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January 09, 2009

Launching New Products

This is the second in a series of posts sharing business lessons learned from the movie, AMERICAN GANGSTER.


Setting the Scene:
In the early 70s, heroin was widely available in the streets of New York City. Common practice was to dilute the heroin with sugars, chalk, flour, or powdered milk. By diluting the heroin, dealers were able to significantly stretch their product inventory and maintain their high prices without upsetting their customer base. Customers had come to expect lower potency heroin as the only choice despite a growing number of dealers.

Launching a Remarkable Product
Frank Lucas understood heroin customers would appreciate a richer, more potent product at a lower price.

To create such a remarkable product, Lucas had to go outside the established heroin supply chain. He cut out the middleman wholesale supplier and went straight to the source by forging a direct business relationship with a heroin producer in Saigon, Vietnam. He procured 100% pure heroin product and smuggled it into New York City using the US Army as the transportation channel.

And, instead of following the standard drug dealing practice of diluting heroin with adjuncts, Lucas made the strategic decision to differentiate his product by selling 100% pure heroin.

Plus, Lucas smartly packaged his heroin in small blue baggies and stamped each bag with the brand name, BLUE MAGIC. (“Blue Magic” references the purity of the product. When tested with chemicals, pure heroin turns blue.)

Frank Lucas simply followed the Purple Cow approach and the ZAG approach to creating a remarkable product.

Out-of-the-box thinking all-the-way. Just like other “Blue Magic” products and businesses … iPod … Starbucks Coffee … Method soap … Whole Foods Market … In-N-Out Burger … … and the list could go on and on.


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Great post, John!!!

I remember thinking "this would make a great post" while watching the movie. Excellent.:)

This might be the beginning of an excellent series of posts! A perfect read - short, to the point, easy to understand. Looking forward to more of those!

I think some of your examples at the end are proof that if you create something that is better than everyone else and market it well, you will succeed. The "Blue Magic" created such a problem for the other dealers it reminds me of Apple and iPod's. Other companies just don't know what to do and it took so long for them to catch up that its too late now...iPod has replaced MP3 player as the words we use to describe a portable music device.

Love the posts, keep it up!

Of course, it also helps if your product causes a chemical dependence in your customers, but that's a different post . . .

I remember watching Frank Lucas in the movie tear into Cuba Gooding, Jr.'s character for infringing on his brand. Of all the low-level stuff he dealt with, he got the most pissed when someone messed with his brand.

Fortune favors the brave.

Great post after watching the movie I thought there was allot of good business principles Frank Lucas used to run his operation he would make a great guest blogger.

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