Luck in Entrepreneurship

By Yaro Starak
7 Comments

On Monday I attended the latest YNOT event with David McMahon, a founder of Fone Zone, one of the largest retailers of mobile phones (cell phones) in Australia. David’s presentation was good, while he offered no revelations for me he certainly reiterated a lot of what the business textbooks teach and showed that he has applied these principles to his business as it has grown. There was one interesting part early on in his speech that sparked the idea for this article about luck in entrepreneurship.

David and his partner came from a mobile phone B2B (Business to Business) background and had jobs as sales agents for mobile products before portable phones became mainstream consumables for the masses. Consequently he had a strong familiarity with the marketplace (yet ironically not a great understanding of the phones themselves) and decided to start up his own enterprise selling phones. Initially he planned to open one shop and be content with that, but things went a little bit crazier than planned and today Fone Zone is forecasted to make over $150M this year with hundreds of shops around Oz.

As I listened to David’s story it became apparent that he was truly in the right place at the right time. He was involved enough in the mobile phone industry to want to start up his own store which he stated was more from a desire for freedom – financial freedom and independence. He was an innovator in the industry in two significant ways; he started selling the phone plan or service rather than the phone itself, and he saw that the future for the industry was in B2C (Business to Consumer) and that having retail outlets selling direct to the public was were things were heading.

Fone Zone was the first retailer of mobile phones to open up shop in a shopping center starting a trend that now sees Australian shopping malls littered with competing mobile phone retailers. Fone Zone’s success was built on David’s two early innovations and while there are many factors (differentiation strategy being the most important) that have kept the business competitive in what is now a saturated marketplace, I believe it was because of David being in the in the right place at the start of the mobile phone boom that accounted for his success.

So was he lucky to be there at the start of an industry boom? To a certain degree for sure, you could say he was “lucky” to be starting a business at the early stages of the formation of a new industry. His first shop sold so many phones he had to go to other shops and buy their phones at retail to meet demand. You don’t hear stories like that for most new businesses but often you hear them from the background of the extremely successful entrepreneurs. They just seem to get it very, very right and demand explodes. But is that luck?

I believe luck plays a role in business but when you start talking about luck in entrepreneurship I don’t think you can ever attribute too much credit for success to fortune’s wheel. When a person becomes an entrepreneur by deciding to start a business they are acting on an opportunity that they believe will satisfy a need both for consumers (a product or service) and themselves (independence, wealth, fame). How much success they have can be attributed to being lucky – starting the right business at the right time – however the owner would not start a business if they didn’t believe an opportunity to create something profitable isn’t there. That’s not luck, it’s common sense smarts.

Luck means that a variable is random and the outcome just happens to be positive purely by chance. Successful entrepreneurs aren’t successful because they rolled dice; they made a lot of careful and calculated decisions, and had enough motivation to take action at a point in time. They saw opportunity, the chance to be “lucky” and decided to go for it given they had the skills to make it happen.

David was not successful because lady luck smiled on Fone Zone, his business boomed because David was opportunistic at the right time. Most failed businesses flop because the owner was opportunistic at the wrong time or in the wrong place. An entrepreneur creates their own luck by making choices that lead to actions and those that make the right choices at the right time earn their successes.

Yaro Starak

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7 Comments

  • chika

    Hi,

    Interesting post

    There are also some entrepreneurs that have first mover advantage but are too early for the market..(Joe Kraus and Excite). I think if you have to spend time educating your customers then you’re too early and should wait a bit.

    The early bird doesn’t always get the fattest worm..maybe because the worms haven’t come out yet!

    C

  • Even so, I believe Yaro’s on the money there – being observant to the opportunities that a market presents and having the guts to take advantage of it is infinitely more important than the actual timing IMHO :-).

    You can still make money either way – being the market maker or being a follower, but I think being the maker is much more fun and exciting. :-)

    Chris

  • chika

    Not convinced..

    Yes of course as an entrepreneur, keeping a beady eye on the market is your stock in trade but timing is still important. There are countless examples, in business history, of shrewd entrepreneurs who weren’t necessarily the first in that market but still revolutionised the business landscape and became huge successes (e.g Mark Cuban of Broadcast.com fame)

  • [...] Yaro Starak: I believe luck plays a role in business but when you start talking about luck in entrepreneurship I don’t think you can ever attribute too much credit for success to fortune’s wheel. When a person becomes an entrepreneur by deciding to start a business they are acting on an opportunity that they believe will satisfy a need both for consumers (a product or service) and themselves (independence, wealth, fame). How much success they have can be attributed to being lucky – starting the right business at the right time – however the owner would not start a business if they didn’t believe an opportunity to create something profitable isn’t there. That’s not luck, it’s common sense smarts. [...]

  • Most successful entrepreneurs have in common 3 things, 1 – spotting a market by either being in the right place at the right time or just by hard work and making sure they are well informed on many different markets and seeing possible trends and opportunities. 2 – having a risk personality so that they are more likely to seize that opportunity and 3 – having the skills to manage that opportunity with regards to putting in place the finance and marketing and basically being pushy enough to make it happen with the perseverance to keep up momentum and make sure it happens despite any pitfalls along the way.

    The old saying of the harder you work the luckier you get is very appropriate.

    Regards

    Rob

  • Jackie

    This post reminded me of the many ways that someone can make their own luck – for most entrepreneurs, it’s a combination of working your tail off, being in the right place at the right time, by having the guts to approach highly ranked people in your industry, and/or by taking advantage of available contests and grants like the Knight News Challenge (http://newschallenge.org) – even it seems unlikely that you can win, you’ll never know if you don’t try.

    And that phrase – “you’ll never know what you can do if you don’t try” should be (it probably already is) part of every entrepreneur’s vocabulary.

  • [...] that luck is not important for successful serial entrepreneurs. Despite this, many argue that entrepreneurs make their own luck and an amazing 78% of successful entrepreneurs recognise that luck had an important role in their [...]

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