Press Release (ePRNews.com) - DUBLIN 2, Ireland - Jan 11, 2016 - Emmet Savage December 9th
As we gear up for our official launch next week, I thought I’d take this week to explain how we designed our showroom. It’s a question that gets asked a lot and deserves a mention. As always I’ll digress briefly, this week to talk about vacuum cleaners.
After 5,127 prototypes, James Dyson had finally fulfilled his vision of creating a bagless vacuum cleaner when he ran into a big problem. All the marketing people he talked to, all the focus groups, all the retailers told him it wouldn’t sell.
They all said the same thing – that the clear plastic collection bin would turn customers off. No one wants to see all the dirt that lives in their carpet sitting inside their vacuum cleaner.
Luckily, James (Sir James now) didn’t listen to any of them and released the cleaner anyway. It turned out that the clear plastic bin was one customer’s favourite features. It became the main focus of the advertising strategy. The Dyson vacuum was sold in the London store of fashion designer Paul Smith.
What had happened in the mind of the detractors, was they had thought totally logically about the problem. They didn’t anticipate the emotional satisfaction of knowing all that dirt is no longer on the floor. They didn’t think about how great it feels to see a product you’ve bought, working exactly how it should.
The majority of purchases we make require two sets of considerations: the rational and the emotional. These paired viewpoints need to work together for great decision making.
Take, for example, buying a car. When we fantasize about the car we’re going to own we usually think in terms of the look, the brand, the shape. We think in terms of how the car will make us feel on an emotional level.
The practical purchaser in you looks at fuel type and consumption, size, acceleration and most importantly price. Here we are thinking in logical terms. We’re focussing on the things that we can measure in numbers.
If we’re lucky we come to a happy medium where both sides are satisfied.
There are countless books dedicated to the numeric qualities of great companies, items that can be measured and reflected on a balance sheet, income and cash flow statements.
Then, there are thousands of books focussed to what makes a great business leaders, how customer evangelism is achieved through products that create love and drive loyalty.
In designing our showroom we identified businesses that satisfy both the practical and emotional sides of our thinking.
On the emotional side we look for things like;
• Does the management have a track history of success and a strong moral compass? Are they admired by customers and staff?
• Do they have a sustainable competitive advantage? A moat, brand, or technology that can not be easily replicated?
• Does the company create customer evangelists? Do people tell their friends about it?
• Is this a business for the future? Are they operating in an area that has great opportunity for growth?
Asking questions like this can help us identify great businesses, but that doesn’t necessarily make for a great investment.
Peter Lynch, author of One Up On Wall Street (http://www.amazon.com/One-Up-On-Wall-Street/dp/0743200403), said “invest in what you know”. However, just this week, Lynch came out and said that he didn’t mean you should invest in a Starbucks just because you like the coffee. You have to dig a little deeper and look at some figures.
There are hundreds of data points you can use to determine whether a company is financially healthy. Those that we look at include;
• Is there high insider ownership? Do those running the business have a stake in its future success?
• Is the company making more money than they are spending?
• Does the company have more cash than debt?
• For every dollar they spent, how much profit is made? When this “Return on Equity” is greater than 15% the business is getting good bang for its buck
• Has sales been growing at more than 10% per year for the last 3 years?
In my years of investing I’ve yet to find a company that satisfies all these criteria, but that’s when the final step in choosing a good investment comes in.
Investing is all about stories. A brilliant investment is the story of a great business rising above the competition and creating wealth for its shareholders. All these elements feed into that story.
That marriage of the emotional and rational is key to this.
Before you invest; what’s this business’s story?
If you can’t imagine it (and believe in it) why would you invest?
These are the questions we have to ask ourselves. Source :