The star of TV’s The Apprentice opened the second day of the National Achievers Congress to an audience of 7500 at London’s Excel conference centre. Along with Richard Branson who would speak the following day, Sugar was interviewed by Michael Buerk. It was the first time the two had met and would probably be the last if Sugar’s response to Buerk’s questions was anything to go by.
Sugar felt a bit affronted by what he considered to be simplistic, inane or irrelevant questions. He correctly surmised that we wanted to know his business thinking, how and why he did what he did. We were less interested his so-called ‘rags to riches’ backstory (which turns out not to be quite true anyway). When asked what one piece of advice Lord Sugar to give to the audience he refused to answer, saying how could he cater for all the different kinds of people in the audience with one stock answer. This gave us an insight into the real Alan Sugar. And guess what, despite what he says, it’s very much the same as the belligerent boss we see on the telly.
The questions I would have loved to know the answer to were things like why did he sell of his manufacturing business when he places such importance on making things? Especially when his definition of a proper business is “you have an idea, you make it and you sell it.” He attacked those who made their money on the stock markets, “making money from other people’s misfortune” and yet there he is now, effectively a property mogul. Not too dissimilar.
He also critised big internet business such as Facebook, citing it as a waste of time. He couldn’t see “where the money is” in such businesses and made reference to ITV losing money of Friends Reunited and the dot.com crash of 2000. Both of those examples are as irrelevant as saying there’s no money in computers because Apricot* went bust. Sugar fails to understand what has become known as ‘the New Economy’. The ‘money’ in Facebook is not extracted from traditional methods but from the value in the network and the targeted way people can be reached. Money these days is not made by shouting but by going where the eyeballs go.
Sugar’s main belief still does stand true and offers us all a sober lesson. He believes that a business should start from the ground up, work hard and make money and profit. He pointed out that many young people have been given the erroneous impression that it is all too easy and that it is their ‘right’ to be able to do it and to get loans from banks without taking on board the risk. Sugar had got into trouble at a college, where he was asked to give a talk, for responding in his down to earth way. He critisised a student who thought it was outrageous that the bank wouldn’t lend him hundreds of thousands of pounds without putting his house on the line. “You have to show the bank you are willing to take a risk. If you don’t, why should they” Sugar said.
He gave a great example of this when he wanted to borrow some money for his fledgling computer business in the early 1980s. The bank asked him what assets he had. He listed the components and half-built computers he had in stock. The bank valued all that at zero. They told him that if he went bust, what would they do with a load of components and screws? This is a good lesson for us to hear as we often think in business that we have value in assets which in fact are liabilities (there may be assets we do have, that we don’t value as much as we should, such as intellectual property).
What Sugar was good at, was seeing an opportunity to sell someone something they wanted. His early examples were when he was employed to sell tape recorders. Instead of hauling round every small independent shop that might buy two units, he went to the then new bigger chains such as Currys, Rumbellows, Comet and Dixons and got them to buy hundreds or even thousands.
All his type of innovative ideas take the same kind of route: he modifies something that already exists to make it more attractive. Think about his most famous business, for which he is still known for today, home computers. The market was dominated by the Sinclair ZX Spectrum, Commodore 64 and Acorn BBC. Sugar had previously been making bundled hi-fi equipment. Up to that point, all hi-fi equipment was sold as separate units made by different specialist manufacturers. You bought a record player, a tape player, a radio and an amplifier and you ‘stacked’ them on top of each other and plugged speakers in. His model was to use cheap Japanese electronics and put the record player, tape cassette player and radio all in the same box. At the time this was a revelation and it opened the way for the stereos and ‘ghetto blasters’ that defined the 1980s. Lifting the lid of a rival’s computer he saw that inside there was no magic, it was just silicone chips, resistors and circuit boards, just as in his hi-fis. He applied the same idea he had done to his hi-fi business. Let’s have a closer look.
Sugar four things that made his business a success, these four simple innovations:
- He built in the datasette (the cassette tape recorder that the computer programs were stored on) into the keyboard.
- He bundled a cheap monitor so that the kids wouldn’t have to plug their computer into the family television.
- He used MSX BASIC as the operating software. This was a new variant of Microsoft’s BASIC programming language that was already being used on most of the computers of the time. The difference was that each of the different companies used a different version of BASIC so a program written on one make wouldn’t run on another. MSX was a new standard that was being adopted by a host of other computers meaning that software for the new Amstrad computer had more games being written faster.
- He made it really cheap, and sold it really cheap.
Many would argue that the Amstrad home computers (as well as his stereos) were cheap, cheerful and lacked style and class. They didn’t attract the wider appeal, kudos and cult following of the classic home computers like the ZX81, Spectrum, VIC20, Commodore 64 and BBC B. But they did make Sugar a lot of money.
When the home computer market ran out of steam (the home computer gold rush only lasted from 1980 to 1984) he switched his attention to a computer that would only have one function: a word processor. This is perhaps Sugar’s finest hour. He got into that gap in the market at exactly the right time. With subsequent innovations such as his hand-held personal organiser and video phone, he was too early. In fact it seems, with the possible exception of his BSkyB equipment and petrol station advertising screens, that consumer product magical innovation skill has eluded him since the mid 1980s.
But perhaps that too is a lesson for all of us. Our businesses may be lucky enough to make money from something that becomes iconic, or maybe we’ll have to be happy with making money from something that goes unseen and unsung by the general public but is successful nonetheless. We need to make sure we are working hard to make profit, not glory as the two seldom go together.
One thing is clear from what Lord Sugar had to say. If you want to start a business and be successful in it you must chose something that you have some knowledge in. It must be something that you have experience in, and it must be something you have a passion for. So many people, he pointed out, have made the mistake of trying to jump on what they think is a get rich quick bandwagon of what appears to be a good idea but is outside those key areas of their knowledge, experience and passion. The secret to a successful business is simple, obviously simple, but it’s not easy: hard work, determination, innovation and an eye always open for opportunities.
Just look at what happened in the latest series of the BBC’s The Apprentice. Sugar changed the rules. He wasn’t looking for another employee this time. He didn’t need another salesman. That’s why Tom the inventor won. He was really the only suitable candidate. The rest were old school sales employees. Sugar valued the approach and ideas that Tom had and saw the value in his already substantial achievements with his curved nail file invention. Who knows what he’d come up with next.
This shows that Sugar still has some interesting business mileage in him, unlike Donald Trump who’s tv series has descended into celebrity game show farce.
Lord Sugar may not be held in the same high esteem as Richard Branson or James Dyson and his companies may not be regarded as cool as Innocent or Apple. he may be out of touch with some of the newer methods of doing business such as the increased emphasis on networking (although he does tweet every day) but his knowledge of the principles of starting, innovating and selling to make a profit are universal and give us sobering lessons we can all apply.
*Apricot was a British PC manufacturer in the 1980s who could have rivaled IBM and Apple, but didn’t.
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I was fortunate enough to see Richard Branson speak at the close of a three day event at the London Excel conference centre last week. There were reportedly 7500 people in attendance. He was interviewed by Michael Burke, and quite nervous.
Ding! 