ENTREPRENEURSHIP – HOW TO BUILD
Why Smart Executives Fail
The Intelligent Entrepreneur
The Founder’s Dilemmas
The Hard Thing About Hard Things
Better and Faster
The Lean Startup
Good Strategy / Bad Strategy
The Entrepreneur Roller Coaster
Time Management For Entrepreneurs
The Creators Code
You Are a Message
The Science Of Selling
If You Are Not Firsty You Are Last
Never Bet The Farm
The Age Of Agile
Out Think The Competition
Team Of Teams
The Challenger Sale
Playing To Win
The Innovator’s Dilemma
Marketing Without Marketing
How TO Get Rich
Marketing To The consumer
Zero To One
Sell Or Be Sold
The Power Of Broke
1- Scaling Lean
- Showcases how to apply a “lean” methodology to scaling a startup.
- How to properly measure success in a startup by defining a “traction” metric.
- Discusses specific strategies for how to identify and overcome constraints in your business.
- How to define 2-week sprints in order to systematically scale your small business.
Entrepreneurs start with many ideas, and yet limited resources and time. As the founder, you are the most important stakeholder, and your most precious resource is your own time.
At the start anything seems possible. This is the honeymoon phase. But the reality sets in, and you must start to measure external progress. It’s difficult to find the proper metric, traditional accounting metrics like revenue are nil at the start.
On the other hand, trying to measure everything will result in information overload.
Raw Knowledge from experiments is wonderful in science, but since “entrepreneurship is goal drive”, you mus measure the correct metrics. In addition, the 3-6 month design cycles in the lean startup methodology requires some faith to stick to. This book describes how to use the underlying “lean” concepts in order to scale your business in a lean fashion.
Small improvements in wasteful areas can truly add up to some huge changes. If you view your business as a chain-linked system, when you pull on such a system, the weakest link breaks. The goal is to find the weakest link in your business, and focus all your attention on that. Then, re-evaluate frequently and discover the next weakest link, until your business is solidly growing.
Defining progress. Traction is the goal.
Entrepreneurs tend to want to lead with their solution or idea, and showcase nice upward-trending graphs. Investors want to know market size, margins, and your unfair advantage. If you focus on traction, BOTH goals become aligned. Traction should track an increase in some customer behavior or action.
Created value (your customer’s benefit) > Captured value (what you charge them) > Cost (your expenses)
You want to create happy customers, and to most efficiently turn your raw material into cash. In-progress items are a waste, as is excess inventory and non-paying users. When defining your traction metric, you must consider the cost of acquiring the customer, the lifetime value of the customer, as well as any increased operation expenses due to new customers. Traction “prioritizes value creation over cost cutting”, focus on increasing the rate at which you turn raw material into cash.
The back-of-the-envelope. Business model test.
1. Start with your minimum success criteria, not maximum.
2. Find out what you would prefer the company to be worth in 3 years.
3. Define the revenue and throughput you’ll need to reach your 3-year goal.
4. Convert that target into a required number of customers.
5. Consider customer leaving and calculate the lifetime value of each customer.
6. Calculate the number of customer per month you need to grow to reach your goal.
7. Calculate the number of unaware people you need to see your offer to reach your desired growth.
Turn each of the above calculations into assumptions you can quickly test. Also consider that most entrepreneurs are not willing to increase the price of their product, but if doubling the price gains you more revenue than you lose from lost customers, it can be a viable strategy. In essence, define your minim success, calculate your required customer throughput, and adjust your business model.
Build a traction model.
Entrepreneurs must break their ambitious goals into milestones. The purpose is not to build the product first, or receive funding first, but rather to create traction first. Your goal is not to create a surge of customers, but rather create a repeatable system for customer acquisition. While the first customers are challenging, start with an offer and the follow that up with a minimum viable product (MVP). The offer should contain your unique value proposition (your grand vision), a demo (your “carefully scripted narrative”), followed by your pricing model.
While individual people do indeed act irrationally, it is still possible to predict their (irrational) behaviour. Ten customer interviews may be sufficient to notice a trend. The growth curve you are aiming for is not actually smooth, it comers in little pushes that eventually yield exponential growth. Focus your effort on increasing the percentage of new customers per month.
- Remember: you want your minimum success criteria to be 3 years away.
- The company Y Combinator recommends 5-7% growth per week.
- It should take approximately 8 weeks from idea to “solution fit”.
- It should then take 2 years to find “market fit”.
- Find your best early adopters, refine your product with them, and then scale. If you can’t convince your first 10, how can you convince thousands?
Prioritizing waste. The customer factory blueprint.
Instead of “drowning in a sea of nonactionable data” there are several important metrics to focus on, in order to better define traction.
1. Acquisition: This is your offer (for example, your landing page).
2. Activation: The potential customer’s first experience with the product. Minimize the time between 1 and 2.
3. Retention: Keeping people inside your factory so they spend money repeatedly.
4. Revenue: The actual act of making purchases.
5. Referral: In which your existing customers lead to new acquisitions (Step 1.).
The example is a flower shop. Customer walk by and see the flowers (Step 1.). They then enter the store (Step 2.). While browsing, they are enticed to stay inside (Step 3.). they make a purchase (Step 4.) and tell their friends about your store (Step 5.).
There are 3 engines of growth for your factory:
1. Paid: Using sales or ads to improve acquisition. The lifetime value of each customer must be more than 3x the cost of acquiring them.
2. Sticky: Long term subscription services must provide enough value to retain customer.
3. Referral: Your referral rate needs to be greater than 0.
Lay out your throughput process by writing down the system which turn your raw material into cash. Then, determinate the number of units being created through each part of your pipeline. Loom for bottlenecks, which are slowing down the rest of the chain. Such bottlenecks may include inventory piling up at one part of the system, or defective units at another part of the flow.
You might need to increase your quality system if defective units are appearing, or you may need to devote more manpower to one part if inventory is piling up. Even “pending users” can be seen as inventory pileup representing a bottleneck. Constraints in your business can include:
- External: The market demand is actually less than what your company can handle.
- Physical: Insufficient time, money, equipment, or people in order to grow. Keep in mind one should not jump quickly to a “more is better” mentality. More money can accelerate bad decision, and more people can increase complexity. More time however is nearly always a benefit.
-Policy: Existing company mindsets, constrained habits, conflicting metrics of success, and outdated methods may be causing constraints.
Archiving breakthrough. The art of the scientist.
The build → Measure → Learn loop is akin to the scientific method, aims to creatively come up with a new hypothesis and test it against reality. When scaling, you must aim to find constraints, define strategies to overcome them, and test out such strategies via experimentation.
- You want to run either “learning experiments” (are meant to generate new ideas) or “throughput experiments” (determine if a new feature increases throughput).
-When you find a constraint, first try to leverage the constraint by improving the bottleneck without spending additional resources.
- When discussing constraints, (1) lay out the background of itself, (2) highlight the problem, (3) analyze the constraint, (4) set a goal, (5) propose a new idea, and (6) test out each idea with an experiment.
Seven habits for highly effective experiments.
“Strategy” in entrepreneurship is about increasing your throughput within a set timeframe. Big strategies can be sliced and diced into smaller experiments.
1. State your expected outcomes clearly and outloud. People tend to fear being wrong, and thus avoid this.
2. Detach ego and declare your expectations to your team. “Make it team effort”.
3. Estimate don’t be precise. Guess in term of range rather than numbers.
4. Ignore what people say and only focus on the actions of your customers.
5. Create specific falsifiable hypothesis.
6. Create small batches of customers in order to receive feedback more quicly.
7. Always have a control group.
Dealing with failure.
Your greatest discoveries will typically happen due to “failed” experiments. When an experiment fails always ask why. Continuosly dig into the root cause of the failure, don’t simply abandon an experiment as “failure”. Look on your notes, customer reviews, and any additional data you may have gathered.
Strategy worked → Focus on the next bottleneck.
Indicators suggesting more data needed → Persevere by extending or repeating the experiment
Not enough positive indicator → Pivot to new idea.
Negative indicators → Devise a new strategy.
3- The Intelligent Entrepreneur
Entrepreneurship can be learn.
To most people, entrepreneurship can be seen as a black box of luck, tenacity and passion. Yet somehow along the way entrepreneurs showcased here all realized that their entrepreneurial successes were not from dumb luck, rather skills which could be learned and taught. They statistically en up happier and healthier in life. And most importantly, small incremental changes are not what drive entrepreneurs, rather they are driven by making significant changes to the world, which may even result in brand new industries being created.
Make the commitment.
Your peers will likely be enjoying some early success in life while you are busy plugging away trying to grow a business, which can be frustrating for an entrepreneur. But you must follow through your commitment. There will be enormous amounts of stress. Other people and obligations in one’s [ersonal life will inevitably compete for and entrepreneur’s time and resources.
- One of the most important lessons for a startup is DROOM “Don’t Run Out Of Money”. Money not only buys resources to create a product but also buys time.
- One great idea is insufficient for success, you need great execution and the ability to spin off new ideas rapidly in order to adapt to changing circumstances.
- You must recognize that as an entrepreneur you’re inherently a salesman.
- Entrepreneur who fail to plan “may as well plan to fail”.
- Entrepreneurs must develop the skill of self-creation, pulling themselves up by their bootstraps.
- Once a full commitment towards entrepreneurship is made, a context-shift is made in which you being to wonder “Why not?” instead of “Why?”
Find a problem, then solve it.
- One of the most common mistakes amongst entrepreneurs is to start with the solutions, and the try to fit the solution to a problem.
- Many business school student incorrectly believe that general knowledge is applicable to any industry.
- There is some merit in possibly taking a job before becoming an entrepreneur to discover your interest and skills.
- After several successful startups, serial entrepreneurs can develop a skill at “identifying ans exploiting promising new markets”. They also are able to quickly pivot when necessary instead of being bogged by an initial idea
Think big, think new, think again.
There will be tremendously wild swings of emotions alongside incredible stress and pressure when becoming an entrepreneur. Fear of failure will consume you at times. To fight off a fear of failure, sometimes you must “put blinders on and drive forward”. Resolve, determination and an inner fire can you persist through these inevitable struggles.
- The concept of not thinking big would be ridiculous in the mind of an entrepreneur.
- Once you understand and internalize the fact that other successful entrepreneurs are just other human beings with an idea, you being to ask “Why not me?”.
- Difficulty pushes you to take on larger challenges.
- People use “experiences” as an excuse for failure.
- Companies who fail to continuously innovate will inevitably wither and die.
- Innovation can be regarding a new technology but it can also be creating a new business model.
- Beware of confusing “thinking big” with overcomplicating an idea.
You can’t do it alone.
Investors typically care as much as the people in a startup as they do the product idea. They will look at the management team as a major consideration regarding whether or nor to invest. Entrepreneurs need to organize their own strengths and weaknesses and supplement skills with other teammates.
- Successful entrepreneurs typically have a unique blend of: creative idealism and a dispassionate analytic mind.
- Founders should ideally encompass having big ideas, with the diligent execution necessary to make those ideas a reality.
- People are drawn to entrepreneur’s excitement and passion. That passion is an entrepreneur’s best networking tool.
- Competition is the business arena can be crucial. It spurts an entrepreneur to improve you skills and forces you to be more innovative.
You must do it alone
There are going to be enormous challenges of confidence and self-belief along the entrepreneurial journey. Many entrepreneurs must face the psychological challenge of being seen as a failure if their venture does not succeed.
To counteract such challenges requires an inordinate amount of stubbornness and self-assuredness. The entrepreneurship roller coaster consists emotionally of extreme highs and lows, and is not for the faint of heart. Self-doubt and loneliness will plague every entrepreneur, and your self-confidence and courage must be sufficient to quell such doubts.
- If the entrepreneur doesn’t fully believe in his idea, he will have difficulty convincing investors and customers of the idea.
- An entrepreneur should enjoy the creative process, while also being extremely diligent and organize.
- Entrepreneurs must learn how to balance handling the responsibility of the journey alone, while also being good team players.
- If you look for flaws in any startup’s business plan, you will be able to find them. To overanalyze is risky, since you can get paralyzed by all the risks. Do not become too cautious to seize the moment.
Contrary to popular belief, many entrepreneurs are not actually risk-seekers. Entrepreneurship in the long run might not necessarily be more risky than taking a stable job, a stable job could mean that you are missing out on a great opportunity. Sometimes it’s riskier not to get involved in a startup, if the startup is truly promising.
- Feeling early momentum building can give an entrepreneur boundless energy. Energy to face tremendous financial risk and typically a huge amount of personal debt.
- Entrepreneurs must be adaptable enough to recognize business opportunities which may not be in line with their original vision for their product.
- Entrepreneurs must be extremely careful about not taking on too musk risk. They must learn to be frugal with their startup’s cash flow, lest they run out of money.
- When evaluating a new venture, consider all your assets including your passion, experience, and you existing personal network.
Learn to lead.
- Entrepreneurs should constinously learn and study business(?), management, and sales through reading.
- When you already have an offer from one investor, pitching to other investors turns the tables, they will now compete for your attention.
- Facing real struggle and adversity can be integral for becoming strong enough to succeed.
- Leaders must get people “fired up and exited” while simultaneously making sure the people are effective at their jobs.
- Leaders will never be liked by everybody, but it is not important to be friends with your employees.
- Leaders must take an egoless approach to ferreting out their own strengths ans weaknesses via self awareness.
- Leaders must be able to delegate and empower their employees while still bearing all the responsibility themselves.
Learn to sell.
Many people want something to believe in, whether a person or and idea or a product. Your job as an entrepreneur is to provide that. You are not targeting customers, but rather proving value for a fair price.
- Don’t look to hire general salesmen who claim they can sell anything. Rather, you want salesmen to understand the ins and outs of your product, and how your solution helps solve a real-life problem that your customers have.
- if you make false promises at the start or overinflate your progress, that may help in the short term but will hurt you in the long run.
- When selling anything, the more data you have to back up your claim, the easier the sale.
- Expect to hear “NO” significantly more often than “YES”.
- No deal is closed until the money clears.
Persist, persevere, prevail.
If you have successfully mitigated as many risks as possible, collected the right team of people and learned how to sell, then persistence will likely be the deciding factor separating success and failure. When you persist long enough, you are allowing yourself to survive in order to take advantage of opportunities which will inevitably be presented. By refusing to accept failure as a possibility, your mind will look for ways to succeed despite setbacks.
- Every year that a company survives, increases its odds of long term survival.
- While persisting, you must be willing to reflect and critically analyze your past decisions in order to learn and improve.
- Keeping a diary can help you analyze past decisions.
- Always look for more data and knowledge to adapt and improve your strategy.
- Bad luck is rarely the real reason for failure. Typically it has to do with the people on your team, the problem you are trying to solve, or the competition you may have underestimated.
Entrepreneurship is about money and fulfillment. Making a total commitment to the goal is necessary, as is the extremely difficult work to make the goal a reality. The four element to a successful life are balancing: “happiness, achievement, significance and legacy”.
This book contains a systematic approach towards making ideas, products and behaviour viral and contagious. It relies on social currency, and how to most effectively spread your idea or product through word of mouth. Describes how to trigger peoples emotions in order to get them to advertise for you for free.
While most people believe that social media is how to make something contagious, the data actually show that to be incorrect. Advertising an idea despite the wide audience, only 7% of endorsements happen online.
The idea for making ideas spread through word of mouth can be summer in by the 6 “STEPPS”.
Most people spend a significant amount of time talking about themselves. Self sharing is the intrinsic nature of humans, and inherently “me-focused”. In fact, scientific studies have revealed that talking about yourself releases the same pleasurable dopamine as food or financial rewards.
People subconsciously use self talk to make good impressions with others. This type of self talk is therefore a type of social currency for increasing stature and rapport.
There are 3 tricks to imbue social currency value into your idea:
1. Inner remarkability: If your idea or product is unusual, attention worthy or simply “something else” it will give people something to talk about. The more novel, unbelievable and crazy, the more chatter it will generate. By talking about your idea, people end up “looking cool”, thus increasing their status.
2. Leverage game mechanics: By creating a game or reward system, you encourage people to engage in social competition. In your game, there must be tangible symbols of achievement that give people something to boast about to their friends, thus increasing their status.
3. Make people feel like insiders: Make people feel like insiders. Adding a sense of exclusiveness and scarcity to a product can make it appear more valuable than it is. If a service is extended “by invite only” customers feel privileged for the chance to participate.
The most interesting and peculiar products aren’t necessarily always the hottest topic. Overall, social currency gets people talking, but triggers keep them talking for a long time. What matter with regards to contagiousness, is if your idea is relatable.
- Interesting ideas cause some immediate word of mouth buzz. This is followed by a large hype, which is bound to die out.
- Boring ideas may not cause much hype, but the word of mouth continues for quite some time.
Triggers are concepts related to your idea. These include what we see, hear and smell, associated with your idea. (Bear in mind that only the most recent and most repetitive triggers are what people discuss frequently.)
- Maximize triggers by carefully cultivating the environment of your target audience.
- By creating easy triggers related to your idea, this will keep your idea afloat for a long time.
- Negative publicity is also publicity.
“If you care, you share”. If the message content associated with your ad or idea is emotional, then people are more likely to share it with others. Emotions can be classified on two bases:
Feeling good vs feeling bad:
Sadness is less likely to be shared than excitement. But this relationship is no always true, as some negative emotions like anger or anxiety are more likely to be discussed than some positive emotions. It must generate a strong sense of energy in us, in order to be shared.
Physiologically arousing vs stifling:
Anxiety, anger, excitement, amusement and awe all create an arousal in people that make them move, laugh, wring their hands, and pump their fists. These are physiologically arousing emotions. People will share ideas much more when they are made to feel these emotions. Contrarily, emotions like sadness and contentment actually stifle action in people, when feeling there emotions, people are less likely to share your product or idea. Hence, to make your ideas contagious, its important to always consider how to get people talking, and imbue into your promotion strategy and emotion that will inspire people to share.
If it is build to show, it is build to grow. People follow the crude behaviour of “monkey see, monkey do” This is called “social proof” in psychology term, They imitate what other do, and will typically follow the popular opinion. When looking to follow social proof, people will typically only consider others public opinions (not others people internal thoughts and struggles).
- To take advantage of this phenomenon, make your product or idea more visible. When people see it being implemented and used, they will want to follow the trend. If it stands out, and is observable, people will both talk about it and follow it.
- One method of taking advantage of “monkey see monkey do” is by creating “behavioural residue”. This is a souvenir that people can sport around or use in their daily lives, which also advertises your idea.
- Bear in mind that making something observable can potentially have a negative aspect. For example, drug use actually increased across America with the advent of anti-drug ads on media. The lesson to be learned is that people will gravitate towards anything which is publicly observable, no matter the intentions.
People like to pass on useful information. Helping others helps them nurture their relationships, and increases their rapport with others. Sharing practical information makes people feel good internally, since it has aspect of altruism attached to it.
Specific instances of practical value include:
- Discounts and sales hold that practical value. In discounts, the grater the difference between original and sale price shown, the more attractive the offer will seem. This technique is frequently used by infomercials.
- Simply using the word “Sale” on a price label will male people want to purchase the item. The will associate practical value to it, even if behind the scenes you haven’t changed the price.
- When giving out a discount, if the original price of item or service is less than 100, it is more effective to use percentage to express a discount.
- The narrower and more specific your audience, the more likely that the practicality of your message or idea will be shared amongst the niche group.
Stories act as Trojan horses for the core message or crux. Stories are told fot he purposes of:
- A moral lesson
- A maxim to share
- An endorsement
- To be perceived as cool
- To trigger some emotion
- For practical value
At the core, stories that people tell are far more effective than directed ads. The reason I simple, while someone might disagree with the message on an add, people cannot refute a story, its just a story! Additionally, when the listener is to caught up in the emotions of the narrative, she is unlikely to stop the storyteller to voice a disagreement.
- Stories don’t necessarily need context to be told. Since they are just entertainment, the embedded information can be subtly inserted in the narrative without context, hidden under the guise of entertainment.
- Stories can be created by treating your clients extraordinarily.
- Stories can be created using stunts, or by creating out of the blue shocking experiences for people.
- Stories ans stunts only work if they are directly traceable to you and your product and idea,
Talk is the best source of promotion, any product, idea, or behaviour can be made contagious, even on a shoestring advertising budget. In fact, social epidemics are typically driven by the products themselves, when people cannot stop talking about them.
- Social value: If it makes me look cool, ill tell my friends about it
- Triggers: Wherever I go, I am constantly reminded about it. Ill definitely talk about it
- Emotion: It moves me emotionally and jolts my senses, ill share it.
- Public: I see it a lot in public. Others must be using it, ill follow the crowd and use it.
- Practical value: Its useful? Lovely! Ill tell about it!
- Stories: Wow, this makes for a cool story to tell, id better tell it at every social gathering.
8- The Lean Startup
The vision of a successful company is the foundation of your entire process. To implement the vision, you must execute a strategy. And to execute a strategy, you must optimize your product towards something that customers will actually purchase.
This is done through the "Build → Measure → Learn” loop. You build "Minimum Viable Products” (MVP's), push them out to customers, and learn which features the customers like or dislike. At some point in your product lifecycle, you will likely need to choose whether to "pivot” to a new version of your product, or “persevere” with the path you're on.
Most companies use "learning" as an excuse for a lack of successful execution. Most "learning" in corporations is actually just meant to hide failure.
Validated learning, which is to learn as you build, by defining "actionable metrics." The goal is to quickly determine whether the customer actually wants the new feature or new product by measuring changes in sales.
The overarching goal is to quickly determine if company resources are being spent towards products which customers will actually pay for. While one might assume this means asking the customer what he wants, this is not entirely accurate. Customers don't necessarily know what they want before they've seen it. Instead of simply “pulling" from the market, a more nuanced method is to "push" new features onto the market quickly and test the response
The method to implement validated learning is to split your potential customers into groups, and showcase different versions of the product to these groups (split- testing). Determine which features are useful by measuring the actual response from the customer groups (in terms of actual sales, for example).
By not releasing anything, it's "safe" in that you haven't heard a "no" yet. This creates the incentive to postpone gathering any data until you are guaranteed to succeed. However, this actually increases the risk that the customer will not actually purchase the product when it is finally released.
"Build → Measure → Learn" loop through which every iteration of the product should be run. You build a MVP, measure customer response, learn about your assumptions, and repeat. The goal is to go through that cycle as quickly as possible.
In order to determine which assumptions to test, you should seek to quickly test the riskiest assumptions. List the assumptions deeply embedded in your product, and rigorously test each one, prioritizing the riskiest.
There are a few assumptions which are leaps of faith. A leap of faith might be: customers will flock to your product because your product is similar to a competitor's product. Aim to specifically drill down which assumptions are leaps of faith.
The goal of the MVP is to begin the Build → Measure → Learn loop. Early adopters may actually prefer an 80% completed product instead of an overly polished one. If you have trouble creating an MVP (due to budgetary or regulatory constraints) a video can be a valid alternative.
The goal of the first MVP is to test the leap-of- faith assumptions. Every week that the MVP is updated and tested, learning and improvement occurs. While it may seem like there is more overhead with constantly creating MVP's, cumulatively it creates less waste for the company in the long run. This is due to the fact that resources are being diverted only to products which customers will actually purchase.
The assumption that entrepreneurs or engineers actually know what the customers want is one of the core assumptions being tested by MVP's.
Customers don't care how much time something takes to build. They only care if it serves their needs.
You want to measure customer feedback as quickly as possible so that you don't try to persevere with a failing idea. Only measure metrics which have a direct connection to revenue; everything else is fake.
"Vanity metrics" are simply meant to give a rosy picture of the company, whereas "actionable metrics" are meant to drive revenue. Actionable metrics must have a clear cause and effect relationship to revenue. Optimizing marketing and engineering for a product that customers do not want is a waste of precious resources.
You should attempt to describe a product or feature from the perspective of the customer. In order to determine if a feature is something that customers actually want, showcase a given feature to only some customers, and measure their response (called "split-testing")
The real work that determines whether a startup will succeed is not like the wonderful montages in movies, but rather the detailed behind-the-scenes work done by interacting with customers.
Pivot (or Persevere)
The human element of vision and intuition should not be discounted from entrepreneurship. Rather, you want to test the base assumptions behind that vision against reality.
Founders typically want to always believe that "success might be just around the corner." That's why, at some point, you will have to face the decision to "pivot" or "persevere”.
Pivoting involves a drastic change in product development, more in line with customer requirements. Pivots are scary and require a of courage, but by not pivoting and "seeing what happens”, you only succeed in "seeing what happens”, not necessarily making a profit. In fact, the author suggests holding regular "pivot or persevere meetings".
There are several types of pivots:
"Zoom-In Pivot": Refocusing the product on a specific feature.
"Zoom-Out Pivot": Make the product simply a feature within another product.
"Customer Segment Pivot": Changing which customer you are targeting.
"Customer Need Pivot": Solve a different customer problem.
"Platform Pivot": Change your target from individual customers to other businesses, or perform some other core change to the platform you are offering
"Business Architecture Pivot": Change business goals related to your desired margin, volume, or cost.
"Value Capture Pivot": Change how revenue will be generated.
"Engine of Growth Pivot": Change what type of growth you're expecting from the customer base and how you achieve it.
"Channel Pivot": Change how the product will be distributed to the customer.
You must clearly define which of a startup's activities create value and which create waste.
While many companies may wish to automate manufacturing and churn out large batches of products, there's actually incredible value in focusing on creating small batches. To solidify a single finished product quickly, in order to determine if there are any issues quickly, may be better.
By mastering a single product feature at a time, you can immediately check for defects. You can then start to accelerate the design process by receiving feedback on the final design immediately.
Sustainable growth comes when the actions of past customers generate new revenue. This is done by:
1. Word of mouth.
2. Sharing and showcasing product usage.
3. Advertising, which should be paid from the revenue of existing customers.
4. Repeated purchase or use from past customers.
Three engines of growth are discussed:
1. Sticky: Aiming to retain customers, long term. Companies using this engine of growth should maximize the rate of new customers divided by the rate of customers leaving.
2. Viral: Companies depending on person-to-person transmission exponentially growing their customer base. Companies depending on this engine should maximize the viral coefficient (the number of new customers stemming from a single customer).
3. Paid: When companies must pay to acquire new customers (e.g. advertising). Companies using this engine should minimize
9-Good Strategy / Bad Strategy
Good Strategy typically looks simple, and you don't need a degree in economics to notice Bad Strategy. Good Strategy offers specific, actionable, surmountable response to challenges.
High-sounding goals, ambition, and vision, may be valuable, but are not strategy.
Examples of Bad Strategy:
The "strategy" to deal with 2008 financial crisis.
Young aspiring tech CEO's talking about never quitting as a "strategy".
Company “strategy retreats" discussing goals, growth, high return, and vision.
High-sounding military goals such as “freedom", "democracy", and "reconstruction".
Bad Strategy ignores specific details of problems. It tries to cover all the bases as to not offend anyone. It confuses strategy with success or vision. Strategy is the "how", not the goal itself.
Good Strategy is about exerting relative strength against relative weakness. It's the discovery of power by the discovery of an asymmetry.
Bad Strategy typically confuses strategy with lists of goals. For example, to "work with others to defuse regional conflicts” is a useless superficial political slogan.
A good strategy would explain why there are regional conflicts in certain areas. Why is it a problem now, when humanity has always had conflicts? Bad Strategy is not no strategy; it's obscuring a lack of Good Strategy by confusing lofty ambitions with strategy.
"Fluff": Buzzwords, catchy slogans, and "a flurry of fluff masking an absence of substance."
"Failure to Face the Challenge": Increasing market share, ignoring gross internal inefficiencies, and using silly fill-in-the-blank strategy templates avoiding the hard work of strategic thinking.
“Mistaking Goals for Strategy": Drive, ambition, and visualization exercises are not strategy.
"Bad Strategic Objects": Having a mess of goals to achieve, or lofty ambiguous goals with “no clue as to how to get there."
Bad Strategy is not miscalculation but rather complacency; it's easier to avoid the hard work of digging into the facts. Strategy requires tough choices – to direct resource to A removes resources from B.
Charisma may be an important trait for a leader, but is different from good strategy.
The Kernel of Good Strategy
1. Diagnosis: "What's going on here?" An insightful diagnosis can change an entire strategy. It tells a simpler story and defines a domain of action. For example, redefining Starbucks as a coffee restaurant, but rather "an urban oasis" could change the strategic direction of their entire product line.
2. Guiding Policy: It constrains the domain of actions by determining advantage. It anticipates responses from others and leverages effort.
3. Coherent Action: It has specific actionable steps which build on each other. Having individuals take responsibility for the final result is important.
Energy against pivotal objectives at the right time creates leverage. It requires Anticipation and Pivot Points:
Anticipation: Consider the "habits, preferences, and policies of others." One example is the anticipation of future demand in Manhattan real-estate. A second is that the Iraqis anticipated the US public opinion on Iraq War, whereas the US did not anticipate the Iraqi's anticipation (like a poker game).
Pivot Points: Direct effort at one point to magnify its effects. One example is when cola companies
Many leaders have lofty visionary goals rife with ambiguity. Yet objectives must be both feasible and on the near time horizon.
Define more and more granular proximate objectives until becomes you distill lofty goals into specific tasks.
When a system is tightly integrated, performance is limited by the weakest link. For example, in assessing property value, being near a noisy highway can be a limiting factor. While you will likely not see incremental improvement, you must identify and address bottlenecks, one after another.
While low quality chain- linked systems (such as General Motors) can be disastrous, high quality ones (such as Ikea's distribution system), can make it difficult for others to compete.
One should always use anticipation, and then design coordinated action. Visualize the customer trying out your product. Keep all the pieces in your head simultaneously, and try to “optimize” her smile after using your product.
Imagine different business decisions, and how they'd change the level of "smiling". You must fit the pieces together as a coherent, high-quality whole (which is especially important in resource-strapped situations like a startup).
Inertia and Entropy
Inertia: Business inertia happens when a company is unable or unwilling to adapt to new circumstances. Outdated routines and stubborn culture can cause inertia. For example, the deregulation of the airline industry meant that the old cost calculations, business models, and strategies, had to change. And yet few airlines spent the effort to actually change their deeply ingrained routines. Some methods for breaking inertia are: (1) simplification (e.g. outsourcing), and (2) have the alphas of small social groups institute new norms in the culture.
Entropy: The idea that "great works of art blur and crumble" also applies to organizations. Companies must value adaptation over old profit streams. Look deeply into the data regarding which parts of the company or customer base are underperforming. Undo accumulated clutter by staying constantly vigilant.
The Science of Strategy
While meticulous planning is what an engineer might want, it relies on deduction. Strategy is actually induction: a creative hypothesis to test against reality. Not a deductive analysis.
Using Your Head
Challenge your own limitations, biases, and judgments. Write down decisions in order to later analyze them. Fact check things on the ground.
Good ideas pop into our heads and most people tend to stick with their first idea. This may be good in some situations (as described in the book Blink). Yet instead of rashly accepting the first one, Good Strategy is about coming up with alternative ideas and investigating each one.
Constantly create and destroy new ideas. Improved strategy typically stems from a better diagnosis of the issue, not necessarily better actions. Create an internal “virtual counsel" of people you respect, and ask yourself how they'd react to the given situation in which you find yourself.
Keeping Your Head .
Trusting the all-knowing stock market is simply following the crowd. Instead, delve into the details of the business logic yourself. (Remember Enron?)
Government bailouts means that others are taking the loss when things go poorly, and actually increases riskiness of the economy in the long-run. Easy credit, an incorrect belief that owning land can never lose you money, and overleveraging, were all Bad Strategy decisions which caused the 2008 crisis. Everyone (and every company) believes that the statistics don't apply to them; that they are different.
10-The Entrepreneur Rollercoaster
The Height Requirement
To be an entrepreneur, you must be filled with love. You must love your idea because, as Elon Musk said, starting a business is "like staring into the abyss and eating glass." In order to persevere through such a tumultuous journey, you must have passion for at least one of the following four aspects:
1. What: You can't have uninterrupted passion all day. 95% of the time is going to be grueling, hard, behind- the-scenes work. Looking at successful happy people, you only see them 5% of the time. Yet that 5% makes it all worth it.
2. Why: If you achieved your goals, how would the world change? You can love your "why", which is simply the motivation behind your endeavor.
3. How: You can love the meticulousness of your work. Lawyers, accountants, and CEO's, all take current task. They love the “how".
4. Who: Who is going to benefit from your idea? Will your family benefit? Will your customers' lives improve? Fall in love with "who" benefits.
Many people erroneously believe that you need to have innate skill to succeed. That your DNA determines all, or at least most, of your success.
Having innate skill does not come into play. Yet most people want to believe that success is in one's DNA. Because if that is true, then you simply have to check if your DNA is built for success; if not, your burden of expectation is nil.
Most people do not wish to admit the painful truth: they simply aren't working hard or smart enough, or are not obsessed enough, to succeed. It's easier to avoid the risk of disappointment, and just claim that you're not built to be successful.
The only question is: do you have the drive to put in the necessary 10,000 hours of deliberate practice (discussed in Peak)?
Secure Your Shoulder Harness
You must be a freak to want to start your own business. Freaks are the ones who are "unusually enthusiastic" about their endeavors; normal people on the other hand want nothing more than to conform.
Non-conformity threatens normal people. When you do not conform, it "challenges their choices and identity." They will scorn you. They will pull you back down like crabs in a bucket.
Your friends, family, and colleagues, will use subtle innuendo, doubt, belittlement, and sarcasm to hold you back. Why would these people be so subtly unsupportive of your endeavor?. You make them look bad. You are a mirror reflecting their own cowardice. They will hide behind claims that what you are doing is foolish, or risky. Yet it is their own cowardice they fear. They are not as courageous as you. They desperately love their "corporate bosom" with their "meager “benefits'".
They are not brave enough, and they know it, so will subconsciously hold you back. Such doubts can be painful to an entrepreneur. This is your idea, your vision, your business, and thus it's easy to take such subtle critiques personally.
There are five strategies to deal with this belittlement:
1. Stop worrying about being liked. Every elected president is disliked by nearly half the country. Take their scorn as a sign that you are doing something right. Progress and change are naturally disruptive.
2. Be laughable. Many of the greatest ideas from SpaceX to Disneyland to Jet Blue were laughable before they were accomplished. Embrace that.
3. Define success for yourself. Why are you starting a business? Is it to please your father? To get a title on a business card? Be clear about your "why".
4. Get a grip. There are likely only 10 or so people who will cry at your funeral. Is this person really one of those people? Does their opinion actually matter? Embrace the 18-40-65 rule: At 18-years-old, you care what others think. At 40-years-old, you stop caring. At 65-years-old you realize everyone is so self- absorbed that nobody was thinking about you.
5. Reduce your recovery time. You will get knocked down and disappointed. If you don't fall down, you don't improve.
Fuel For The Motor
It is not the best team or the best product that wins. The most important skill in starting our own business is sales. Yet many business owners hide behind emails and to-do lists. They wish to avoid "the unique sting of rejection" that comes from sales.
The brutal fact is: your success depends 10% on the quality of your product and 90% on sales. You are always selling. Whether selling your vision to investors, or selling your company to potential employees. And we all know how to sell and influence instinctively, from babies who cry, to parents telling children to eat vegetables.
There are several strategies for improving your salesmanship: Don't think of your customers as "targets". You are trying to help them address a desire or fear. Connect and empathize with your customers. What do they worry or dream about at night? Don't talk too much. Listen. Don't assume. Sell a different feature of your product to each customer. Focus on personalizing it to their needs. Don't cold call. Get warm intros. You likely already have a connection on LinkedIn. Sell in bulk. Look for key influencers; they will bring in their colleagues. Embrace shock & awe. Make them love you or hate you, but don't let them ignore or forget you. Find your best buyers. Narrow your target group to the people who will become lifetime customers. Find the 50 biggest customers (even if they are out of reach) and focus all your attention on them.
Filling Your Empty Seats
Entrepreneurs are hopeless romantics, with undying faith in their own vision. However, when looking to hire that exact sentiment yields sub-optimal hiring decisions Entrepreneurs foolishly hire anyone who believes "in your grand plan."
When hiring, one must aim to be "extremely rational and pragmatic." Focus on finding great employees, not merely "good" employees. Having great employees will free you from the burden of daily stressors and emergencies, and will attract other great employees.
Most importantly, great employees are actually free! If you pay them $200k/year, and they generate $500k/year in value for your business, then in essence they actually cost you nothing. Find people smarter and better than you. Put your ego aside and realize that you want to be the dumbest person in the room.
You don't want to be . able to solve a problem that your CFO has been struggling with. Hire for character. For example, do not train employees to be friendly; hire friendly people. Don't try to force a certain culture. Realize it will evolve from the type of people you hire.
Great employees have different goals than good employees. They want, in the following order:
1. To work only with other great people.
2. To be a part of something great and challenging.
3. The opportunity to move up in the company.
4. The growth opportunities allowing them to become who they are meant to be.
5. Money is less important than the preceding four items, but you should always pay them above their market value (if they're great, they're free, right?).
Riding In The Front Seat
Companies are only constrained by the owner's ambitions. The downside is that everything is also your responsibility, from every trouble with a production line to every rejected sales call.
Most leaders believe they are better than average; this is mathematically impossible. In order to become the best leader possible, you must (ironically) question your own leadership abilities.
In past generations, there used to be a boss at the top of a pyramid, executing his will. "A boss leads by authority, fear, and command." Yet now, millennials “value self- expression, not compliance."
The gender and racial dynamics of companies have drastically shifted. By 2050, so-called "minorities” will actually be majorities in the workforce.
You must learn to delegate. When interviewing a billionaire, the man claimed to have achieved his enormous success by “quitting” as much as he could. At the start, you need to do everything yourself, from accounting to product development to garbage removal. However, your goal is to delegate as fast as possible, so that you are only spending your time leading.
Remember: you're the coach, not the player.
Picking Up Speed
When starting a new business, you tend to focus on everything. Entrepreneurs are not short on ambition nor work ethic. Most try to overschedule themselves and focus on everything. However, such relentless brute force is not actually good. “They end up overworked, overscheduled, overwhelmed, and still underperforming.
Most people focus on what feels productive, yet actually is not. You can be "busy" without being
productive. “Activity is not productivity.'
Vital Functions are the 3 key contributions that will actually result in financial success for your company. Find them and focus on them. Your "Vital Priorities" are the 3 day-to-day actions which will improve those vita functions.
The "Vital Metric" is the 1 measure of success that everything else stems from. Find that one
"economic denominator", focus on it, and let the rest of your business activities maximize that metric.
Distractions will never go away, but you must have the mental fortitude to say no.
Boundaries are vital to succeed. This means saying no to happy hours, and to that useless phone call.
Find 3 key habits which, if done daily would yield success. You must track your habits on paper; otherwise they will drift.
Hands In The Air
Starting your own business is terrifying. "You are going to come face-to-face with daily uncertainty." Fear stops many people from ever trying. You can't stop the fear from arising. Every single entrepreneur has felt that fear. Courage, however, is simply proceeding anyway. What you fear is an illusion; it's no more real than any other emotion (better described in The Good Psychopath's Guide to Success).
Our ancient primitive brain evolved hundreds of thousands of years ago to be on constant alert for physical threats. Yet modern recorded history has only been around for the past six thousand years.
The issue is that our biological brain has not caught up with modern times; we are still on constant alert for physical threats. When feeling anxiety and fear, you must tell your brain that it's just a telephone call, not a lion. We tend to have "disproportionate fear responses." It's not even the rejection you fear; it's the anticipation leading up to the event which causes the most pain.
Methods to dealing with fear include:
Realizing you do not have to be courageous 24 hours per day. You typically only need to be courageous for the 20 seconds it takes to call that big customer. If you can't convince your brain that it's not dangerous, turn your brain off temporarily. Hold your breath or shut your eyes for a few seconds.
Focus all your attention on the present task. When facing a last-minute shot, Michael Jordan did not
think about the result of the game; he focused 100% on the shot at hand. We become a "frantic mess" by focusing too much on the outcome.
Make failing into a game. Aim to get rejected by a certain number of clients before the day finishes.
If you imagine success and failure as a pendulum, most people only wish to experience a narrow range in the middle. They do not wish to experience the large swings (which are actually necessary to taste true wealth).
Entrepreneurs should aim to have wild swings. It is irrational to think you can have "success without failure, love without heartache."
Seek failure maniacally, in order to achieve success. You first realize that failure is not that bad. You then realize that failure is necessary.
Finally, you start to want the giant swings of the pendulum, so that you can swing towards extreme wealth and success.
Smile For The Camera
Don't follow others' goals or ambitions. Don't follow social pressure to keep up with the Joneses. It's your roller coaster ride.
Do not be the man who, at the end of his life, realizes that he missed the point. The man who has too many houses and not enough relationships. Yet you also don't want to be the man who has a nice family but gave up his dreams of changing the world. Always ask yourself which path you would regret more. Minimize future regret.
Imagine your own obituary and make sure it reads you want. Make sure that your ambitions make your smile wider, your day brighter. Your friends and family will tell you that you're crazy. That they care about you and that this is too dangerous. That you should be lucky to be employed at all in this economy! You must have the fortitude to say no. They will recount examples of people who tried and failed. People who lost their houses. Whose families suffered. They will claim they care about you. That they want you to be safe, so give it up. You must have the fortitude to say no. Then you'll stick with it for a while. They'll be concerned how long you've been at it with minimal
results. How much longer until you see reason and find a stable job? You must have the fortitude to say no. Eventually they'll move on to "helping" someone else.
Many entrepreneurs quit when the summit is so close within their reach. You must push on. Do not lose sight of who vou were when you started and vour original reason for starting your business. Your goal in life should be to productively reach your full potential.
Your Business Is An Out-Of-Control Cash-Eating Monster
While many small businesses and startups fail, many more are taking on massive debt.
Sales go up, and we raise our expenses to match. We believe that our best month is the new normal. Sustained profitability depends on efficiency.
Growth is, indeed, half of the equation. But focusing exclusively on growth misses the point that if you grow too fast, expenses can rise up and become a vicious monster, while the profits never arrive. Profits should instead be a habitual process, not one-time events to occur at some far-off future time. Don't focus on sales, sales, sales, maybe taking a profit one day.
Most people rarely look at their cash flow and profit/loss statements as often as they look at their bank accounts. We tend to focus elsewhere when the bank account is flush with cash, and then go into panic mode, drastically cutting costs or taking on debt when it dips.
We move from crisis to crisis, and every time we solve a crisis, we think we're getting closer to our goals. It s human nature to look at our bank accounts. Its top-line thinking to focus on your revenue first. We are trained to look at venue then subtract ponses then taxes, then salarists, and consider whatever left focusing on revenue and growth tends to make us forget about the expenses which naturally rise to meet that growth.
The Core Principles Of Profit First
Instead of thinking that Sales - Expenses – Profit, turn the tables: Sales - Profit - Expenses. You want to set up a single "INCOME” business checking account which then gets distributed to smaller plates.
The first step is to set up a new "PROFIT" business checking account and move 1% of your money there tomorrow. If you can run things off $20,000 / month, for example, then you can also run things off of $19,800.
Get into a habit of taking your profit first, before getting more advanced, in order to win over your mind. "You will be forced to think smarter and innovate more.
Setting Up Profit First
Accountants will tell you to ignore your bank accounts only look at your Profit & Loss Cash Flow, and associated statements. But do you really understand them? As humans, we look our bank accounts and are wired to make decisions based on what we see.
You want to set up 5 accounts INCOME, PROFIT, OWNER'S COMP, TAX, OPEX.
Everything initially seen into INCOME and then is immediately distributed to the remaining counts as your small plates.
Assessing The Health Of Your Business
The first step in Profit First is to determine exactly how healthy your business is today. The cold hard truth is likely going to hurt, and that's okay. You can ignore it and keep running your business as you are, or you can face reality. You should be free to focus on the big obstacles, not the little fires, in your business.
Profit First is fully cash-based, based on real money in checking accounts. For the past year, measure: revenue, profit owner's comp, taxes, and operating expenses.
Figure out exactly how many dollars went to each, and figure out the exact percentages (revenue will be 100%, and the rest will add up to a total of 100%).
At the start of your business (up to about $250k/year in revenue), you want 5% profit, 50% owner's comp, 15% taxes, and 30% operating expenses. You should not be struggling to live comfortably as you are growing your business. Once you get to over 1 million year in revenue, those numbers should be 10% profil 10% owner's comp, 15% taxes, and 65 operating expenses.
Figure out how far you are from your ideal numbers. You're now focusing on how to make your business better, not bigger (that occurs naturally)
Putting Profit First Into Motion
Entrepreneurship should have rewards; it should no be all personal sacrifice. First, get your accountant and any financial professionals on board with Profit First and when people push back because it's not "normal". tell them that just because nobody else operates this way, doesn't mean it's a flawed system. And whatever you do, don't make "fake" small plates accounts in Excel. You must actually use the real bank accounts.
If you realize your expenses are too high (a likely scenario), that's okay. You can probably cut 10% to 20% of your expenses tonight if you had to, which is going to be easier than trying to magically get sales, once you start using this system. Remove waste; if you can't pay your bills, then you aren't running efficiently enough.
Destroy Your Debt
Most people focus on the top line (revenue) and rack up too much debt. Don't fix the crisis - fix the root of the problem. You want to create a permanently healthy business, not do a crash diet.
Until your debt is gone, when distributing your 50% of profits, put most of it towards your debt instead of a personal reward. Paying down the debt will be its own reward. Don't make decisions based on your best month; that's how debt piles up; use a rolling average.
Most often, you have too much debt because you have too much labor costs. Build a leaner team, and realize you will probably have to lay some people off.Critically evaluate each person's job role, and ask if it's mandatory. Never give everyone a pay cut; that just makes morale suffer worse than laying off a few people.
In a Debt Snowball, you pay down the smallest debt to build some emotional momentum, and then plow all that money on the next smallest debt, until you're debt free
Find Money Within Your Business
There's money in your business if you know where to look. First, focus on improving efficiencies to increase your profit. If your profit percentages were to fluctuate (like most companies), if you were to start increasing profit margins from 10% to 20%, your competitors would notice. They would determine what you did to improve, and would duplicate it for themselves.
However, it you keep your profit percentage constant from the start, then you are naturally looking for more efficiencies from the very beginning of your business's life, and there are no major changes for them to duplicate. You've always been consistently more profitable than them, as you've found efficiencies along the way.
Work on efficiency first, before you try to improve sales, because efficiencies is easier to find and sales are volatile. Ask yourself: How could you double your results with half the effort? Look for the big-ticket items that actually answer that question. Someone will figure out how to make things more efficient eventually why don't you be that person?
Profit First: Advanced Techniques
If you need more granularity for your business, add additional accounts. You can have additional small- plate-accounts for reimbursed expenses, materials, subcontractors, employee payroll, equipment, sales tax, or even outside investment, depending on your unique business needs.
This process you developed for your business must be documented and written down for your own benefit. For each employee that you decide to take on, you should expect them to bring in an
additional $250,000 / year in revenue for your business.
Finally, never borrow from one account to pay for another, especially the tax account. Go ahead and
rename it "GOVERNMENT'S MONEY" if that helps you keep your grubby paws off it.
The 4 Villains of Decision Making
Most people are prone to four decision-making biases:
1. Narrow Framing. You have defined your choices too narrowly. For example, one company had a major project to outsource and was deciding on which firm to use. They decided to break the project up into sub-projects, and hired 5 contractors for the first sub-task. It barely increased the budget, and yet had a great effect since the organization got a feel for how each firm performed on a real task.
2. Confirmation Bias: We tend to look for data which supports what our guts already tell us. It makes us feel scientific since we are gathering data but isn't.
3. Short-term Emotion: In the 1980s, Intel was debating whether to stay in the memory business or not – it was a major product line but heavily competitive. The executives were only able to think
clearly after asking themselves a simple question: IF they were fired and someone else took over, what would the new CEO do? They clearly have done well in the microprocessor business since.
4.Overconfidence: Believe it or not some producers didn't like the Beatles at first, they didn't believe people would want t-person boy bands. When most people sive adviou, they just know they are right. And they are often wrong.
Find Someone Who's Solved Your Problem.
In 1954, Sam Walton (founder of Walmart) frequently went to variety stores. He saw some stores which had a centralized checkout and duplicated it for his store. He ruthlessly copied from others all the time.
Use Others' Solutions: Someone has most likely already solved your problem; use them. One medical practitioner wanted to fight sepsis in her hospital. She scoured the research and came across a scientific article describing some unique methods. She implemented this in her hospital and was able to reduce the rates of sepsis to 28% below the national average.
Bright Spots: Look for "bright spots” in the past. For example, you are trying a new exercise regimen but are not staying consistent. Look for the few days you did go to the gym last month (the bright spots). What did they have in common, and what can you learn from these bright spots?
Prescription List: Once you have absorbed the best practices from others and found your bright spots, create a "prescription list of solutions so you can replicate the process. For example, what questions did you come up with the last time budget cuts were made?
Analogies: Scientists frequently use analogies to solve problems. They define the important features of a given problem, and then naturally search for solutions others have come up with in similar areas. "When you use analogies you can take your pick from the world's buffet of solutions.
Ladder Approach: Move up the ladder in generality. For example, one principal wanted to improve the speed of the lunch line at school. He might look at department stores checkout lines. If there are no new ideas, he might then look at lines in sports stadiums. He might then look at methods
plumbers use to control flow through a pipe.
Consider the opposite
Seek Disagreement. We must seek disagreement, as we are all biased towards our own beliefs.
Devil's Advocate. Create a person whose job it is to pretend they are a strategist for your competitor.
However, beware of (1) the devil's advocate being marginalized, and (2) lazy thinking where people
don't bother thinking of critiques because they believe the devil's advocate will handle it.
Anti-Group. Assign a few people to argue against all major decisions.
Specifies: When we ask the waiter if the chocolate cake is good, we just want to be told yes. To counteract this tendency, request specifics. For example, a new recruit for a law firm might ask existing lawyers the number of dinners they spend with family per week, instead of asking general
questions about work-life-balance
Consider the Opposite: When you're upset with your spouse, write down days she was good to you.
70% of couples improved their relationship following the creation of such a diary. Or with a new fad diet, consider the opinions of those who take the opposite approach.
Zoom Out Zoom In
One way is to get an outside view is to talk to an expert about "base rates” (how similar situations have played out in the past). Yet be careful to avoid asking about predicting the future of your situation. Ask them about the past, not the future.
But perhaps we should we trust our gut instincts over the data. Aren't you better than the average? The truth is, it doesn't matter what you believe, you are simply seeking to feed your gut more data to make better decisions.
Afterwards, you then want to zoom in and get some dose-up "texture" to the situation by talking to
individuals. Yet when you zoom in and read some individual negative reviews, you might realize the negative reviews are only due to the price.
In business, zoom in and actually our competitor's product to add some texture. Taking this outside view helps overcome our overly optimistic bias in our own thoughts.
Overcome Short-Term Emotion
The age-old platitude of "sleep on it" actually has a lot of wisdom to it; it lets the visceral emotions fade. Two methods are: Ask yourself how you'd feel 10 minutes, 10 months, and 10 years from now, for a given decision. Ask yourself what you'd advise a friend to do in a similar situation.
Bookend the Future
Define a Range: It's extremely difficult to predict the future with high accuracy. It's far better to consider both good and bad possibilities, and define a range for the future. This counterbalances
both overconfidence and over-pessimism.
What Would Have to Happen: Start with either a positive or negative future outcome, and then ask
what would have had to happen for the result to occur. For example, what would have occurred to
make an employee quit months from now?
Premortems: Pretend a project has failed, and work backwards to figure out why. You can also conduct a "preparade" in the opposite manner.
Buffers: Most companies now know to build buffers into budgets and timelines, thus intuitively
recognizing that the future is a range, not a value.
Mental Vaccination: One company had interview applicants deal with a simulated irate customer on
the spot, in an attempt to prepare them for the reality of the job. This helped weed out applicants and made the future employees more prepared
Trusting the Process
When you include negative opinions, you are demonstrating to colleagues that you've considered
multiple angles. When a manager decides on Plan A, but someone wanted Plan Z, a wise manager would say that Plan 2 has merits, and Plan A does indeed have faults, but the decision was made. It's crucial that the organization trust in the decision-making process even if not on every decision.
13- The Creators Code
Find the gap
Plenty of people with plenty of “connections, expertise, talent, and resources” consistently fail to capitalize on opportunities; rather, it's a unique way of thinking which separates creators from the rest.
They take solutions to problems devised in other fields, and apply them to the problem at hand.
There are three major categories of creators, all of whom focus on curiosity:
They cross-pollinate ideas, like birds taking nectar from one flower and pollinating others.
They are able to move concepts across industries and geographies, thereby transporting solutions. They use analogies and metaphors reflecting the underlying pattern in various industries.
They are problem-finders, forming new logical designs from existing components, wondering what's missing, and "why" something is as it is.
"They believe rigorous questioning is the hallmark of discovery, and they retain a certain childlike naïveté, a beginner's mind." For any idea in its infancy, there are a plethora of reasons why it will fail; architects don't necessarily benefit from the objections of their "friends".
They wonder how they would achieve something if nobody showed them how.
They are always thinking.
They do not have many hobbies nor do they watch much TV.
They are detectives looking for inconsistencies and asking questions,
They combine existing concepts for novel amalgams (described in Better & Faster).
They focus on fusing elements with a purpose.
Drive for daylight
Goal-oriented people tend to have "to-go" thinking (focusing on where they are going) as compared to "to- date" thinking (thinking about how far they've come). To-go thinkers see where they want to go, they see reality, and they notice what is different between the two. When you run a marathon, you focus on the next few miles to go until the end, not how many miles you've already exhaustingly ran.
Always scan the edges for new ideas, rarely glance in the rearview mirror, but quickly dismiss poor strategies and ideas. Avoid nostalgia. Learn from mistakes, but don't "regret or fret over the past."
Don't worry about missed opportunities or bad choices; just focus on the next task.
Fly the OODA loop .
-Observe all the data you can about the situation. A crucial part of improving one's OODA loop is to quickly notice inconsistencies between reality and your expectations.
-Orient by sifting the signal from the noise, focusing on the relevant information.
-Decide on a solid course of action. Making rapid decisions is crucial.
-Act, then Observe. Acting quickly & unexpectedly trips up your competitor's OODA loop.
OODA loop flyers realize they must continuously move through the loop and always improve, lest they become obviated. While most things either work or don't work, building a business is actually more of an iterative process. The lessons from the past are not always obvious, but flying the OODA loop can give you a significant edge against competitors.
Aim to create a series of trial-and-error experiments with small bets, so that each “error” doesn't cost too much. Little tests that fail can be reinterpreted as simple data-gathering experiments.
Creators quickly accept the present situation as it is and move forward with it.
Creating networked minds is about capturing the "cognitive diversity" of various perspectives on a given problem. Diversity is not necessarily race or gender, but rather various backgrounds and talents that can be brought to bear upon a problem.
Creators realize that an idea alone isn't typically given useful feedback. But once it is made into a prototype, the iteration process can begin, as people are happy to point out flaws and features of physical products.
Creators aim to create spaces, whether physical or virtual, to connect different-minded people. To keep a diverse team in sync, make sure the immediate goal or problem is clearly defined. The advantage of networked minds isn't necessarily due to the most "unique" individual providing novel ideas. Instead, the fact that members must describe their ideas to different people forces members to better prepare and think through their own ideas.
With homogeneous groups, people tend to maintain the status quo, but with heterogeneous groups, people are forced to explain their own ideas more explicitly.
Specific types of networked minds include:
Flash Teams are a special type of group which is quickly formed to solve a problem, and then quickly disbanded (like a group of lawyers at a firm working together for a specific case). Flash Teams need to have both veteran and newcomer members to work well, as newcomers bring fresh ideas and veterans have a stronger handle on the situation.
Prize Competitions for solving business engineering problems will encourage multiple people to attack a problem, for some sort of reward.
Gamifying is the process of turning a problem into a game of some sort, creating "levels" that players complete. Such a game offers points for helping the business or researcher solve the given problem.