Brain is more important than capital

In Germany black tea lovers know the tea campaign (German: Teekampagne) as the source of excellent Darjeeling tea. In its 25 years of existence it developed into the world's largest single importer of Darjeeling tea from India – importing more than 400 tons per year. What makes tea campaign special and so successful? The company sells only one type of tea: The finest Darjeeling tea from selected tea gardens in the Darjeeling area in India. It only sells packages of 1 kg and the tea can only be purchased through a website or mail order. There are no stores. The quality of tea campaign’s tea is radically better than the teas in most small tea shops in Germany and it sells for a much cheaper price than all tea shops.

The quality is so much better because tea campaign has exclusive contracts and buys the whole yearly output of selected tea gardens in India that have to adhere to strict quality standards. 25% of the annual revenue of tea campaign is invested in local projects at partner tea gardens of tea campaign to provide schooling for the families working at the tea gardens and to provide fair wages and prices.

The founder of tea campaign, the German university professor for entrepreneurship Günter Faltin, discovered 25 years ago that 90% of the tea price the end user pays in Germany is caused by various layers of intermediate wholesale traders that want their share of the import business. That resulted in a great variety of teas in small packages with way too high prices, according to Faltin’s view. If one could eliminate the wholesale traders from the equation there would be a lot of room to pay decent prices to the tea gardens and the people working there and to offer outstanding tea at a much cheaper price. Where before there was the wholesale market, the tea surveyor, the broker, the auctioneer, the intermediary, the importer, the exporter, the packager and the tea store owner, now there is only the tea producer, tea campaign and the end user. Using an innovative business model, tea campaign radically simplified the supply chain and the way tea is bought and sold.

“You are a fool, until your idea becomes a success”

When he first came up with his concept of the tea campaign everybody declared him insane. Not only the people around him, but also the students in his lectures as well as the tea producers in India. There was this strange German professor who had no background and no track history in selling teas who suddenly stood in front of them and wanted to buy their tea. So they decided not to sell it to him. As many innovative minds Faltin was not only courageous enough to put forward his idea while everyone laughed at him. He also displayed a second characteristic of many innovative minds: tenacity. Tenacity is the trait of not giving up and using various ways and alternatives to get to one’s goal. So Faltin bought tea through one large wholesaler in Hamburg and sold it directly to the end users. Quickly the word spread among German tea lovers that tea campaign offers better quality tea at much cheaper prices. Business started to pick up. Now, also the tea producers in India realized that the crazy German professor provides good business and they decided to sell tea directly to him. Now the fool became a business partner. The leader of Ambootia Tea Group in India admits that they thought of Faltin as insane but also emphasizes “now, we are equally crazy”.

 A superior business model not philanthropy

The success of his tea campaign can be explained because he adhered to one of the key concepts he teaches: Focus radically on function not on form (convention). In the example of the tea campaign this is to offer high quality tea at a good price. The traditional conventions how this business was done involved a lot of parties taking their share and making the tea unnecessarily expensive. By disregarding the existing conventions and thinking about alternative ways to provide the same function the innovative business model of the tea campaign was born. The tea campaign acted as the “creative destroyer” (a term coined by the German economist Schumpeter) that disrupted existing businesses and business models.

Why Brain is more important than capital

A well-developed business idea is the most important aspect when founding a new business and being an entrepreneur. To Faltin’s regret most guide books and consultants on creating a company take the business idea for granted and focus on legal and management aspects when creating a new company.

According to Faltin this not only scares off many people with business ideas but also takes the focus away from what is the most important, especially in the beginning. There are experts on legal and management questions but these experts will not be able to develop a good business concept. As a consequence of this wrong focus, too little time is spent on developing a good business concept or “idea child” as Faltin calls it.

Instead of innovative companies this leads to imitative companies with all the negative consequences of a high competition and an emphasis on efficiency and small margins. If more time was spent on really developing a solid business concept many more innovative companies could come into being. And that's what an entrepreneur is supposed to do.

According to Faltin an entrepreneur is a “Master of ideas and concepts” in contrast to a “Master of business administration”. Instead of micro-managing what exists an entrepreneur creates something new. Instead of working “in” his company (like a manager) an entrepreneur is working “on” his company. This means the entrepreneur develops the larger picture and a working business model without necessarily doing all the details himself.

Contrary to the wide spread belief Faltin argues that at the beginning of a company capital and management are not the most important for being a successful entrepreneur but a good business concept is.

Creating “concept-creative” businesses

For Faltin creating an innovative company does not mean to create a high-tech company based on patents and inventions. These do require lots of capital and are much more difficult to create. Instead entrepreneurs can use an approach he calls concept-creative. In this approach the entrepreneur acts like a composer who orchestrates existing components into something new that creates value for the customer. The widely used Skype software illustrates this concept: Skype uses an existing standard technology (VOIP). The innovation is not based on creating a new technology but in creating a user-friendly service by improving the interface the customer uses.

Being concept-creative means to skillfully combine existing services and elements provided by specialists into an innovative business model.

Tools for creating a concept-creative business model

Faltin believes that much more people can be entrepreneurs if they used the concept-creative approach and spent more time on developing a solid business concept. Developing the right business concept is a systematic process that takes time and lots of thinking and many different variants of the basic concept.

In his book Faltin developed a few tools that help an entrepreneur to systematically develop new business ideas. People who have been to one of our training programs will recognize the similarities:

• See problems as opportunities: Whenever you're annoyed by a bad product or service it can be seen as an opportunity to make something better. Think of ways to make it better, simpler or cheaper.
• Discover potentials in the existing: Often innovation does not mean to create something completely new but to use existing things in a new way. A Brazilian banker who was transferred to China discovered that the Chinese love to eat chicken feet. In Brazil - one of the largest producers of chickens – these feet were thrown away. Seeing the opportunity the banker bought up the chicken feet from the slaughter houses in Brazil and sold them to China.
• Combine existing things in a new way

When I personally asked Faltin what influenced him becoming the way he is now, he mentioned his childhood. He grew up in a small city in post-war Germany that was very “narrow” and limited: “We kids regarded the adults as rather strange and stiff / pinched. We reckoned that something must have happened on the way to being a grown up that turns creative and lively kids into conformist and narrow minded adults.”

He promised himself that this should not be happening to him: “we did not want to grow into the world of the idiots.” He kept his promise. With over 60 years of age he is still as open and curious as a child.

Comments

[Accompagnatrici Italy]

What was the URL format for Yahoo! 360 Blog posts back in the day?

[praveen bhati]

it looks to me like we are same in concept creation.