Tag Archives: Startup

Startup Vision: Paradox of Consistency vs. Opportunity

Startup VisionThe world is full of paradox, like this one. Here’s research on startup vision that shows “The tech landscape is lush with entrepreneurs whose success blossomed only after the founders had modified or even abandoned their original vision.” That makes sense when you see examples and details. But wait – what about the idea that the best startups are driven by clear vision? Doesn”t the one contract the other?

That’s business. Hard and fast rules don’t work often enough. You can’t just follow lists of best practices.

The thought comes from reading The Risk of an Unwavering Vision | Stanford Graduate School of Business. That piece summarizes research by William P. Barnett, a professor of business leadership, strategy, and organizations at Stanford’s Graduate School of Business; co-authored with colleague Elizabeth G. Pontikes of the University of Chicago. They decided to gauge entrepreneurial success rates by researching the early choices made by software entrepreneurs operating in 4,566 organizations in 456 different market categories over 12 years.

Successful founders change the startup vision

For example (quoting from the article above, describing the research) …

“Facebook became something quite different from the Harvard-specific social connection site created by Mark Zuckerberg. Airbnb? That short-term housing rental juggernaut started as a way for people to find roommates. What eventually became the ride-sharing app Lyft originally offered carpooling software for large companies.”

Barnett adds

“It’s almost always the case that the greatest firms are discovered and not planned.”

Following the crowd doesn’t often work

The post highlights Barnett saying:

“If you want to find a unicorn, listen for the buzz and run the other way.”

And adds the details:

“Barnett and Pontikes found that entrepreneurs who were willing to adapt their vision and products to find the right market often did the best. They also found that those who followed the herd into perceived hot markets, or “consensus” entrants, were less viable in the long run than those who made “non-consensus” choices by defying common wisdom and entering markets that were tainted by failures and thus regarded as riskier.”

Why is this paradoxical?

But wait. Doesn’t vision drive most successful companies? I’ve written in this space about what I call values, which are related to vision, with the idea that clear and consistent values can drive success. For example, from an older post here titled Build a Mission:

… you and I know companies … driven by missions. People can believe in a mission. It gives the team power and momentum. People are happier when they work on something they believe does some good to somebody.

So my conclusion is – and I’ve written this previously – there is no such thing as universal best practices. It’s all case by case.

4 Questions To Ask Before Starting A Business

(This post is taken from my most recent column in the Eugene Register-Guard’s Blue Chip magazine)

Suppose you’ve been wanting to start a business; or maybe you’ve lost a job and you’re thinking that starting a new business might be easier than finding a new job (it’s not that unrealistic, by the way; it does happen sometimes). Is now a good time? Or is now such a horrible time that you should avoid it at all cost? I’d like to suggest some questions that might help you decide.

I’ve done these lists before, but these are tough times, so I want to start with the hard reality of it:

1. Do you have a choice?

This very down year is already showing signs of a surge in the so-called “pushed” entrepreneur. You’re out of a job like millions of others, you look for a new job, but you don’t find one. In frustration, you start your own business. It happens a lot.

And, if that’s the case, plan carefully, go slowly, and communicate well with your loved ones. Don’t risk relationships for business. Spouses, partners, and significant others need to know that what happens next isn’t you chasing dreams. It’s hard reality.

2. Will people buy what I want to sell?

It might seem obvious, but just because you want to do it doesn’t mean anybody else wants to pay you for it. Business isn’t really about doing what you love — unless, that is, people will pay you to do it, so you can meet costs and make a living. People pursue hobbies, sometimes, thinking that because they love it other people will pay for it.

Being original helps, but it’s no guarantee. Sometimes, when you see there’s no competition, what’s really happening is there is no business, because there aren’t enough customers.

Being completely unoriginal doesn’t necessarily hurt. Very few businesses actually start with a great new idea. Take restaurants, graphic artists, car repairs, or management consulting, just to name a few: there are lots of them around, they already exist, but you can still make it if you do a good job, give your customers value, and keep showing up.

This question leads to a lot of very important business planning issues, like target marketing, and business strategy, and the month-by-month sales forecast. But first, take a step back, and give yourself an honest answer. Will people buy it? Then fill in the details.

3. How much will it cost?

You can’t get around this one, you have to be able to make reasonable estimates on what it’s going to cost you to get started, and then, after you’re started, what it’s going to cost you to stay in business.

The math isn’t hard by itself. Your starting costs are essentially two simple lists: a list of expenses and a list of required assets. Expenses are checks you write before starting for tax-deductible items like fixing the place up, establishing the legal entity, designing a website and so on. Assets are checks you write for things you have to own to do business: chairs, tables, cars, and trucks. And yes, there is a trick question hidden there among the assets — how much money do you have to have stashed away to cover your spending during the early lean period of the business, before sales catches up.

So that last question, the one about the cash you’ll need, means more simple math and reasonable estimates. Here again, you might not like it (to be honest, I do; but that’s just me), but the math is simple. Make a list of 12 months and write out your cash coming in, month by month, and the cash flowing out, month by month. And then add up how much cash you need to cover the difference.

As you do this, working out your numbers, you’re going to discover that the only answer that works for you is your own answer. If you’re lucky, you’ll have a lot of good input from people around you who have had some experience. Guides are nice. But no business is exactly like yours, and you don’t have to search the world to find the right numbers. You’ll never find them. You have to estimate for yourself. Your estimate will depend on who you are, what you want your business to be, your strategy, your specific angle, and so on.

Take, for example, the restaurant business. You can be the high-end restaurant that offers gourmet meals to a select few, or the soup cart on the corner by the university. It all depends on you and the choices you make.

4. Do you have a plan?

What happens next depends on your answers to the sales and spending question above. It’s about filtering the opportunities from the ideas. Ideas are a dime a dozen, worth nothing, common. Opportunities are when you have an idea that will work, plus the resources to get it going.

If the numbers don’t seem to work, that’s discouraging. Can you scale down the idea to match your resources, and still have a go at it? Don’t kid yourself on one important point: some businesses scale easily to a reachable level. You focus on a part of it, and watch the spending, and, maybe, take it slowly. Other businesses don’t work in parts or pieces.

If the numbers would work, but only on a scale larger than your resources, don’t just start the business regardless. Find out how and where to look for investors. Do it right, or not at all. Finding investors is a tough path to take, but lots of good businesses go through it. And the good news is that if you need investors and none are willing, then you’ve dodged a bullet. That wasn’t a business you would have wanted to start.

And if the numbers do seem to work, and you think you do have an opportunity, then you’re well on the way to having your business plan.

Flesh out your understanding of the market, particularly who is and who isn’t in your market, and why they buy from you  — what they get out of it, not just what they buy, but the benefits. Just to give you an example, people who buy drills don’t want drills; they want holes. Think about how your new business will spread, what people will say about it, and to whom — that’s marketing. You can also think of marketing as getting people to know, like, and trust you.

Don’t worry about whether the plan exists as a document printed out somewhere. You’ll want that if you need outside investment or a bank loan. Keep it on your computer. But do make sure you have a plan, and, as soon as you actually get started, make sure you review that plan every month. Your plan will be wrong — they all are — but it will become the first draft of the revised plan that will be better.