Sir Charles Dunstone is the chairman and cofounder of Carphone Warehouse (CPW), a UK company that now claims to be the world’s largest mobile phone retailer.
During the 1980s, Dunstone worked as a salesman at NEC, promoting mobile phones. In those days, cell phones were large, awkward and expensive. They were sold in corporate contracts mainly to large corporations. Dunstone foresaw a big growth in the business – particularly for small businesses and individual users who, until then, were poorly served.
He decided to gamble his life savings of £6,000 on the opportunity. In 1989, at the age of 25, he set up his own business selling mobile phones from his apartment in Central London. He called his company Carphone Warehouse in order to appeal to a mass market.
Growth was spectacular. When his company made its initial public offering on the London Stock Exchange in 2000, it was valued at £1.7 billion. In 2014, Carphone Warehouse merged with Dixons to form Dixons Carphone.
In 2005, Dunstone was named The Daily Telegraph’s Business Person of the Year. He was knighted in 2012 for services to the mobile communications industry and to charity.
In 2003, Carphone Warehouse (CPW) started selling a new model, the Razr from Motorola. Sales were doing reasonably well, but Dunstone’s marketing team noted something unusual. Some 80 per cent of sales of this model were to men and only 20 per cent to women. Dunstone was interested to know why. His team investigated and reported that the phone was available only in black and silver grey – both rather masculine colours.
Dunstone called the head of Motorola’s phone business in Europe and asked if it would be possible to produce the Motorola Razr in bright pink. Coloured phones were relatively rare at the time. The answer was cautious but positive. Dunstone then asked if CPW could have a worldwide exclusive on pink Razrs. The Motorola chief replied that it would be possible, but there was a minimum order of 250,000 units. Dunstone gathered his team and discussed the idea. What would they do with a quarter of a million pink phones? What if the phones were not popular? Would they be able to shift them with promotional offers and special deals? They weighed up the risks and rewards and decided that they could handle the downside. Dunstone placed the order.
The only place in the world where you could get a pink Razr was Carphone Warehouse. In the end, over 600,000 units were sold. It was a gamble that paid off.
Roll the dice. Innovative business leaders like Sir Charles Dunstone make careful bets. He saw a gap in the market for mobile phone services to small businesses, so he bet his savings on launching his company. He made a series of acquisitions that enabled him to take on and outmanoeuvre large incumbent European telephone companies. His company was more agile than its larger competitors.
Spot a gap in the market. Dunstone’s team analysed the market and saw an opportunity for a phone that was more appealing for women. Wherever there is an unmet need, there is an opportunity for innovation.
Calculate the risks. Weigh up the options and be prepared to take a gamble, if you feel confident it is the right thing to do. Do the maths but trust your intuition. Estimate the downside risk by asking, ‘What is the upside and what is the worst that can happen?’ Dunstone was able to take a big risk on the pink Razr because he knew he had estimated the downside.