Monday, February 8, 2010

The Root Cause Constraint of Startup Success

"There aren't enough hours in the day...."
"If only we could get some additional funding...."
"By the end of the day, I just want to collapse...."

If you're an entrepreneur, you can probably relate to one or more of these statements.  It's no secret that startups can be time consuming, demanding, money pits.  And its a truism that in a startup, there's never enough time, money, or energy to do all the things that need to be done.  In fact, in the same way that the natural universe is bounded by time & space, energy, and matter, the startup universe appears to be bounded by time, energy, and money. (Ok, I can see the physics majors out there cringing at this analogy;  I admit it, I barely passed freshman physics which is why I became a marketing guy. But hang with me here.)

I call time, money, and energy the visible constraints.  But are these really the fundamental ones?  We know that time, energy, and money are substitutes for one another (e.g. if I have money, I can pay an expert to do something for me faster), but what really underlies the need for time, energy, and money?  To explore this question, I started sketching dependencies, ultimately ending up as the diagram below:

The main reason we need money or expend energy is to execute something or pay someone to execute something, in some period of time.  The less time we have or the broader the scope of activities, the more money or energy that has to be expended.  One way to reduce both is to narrow the scope by focusing.  This is in fact one of the tenets of the Lean Startup movement, which is to strip down activities to the bare minimum necessary to develop a scaleable business model, thereby minimizing cash burn.

In fact, one sure way to cause your startup to fail is to take on too many activities simultaneously.  The rationale behind this is to maximize your chances of gaining traction.  But this is faulty logic.  If I have ten critical items that need to be done, I'm better off completing 6 of the 10 and letting 4 drop than making 60% progress against all 10.  In the first case, I at least have some completions that I can move forward on.  In the latter case, I have nothing.  Incomplete is equal to zero.

So where does focus come from?  It comes from having a vision.  Only with respect to a vision can one decide what to focus on and what to drop.  Vision ultimately stems from the creativity of the entrepreneur and the startup team.  But vision does not occur in a vacuum.  It rarely occurs as a single flash of brilliance.  In most cases, vision evolves as one learns new things, usually from other people who are experts in their field.  In a quote attributed to Steve Jobs, "Creativity is connecting things."  A recent article entitled "The Innovator's DNA," does a nice job of covering this.

This creativity, learning speed, quality of advice loop represents in my diagram what I call an innovation constraint.  I define learning speed as how quickly one can gain insight into whatever knowledge, data, or lesson needs to be mastered.  Quality of advice refers to the source of that data.  The highest quality advice comes from someone who is an expert in their field, which to me means someone with a broad scope and depth of  theoretical knowledge mastered over time through practical experience.  The faster one can iterate through this cycle, the more effectively one can craft an accurate vision of what needs to be done, focusing time, money, and energy.  So in one sense, the root of creativity is expertise.

So how does one find expertise?  By networking with people.  The problem in finding expertise when you personally lack the knowledge to evaluate it, is that you can't necessarily recognize the true experts from the posers.  The solution is to start with people whose expertise you do respect (from your own experience), who are more knowledgeable in the general direction of the expertise you are seeking, and get them to refer you to someone they deem to be more expert than themselves.  For example, if I'm looking for an expert in laser process licensing, I might start with either my patent attorney or laser designer and get their referrals.  From their referrals, I would try to get other referrals until I reached the point where I thought I had the right person.  I would then follow this up by checking on that person's references.

In addition to providing the grist for the creativity mill which leads to vision which leads to the ability to focus, the network is also the source of the people with the to execution skills needed by a startup to do the work.  The recruiting process is ultimately the same as the expertise search process just outlined.

This process, obviously, takes time.  And herein lies what I believe is the ultimate root cause constraint to a startup's success:  one's people network.

So the better my people network and the faster I can build it, the faster my learning speed  and the better the quality of advice I'll receive that will spur my creativity to craft a better vision at the same time enabling me to find people with the right execution skills to focus on the right priorities thus saving me time, money, and energy.

I think it's time for me to set up another lunch.

(1)  Dyer, Jeffrey, Gregersen, Hal, and Christensen, Clayton, "The Innovator's DNA," Harvard Business Review, (December, 2009).

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