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Summary of The Star Principle

By Michael Molloy of

From: The Star Principle by Richard Koch (link will take you to – not an affiliate link)

ISBN: 978-0-7499-2962-6 (link will search


Chapter 1

Positioning is the key to success, provided the positioning is truly exceptional and the venture is a star
business. (p 12)

Chapter 2

2 Attributes of Star Business (p 14)

1. Leader in its market niche

2. Market niche is growing fast, at least 10% per year

About 1 in 20 startups is a star. (p 22)

Chapter 4

The most successful new ventures are usually founder by 2-4 people and the first 12-20 employees are

3 Habits of Investing (pp 39-40)

1. Very selective, preferring to build up existing investments and hold for a long time
2. Take very active role in working out the strategy, don’t hesitate to give guidance to CEO, or
replace CEO if needed
3. Very high expectations of performance and eventual selling price of investments

4 dimensions necessary to translate star idea into star business (pp 41-42)

 Has the product been made technically accessible for a large number of customers?
 Have early prospects been made into customers?
 Have the customers been delighted?
 Is the firm a smoothly oiled machine, with a consistent formula

As an employee – find a baby star and become one of the first 20 employees preferably with a company
that grant options or offers the opportunity to buy options/shares (pp 40-42)

As an entrepreneur – give first 20 employees a good stake in the company, largest shareholder should
hold no more than ten times the equity stake of employee number 20 (pp 46-47)

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Chapter 5

2 Must Have Conditions for creating a new niche (pp 55-56)

1. There must be a gap in the market.

2. There must be a market in the gap.

Chapter 8

Seven Steps to Heaven (pp 95-97)

1. Divide the market.

2. Select a high growth niche.
3. Target your customers.
4. Define the benefits of the new niche.
5. Ensure profitable variation.
6. Name the niche you plan to lead.
7. Name the brand in a way that complements the category name.

Chapter 9

Note: Applying the 80/20 Principle – This chapter is one that should be read, studied, pondered multiple

Step 1: Dreaming Up Star Ideas – brainstorm with 2 or 3 friends, people you utterly trust and would like
to work with as these are potential founders (p 112)

32 Triggers to Generate Potential Star Ideas (pp 113 – 136)

1. Your ideal product doesn’t exist

2. Upmarket/Downmarket
3. Affordable Luxuries
4. Mass Market vs Niches
5. Bigger Product vs Smaller Product
6. Emotional vs Functional
7. Healthier vs Tempting
8. Safe vs Racy
9. Convenience vs Purity
10. Saving Time vs Extending Time
11. Fixed vs Mobile
12. Unisex vs Single Sex
13. Masculine vs Feminine
14. Go Gay

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15. Go Grey
16. Low vs High Service and Different Service
17. DIY vs Professional Service
18. Personalized vs Untailored
19. Bundled vs Focus and Subtraction
20. Expert vs Inexpert Users
21. Centralized vs Decentralized Use
22. Total Cost vs Initial Price
23. First Place vs Third Place
24. Second Place vs Third Place
25. Owned vs Rented vs Fractionally Owned
26. Narrowed Expertise vs Added Expertise
27. Orchestrating a Supplier Alliance
28. Online vs Offline, or a Different Distribution Channel
29. Entrepreneurial Judo
30. Go Green
31. Ideas for Other Industries
32. Ideas from Other Places

Create a shortlist of 2-3 (possibly as many as 5) of the best ideas your group came up with.

Chapter 10

Validating and Choosing Your Star Venture

For each idea on your shortlist complete steps 2-7 of the Seven Steps to Heaven

Step 2: Select a High Growth Niche (pp 139-141)

Minimum 10% a year (without any doubt) and preferably for many years to come

 How large is the market that your niche will substitute into?
 How much of that market could you possibly expect to gain eventually?
 How clear is definition of the target customers and how are that they will prefer your new niche
to the existing market?
 How compelling are the benefits of the new product to the target customers, compared with
what they enjoy at the moment?
 How profitable will leadership in the new niche be? Why is the variation caused by the new
category profitable? How much more profitable will the new niche be, relative to leadership in
the existing market?

Step 3: Target your customers (p 142)

Must have clear idea on who the target customer is and why they will prefer the new niche over the
main market

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Step 4: Define benefits of the new niche

Must offer sharply different basket of benefits

3 Ways of Varying the Benefits (p 142)

1. Increasing one or more of the benefits of the product in the main market to a marked degree
2. Creating one or more new benefits that do not currently exist in the main market
3. Subtracting benefits that exist in the main market

Construct your Comb Chart: (pp 144-148)

 Define the purchase criteria and rate the main market, your new niche market, how your target
market would rate your new niche market
 Download your copy of the Comb Chart Generator at

3 Conditions to Launch a Star Venture Successfully (p 149)

1. Your target customers want something different from the main market.
2. You understand what it is that they want and can provide it with a new product category.
3. The new category can be supplied profitably, because you can charge more for it, and/or
because you can subtract elements of the main market product that are expensive to provide,
so that the new category has lower costs than the main market

Step 5: Assure Profitable Variation (p 150)

Two ways that Profitable Variation can occur

1. Lower unit costs than the main market

2. Higher sales price than the main market

Step 6: Name the New Niche (p 151)

Criteria for choosing the name

 Short
 Easy to Understand
 Describes the Niche
 Is Unique
 Will be used by all competitors to describe the niche

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Step 7: Name the new brand (p 152)

Criteria for choosing the name

 Very Short (two syllables or preferably one)

 Sounds Nice
 Punchy
 Memorable
 Easy to Say
 Unique and Original
 Resonate with the Niche

Ranking of all Ideas (p 154)

 Allocate 1 to 3 ticks for each idea in each of the six steps (steps 2 through 7)
 Then sort to rank your ideas

Chapter 11

Alternative to creating your own star (pp 157-160)

Join a baby star – Here’s what to look for

 Baby businesses grow very fast

 Baby businesses are usually very young
 Baby businesses are usually very small (under 20 employees)
 They have an original idea
 Baby is a leader
 Baby’s customers are different
 A baby business that you can imagine being extremely profitable when it grows up.

How to find your star

 Make it front of mind every day

 Keep your eyes and ears open
 Put up a sign
 Look at websites
 Ask your friends
 Form a Star Alliance

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What to do next

 Talk to them
 Do them a favour
 Discreetly verify that it is a star
 Work out a job you could do for them
 Make your mark
 Check again from the inside that it really is a star
 Raise ambition within the firm
 Consider making an offer for the firm


Chapter 13

4 Formulas to Launch a Star (pp 174-175)

1. The customer attraction formula (pp 175-182)

a. The difference about the new product and category that is attractive to the target
b. An organized process of PR and selling that enables sales to take off
2. The commercial formula (pp 182-185)
a. Application and maintenance of profitable variation
3. The delivery formula (pp 185-187)
a. Make the venture a machine
4. The innovation formula (pp 188-193)
a. Innovation is based on what you already do best and most distinctively
b. Effective innovation makes it impossible for competitors to catch up
c. The best innovation reinforces and extends profitable variation.

Chapter 14

Evolve into a Star (if you’re in 2nd place in a high growth market – current Question Mark quadrant)

Four linked steps to evolve into a star (pp 201-205)

1. Go back to the drawing board

2. Migrate your product
3. Migrate your DNA
4. Migrate your target customer base

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Chapter 15

Seven Ways to Make your Star Grow Faster (pp 211-213)

1. Raise the target growth rate

2. Expand geographically
3. Innovate – new value
4. Innovate – new products
5. Innovate – new channels
6. Innovate – new customers
7. Incremental acquisitions

Four Way NOT to Grow Your Star Venture (p 213)

1. Diversification
2. Unrelated acquisitions
3. Moving outside your core function or customer group
4. Introducing unrelated products

Hiring Star People (pp 215-216)

 Hire people who have worked in very fast growth firms, preferably star ventures
 Hire people who match the venture’s DNA and will fit in
 Control recruitment process yourself and involve a large number of colleagues in each decision
 Hire to raise the average

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