Seven Business Lessons From Earvin ‘Magic’ Johnson

Shah Mohammed
Jul 25, 2018 · 8 min read

Magic Johnson — A retired professional basketball player. He was very famous during his times. After his playing career, he ventured into the business. Everyone told him that he would not succeed in business as it was not like playing ‘Basket Ball’. Many banks, investors were not ready to provide him with funds. He had another problem — Being African American. He faced continuous rejections. Yet he became extremely successful in business.

01. HAVE MENTORS

While growing up as a teenager in Lansing, Michigan, Johnson Idolised two successful businessmen ‘Joe Fergusen’ and ‘Gray Eden’ who showed and taught him that African Americans could own buildings and car dealerships. They taught him to dream of becoming a businessman one day. From the age of 16 years, Johnson began taking business lessons from Carl Fergusen. The first advice Carl gave to Johnson was to educate himself about the business before venturing into it. He asked Johnson to put in as much as time as he puts in playing basketball. Carl gave him a part-time dealership job to help him to understand the nuances of business. Both Carl and Grey encouraged Johnson to slowly learn business practices, principles while playing in the NBA. They also taught and guided Johnson to save money while playing NBA.

Johnson had another mentor-Dr. Buzz, Laker’s CEO who taught him everything about the Sports Business and the general business.

02. BE THIRSTY, BE HUNGRY FOR KNOWLEDGE

After NBA retirement, Johnson was hungry for ‘Business’ knowledge. As one of his mentors suggested, he wanted to learn a lot before venturing into the business. Dr. Buzz, CEO of Lakers, agreed to teach Johnson about business. Johnson would go every day to Laker’s office and spend hours understanding the bank situation, sponsorships, stadium seats, players, suites, advertisements. He took contact details of every employee and met them one by one over lunch. While having food, he constantly bombarded them with open-ended questions to understand their business success factors. He kept interviewing more business people and picked up their strategies, procedures, and ideas. He was not afraid or shy of asking questions. He was not embarrassed to share his ideas and ask their honest opinions. He learned how everyone built their brand, business. He took good things from them, tweaked them and integrated into his own business. The knowledge gave him the confidence and comfortability to start the business.

03. DO USER RESEARCH

The target segment of all Johnson’s businesses was African Americans and Latino Americans. The one major reason for his success was his strong knowledge of his customer’s likes, dislikes, needs, wants and desires. How did Johnson develop this knowledge? Johnson lived among the community members. He was one among them. He grew among them. He had observed them closely. He went with them to many places. He constantly spoke to them and had spent time with them. He stayed in touch with them. He himself was one of the users.

Johnson felt that ‘Urban America’ had been overlooked by every retailer. The community’s needs or wants were not met by the retailers. He saw a potential business opportunity in transforming the lives of his own people.

One of Johnson’s observations of his community was that the number one people who were going to movies in America were the African Americans and Latino Americans, as it was expensive for them to attend any sports games. He saw that the minorities had to travel far away from their communities to watch a movie and those theatres did not understand the needs of his community. He perceived that there was a need for theatres to be located among the communities exclusively catering to their needs.

Johnson opened his first MJ theatre in LA in partnership with Sony. That time, every theatre had ‘Coca-cola’ as the only beverage but Johnson altered the menu and added Strawberry, Grape, Orange juices and other sodas. If it was just Coca-cola, Johnson was sure that the business would be unsuccessful. He also added spicier food to the menu — Spicier Hot dogs, Jalapeno peppers. The reason why he added food in his menu — Minorities would like to have dinner while watching movies. All those smaller tweaks made his ‘theatre venture’ massively successful. He could do those tweakings with confidence because he was aware of his consumer’s hidden needs as he was always close to them.

Johnson had a simple and valuable business rule — “You cannot be everything to everybody. Just focus on only one type of customer”. He Chose ‘Urban America’ as he knows them very well. Johnson opened coffee shops after seeing his consumers traveling far away from their community to have coffee. He opened health clubs after observing them drive outside the neighborhood to access Gyms.

04. DON’T SELL A PRODUCT, SELL EXPERIENCE

Johnson, being a basketball player, was aware of the difference between people who come to watch the game and others who come to ‘experience’ the game. Wonderful experiences would remain in the audience’s emotional mind. Likewise, he realized that the best way to build loyalty was to sell ‘experiences’ — VOW your customers — Go beyond their needs.

One of his successful business ventures was opening up of ‘Starbucks’ Coffee shops in ‘Urban America’ by partnering with ‘Howard Schultz’. As Johnson had good knowledge of his users, Howard gave Johnson a free hand to customize the Starbucks experience.

Though Johnson felt ‘Starbucks’ coffee was great, he was little worried about other items on the menu. He realized that his target consumers would not understand some of the items like ‘Scones’ on the menu. He perceived that he needs to tweak ‘Starbucks’ a little bit to meet the need of minorities. He began modifying the menu. He took out all irrelevant items and added Sweet Potato pie, pound cakes, Peach Cobbler etc… He then turned his attention towards the Lawrence Welk music being played in the store(Minorities had a different musical interest). So, Johnson took out the ‘Starbucks’ music and played Prince, Motown music, Earth, and fire which would resonate with Urban consumers.

Johnson thought about the entire consumer journey — He not only wanted to provide a comfortable buying experience but a pleasant staying experience. He felt if he could make them stay long enough, most of them would go for a second purchase. The more time they spend in their restaurant the closer they would feel to the place. Soon, the consumer would call the store as ‘My Place, My Coffee shop or My restaurant’ — It would help in building loyalty.

05. APPEAL TO EMOTIONAL MIND

Our brain is not of one mind — It has two independent systems — Emotional Mind and Rational Mind. Our rational mind would want us to get up at 5 AM, but when the time comes, our emotional mind would want to sleep for a few more minutes and would finally win the battle of minds. Our rational mind would like to be on diet, but as soon as you see a desert, our emotional mind would force us to eat the desert.

If you want to change something in life or change somebody’s mind, your first preference is to appeal to the emotional mind and then try to influence the rational mind.

One day, in Seattle, Johnson saw a long line outside a ‘coffee shop’ by the name ‘Starbucks’. He went inside, bought a cup of tea and tasted it. He was blown away. He remembered how his community people were traveling far away to have a good coffee. He felt that the ‘Starbucks’ had the potential to become ‘next successful thing’ in ‘Urban America’.

Johnson met Howard Schultz, CEO, Starbucks and presented a potential partnership. But Howard was not fully convinced. Johnson, with his financial figures and reasons, was appealing to Howard’s rational mind which was proving ineffective. He had to appeal to his emotional mind. What did he do? He invited Howard to watch a movie with him in one of his theaters. Howard accepted the invitation.

Johnson chose a Friday night to watch a movie with Howard-the night when Whitney Houston’s movie was also released. Howard came to the theater and he was astonished to see how 4000 to 5000 women were trying to get inside the theatre from around the corner. He saw how everybody was ordering something. While watching the movie, the way women were shouting and advising Whitney Houston confounded him.

After the movie, Howard met Johnson and told him that he never had that kind of movie experience. He was simply blown away. The result — Howard wholeheartedly agreed to partner Magic Johnson in the opening up of ‘Starbucks’ stores in Urban America.

06. ALWAYS OVERDELIVER

For his first business venture, Johnson had approached many banks for funding. He wanted $150 million. Everyone turned him down. He tried another new bank. The new bank gave him only $50 million and asked to prove himself in the business. Johnson went and bought a mall for $22 million which was struggling with 40% occupancy. He increased the occupancy to 100% and sold it for $48 million. Bankers were surprised and felt happier. Johnson gave better returns than he had promised. Also, he gave the returns quicker than what was expected. Johnson gained respect from the bankers and they provided further $100 million quickly.

Johnson advises everyone to ‘overdeliver’ whenever possible — Go beyond what was promised and above what was expected.

07. EMBRACE AND DRIVE CHANGE

Johnson advises that every business must learn to adapt to their changing environment to remain successful. As long as you and your team remain close to your customers, you would find solutions to the questions ‘What to be changed? and ‘When to change?’.

One time, Johnson’s real estate venture invested heavily in building up Condos and he was planning to sell them. Unfortunately, that year, the markets crashed and banks stopped providing loans. Customers did not have money to buy homes. The financial crisis affected everyone. Sensing the mood swings of his customers, Johnson changed the business model to ‘Rental Model’ -He rented out the Condos rather than selling them. The solution made sure that the business would survive the crisis.

CONCLUSION

Johnson’s ‘Ultimate’ measure for business success was not profits but the number of people whose lives he had transformed. His business ventures changed the lives of many people including his customers-He massively contributed to improving the job opportunities for minorities-He gave a better lifestyle — He helped many to remain in better health.

Magic Johnson as businessman perfectly fits the Jack Welch’s definition of a leader -”Before you are a leader, success is all about growing yourself. When you become a leader, success is all about growing others.”

Johnson helped, continue to help many grow in their lives.

REFERENCES: Video — Magic Johnson’s Interview by Stanford Graduate School Of Business, Article by James Thomas in B2C webpage, Magic Johnson Talks at Google.

Shah Mohammed

Written by

Business Growth Consultant, Design Thinker, India. Facing problems in business? For Suggestions, mail to mmshah8@gmail.com