Business is about fulfilling a need, for a profit.
If someone has a need for eggs and has the ability to pay for them, then find and sell them eggs. If there are no eggs available, become a chicken farmer. Find a way to connect the dots.
A fantastic example of this comes from Mark McCormack’s “What they don’t teach you at Harvard Business School”.
In the 1960’s, Raphael Tudela — a glass manufacturer and a qualified petroleum engineer — wanted to get into the oil business.
He discovered that Argentina had a need for $20 million worth of butane gas. His problem; unlike his competitors, BP and Shell, he had no track record, experience or connections to fulfil this need.
His advantage came when he also discovered that Argentina had an oversupply of beef that they desperately needed to get rid of.
He made the following offer to Argentina:
‘If you buy $20 million of butane from me, I will buy $20 million of beef from you’. Argentina agreed on the condition that he bought the beef first.
Tudela then made contact with Spain regarding a shipyard that was about to close down due to a lack of work. This shipyard was a politically sensitive topic and the Spanish government desperately wanted to keep it operational.
Tudela made the following offer to Spain:
‘If you will buy $20 million of beef from me, I will buy a $20 million super-tanker from your shipyard’. The Spanish agreed and the beef was shipped directly from Argentina.
Tudela then went to the Sun Oil Company in the USA with the following offer:
‘I will buy $20 million of butane gas from you, if you charter my $20 million super-tanker that is currently being built in Spain’. Sun Oil agreed.
Tudela’ successfully connected the dots between
- Argentina, who wanted to buy oil and sell beef,
- Spain who wanted to sell a ship and buy beef, and
- Sun Oil that wanted to sell butane and charter a ship.
This ability to connect people with problems, with solutions, allowed him to fulfil his desire of entering into the oil business game.