probably have offered similar options in the era. It, too, was in the process of being created.

Innovative technologies open up new product niches and sometimes pull completely new branches of industry behind them. If you get there on time, you have a good chance of filling the gaps.

That's how it was. The young Konosuke had an early career and after only a few years he was site manager with a decent salary.

A small innovation as a first step

1918 - At the age of 24, Matsushita presented an idea for a new product to his supervisor. It was a lamp socket that was technically superior to that of Osaka Electric Light. His superior rejected the product. In retrospect, Matsushita himself said it was full of mistakes. But he didn't realize that at the time. Offended by the rejection, he quit in his youthful eagerness and wanted to take the production and marketing of the product into his own hands.

With two employees and his wife, they worked day and night on the production method. Unfortunately, they did not succeed in producing insulating material. Only an external source could help. It was a man who had worked in a company for insulating material. He had only done this in order to spy on the production process himself. Then he came off his plan to set up his own insulation company and had no problem sharing his knowledge with Matsushita. Some call it cleverness, today we would call it industrial spies. In any case, the new lamp socket could now be produced.

To put it mildly: getting ideas from the competition is always a good idea. You don't have to reinvent the wheel every time. Of course, it is most honourable not to infringe any patents, which did not happen in this case.

The methods of successful copying.**

Even if it was risky to give up a well paid job, it was the right step to found a company. As an employee, Konosuke might have continued his career and occasionally increased his salary. The big profit, on the other hand, would have always been taken by others and would have become rich with his achievements.

As an employee you can earn well - but you become rich rather as an entrepreneur.

Diligence and commitment made the difference.**

His commitment and willingness to persevere should also be emphasized. We are talking about 16-hour working days that he, his wife and his employees have worked to put the company on the road to success. This, too, is a competitive factor that can make the difference.

The first success is a coincidence

Even though the new product was slightly better than the standard frames on the market, it was not successful. The reason was that the dealers did not want to work with his company. The risk was too great to cooperate with an underfinanced one-product company. This meant that Matsushita Electric was on the verge of bankruptcy.

A dealer who liked the young people gave them a tip. He knew a company that was looking for a supplier of insulating panels. He arranged a contact. Matsushita did not hesitate, applied for the job. A Schmid made a mould and production started in the small apartment. Konosuke, his brother-in-law and his wife worked day and night alternately. Everything was handmade by hand. A sample was sent - the client was highly satisfied with the quality and ordered more.

The first real money was earned by Matsushita Electric with a random product, which had resulted by the way.**

One could now say: Ha! Only lucky, all coincidence. But for me it's what you call forced luck and that's what deserves success. Matsushita took many risks and tried everything to be successful. Had he not done so, as an employee he would probably not have got such an assignment. Only through his activity as an entrepreneur has he brought himself into a position where such situations arise. The probability for such coincidences rises, if one spends his time with networks.

Happy coincidence is a factor whose probability can be increased by targeted activities.**

Some people might have been afraid to accept an order that did not match their product offering. Some would have rejected the order because they would not have been able to deliver the quality in the short time. Matsushita and his team, however, have made up for these disadvantages by diligence and have gone to their limits.

The product range is extended

The basic idea of Matsuhita Electric from the beginning was to improve existing products of others and to manufacture them cheaper. This was achieved by avoiding overhead costs for administration and R&D. They did not afford expensive laboratories, but experimented with simple components and looked for optimization possibilities. Thus, four products were placed in the range: Insulation plates, the original lamp socket, a connector plug and a multiple plug. The latter was very popular, as houses usually had only one socket at the time. Households could operate several appliances with one multiple plug.

An expansion of the product range increases the chances of turnover. If thereby no fixed costs develop, then the pertinent risk goes against zero. One can only win in the process.

With the expansion of the product range, another successful move was made. Firstly, you make a name for yourself in several areas and increase your level of awareness. Furthermore, one improves one's chances of additional turnover, while the risks hardly change. This approach is particularly successful if the fixed costs do not increase as a result of the adjustments.

Matsushita lands a real hit

After the first successes the business stabilized on a solid basis. What followed was a really big hit that led to a nationwide breakthrough for the company.

Bicycles were a very popular means of transportation in Japan. Unfortunately, it was difficult to use at night because the roads were rarely illuminated. It was possible to put on a lamp, but the durability of the batteries was very low. With the version with a lantern plus candle one had the problem that it was constantly blown out by the wind. Matsushita therefore experimented with some constructions and designed a new, energy-saving bicycle lamp. This worked with a battery and lasted many times longer than the standard products on the market. This laid the foundation for a real firecracker.

Anyone who wants to create a successful product solves the problems of as many people as possible.

Matsushita had recognized a thick niche. He knew that a lot of Japanese wanted the possibility to use their bicycles at night. Unfortunately, this was difficult because of the technical possibilities at that time. He was looking for a solution that could significantly improve the lives of cyclists. Thus one creates successful products and in this case one for a mass market.

Only the right conditions policy brings success.

One could think that the new lamp sold like hot cakes - error! At first it was a shopkeeper's item. The dealers didn't play along, they were too sceptical about the product. However, production had already started and the warehouses were full. Only through mass production could the price be set low. Matsushita Electric was about to collapse.

Mass production brings cost advantages.

Two factors helped to establish the product on the market after all. The bicycle dealers were allowed to place the new lamps in their shop windows, where they remained switched on. The batteries actually worked for several days. This convinced them of the quality. In addition, the product was pre-financed for them. In other words, dealers only had to pay for the product once they had sold it. This type of conditions policy was revolutionary by the standards of the time.

This product was probably the most important foundation stone for a flourishing corporation, which formed Matsushita Electric into a corporation.

Analysis of Matsushita strategies

In summary, it can be said that in this story the word luck occurs more often than not. Even if one cannot control coincidences, one can still say that meaningful activity can change the probabilities in the positive direction.

Another fact is that nowadays it will be difficult to develop a technical device in your living room. Our times offer other ways to set up a company out of nowhere: Programming, apps, games, etc. - so mainly in the IT area today the best possibilities are to develop something big without capital.

Matsushita has chosen products for the start that require relatively little capital. Instead of complaining about nobody giving him a loan, he looked for possibilities where he could build something without financing. In doing so, he also ensured that investors could not interfere in the business.

It is easier to enter the market if you make the effort to improve the mistakes of the other companies instead of waiting for the big business idea.

Matsushita was able to keep his cost structures low because he had renounced any luxury. He also saved himself a development department and worked in fields where you didn't have to spend money to initiate improvements.

His market-oriented thinking is also important: "What can I do to make life better or easier for people?

The idea that one should always expand one's offer as far as possible if the fixed costs remain uninfluenced by this is also to be emphasized. This gives you a much better chance of getting orders without taking any additional risk.