A friend posted this article on LinkedIn.com. Due to character limitations for comments, I decided to post my response here. Below is a link to the article referenced: https://hbr.org/2019/07/building-a-startup-that-will-last
The article is interesting, but the emphasis on “second and third acts” assumes that the start-up will successfully navigate the first act. Even with addressing what the author views as key points this is still a very big assumption. The reasons for Longevity and Success are far more complex and multi-dimensional, but it does place a spotlight on some of the more important areas of focus.
Long-term success requires several things: The right combination of having a unique goal that has the potential to make a big impact (think “No software” from Salesforce.com); Innovative ideas to achieve that goal; A diverse team to build the product (a mix of visionaries, insightful “translators,” technical experts, designers, planners, adept doers, etc.); Very good sales / business development / marketing to describe a better way of doing things and converting that to new business; and ultimately a management team focused on sustainable and scalable growth.
The point made about the need to, “Articulate a value framework oriented toward societal impact, not just financial achievement” seems a bit superficial and too tactical in nature.
First, there are unintended consequences to most new technologies. Social Media is a recent example, but Genetic Editing and AI are two areas that are likely to provide more examples over the next decade. Not every societal impact will be positive, and having a negative impact could very well lead to the untimely demise of that company.
Second, the two ideas (societal impact and financial achievement) are not mutually exclusive. When I owned my consulting company we had a goal of funding $1M worth of medical research that would find a cure for Arthritis. We allocated half of our net profits for this goal. Every employee was on-board with this because there was a tangible example of why it mattered (my daughter). We invested $500K, helped launch a few careers for some brilliant MD/Ph.Ds and at least one national protocol came out of their research.
Mission and Vision are so important to a company, yet so many companies fail to view this as anything more than a marketing effort. Those companies fail to realize that this is as much to motivate and inspire their employees, as it is to grab the attention of a prospective customer. These should be both inspirational and aspirational, such as the “BHAG” (Big Hairy Audacious Goals) that Collins and Porras wrote about 25 years ago.
Regarding Endurance and the assertion that “…the best businesses are intrinsically aligned with the long-term interests of society,” my take is slightly different. The best businesses are always looking for trends and opportunities in an ever-changing global competitive landscape – as opposed to looking to their competitors and trying to ride on their coattails. Companies with a culture of fostering innovation as a way to learn and grow (Amazon and Google are two great examples) are able to find that intersection of “good business” and “positive societal impact.” It is much more complex than a simple one-dimensional outlook.
But, it was a good article to help reframe ideas and assumptions around growth.
As an entrepreneur you will typically get advice like, “Fail fast and fail often.” I always found this somewhat amusing, similar to the saying, “It takes money to make money” (a lot of bad investments are made using that philosophy). Living this yourself is an amazing experience – especially when things turn out well. But as I have mentioned before, you learn as much from the good experiences as you do from the bad ones.
Innovating is tough. You need people who are always thinking of different and better ways of doing things, or question why something has to be done or made a certain way. It takes confidence to ask questions that many would view as stupid (“Why would you do that, it’s always been done this way.”) When you have the right mix of people and culture, amazing things can happen and it feels great.
Innovating also takes a willingness to lose time and money, with the hope of winning something big enough later to make it all worthwhile. This is where a lot of companies fall short because they lack the patience, budget, or appetite to fail. I believe that this is why innovation often flows from small companies and small teams, as with them the prospect of doing something really cool is motivation enough to give something a try.
It takes a lot of discipline to follow a plan when a project appears to be failing, but it takes even more discipline to kill a project that has demonstrated real potential but isn’t meeting expectations. That was one of my first, and most important, lessons learned in this area. Let me explain…
In 2000 we looked at franchising our “consulting system” – processes, procedures, tools, metrics, etc. that were proven in our business. We believed that this could help average consultants deliver above average work products. It took a lot of work finding an attorney who would even consider they believed it would be impossible to proceduralize a somewhat ambiguous task like solving a business or technical problem. We found an attorney who after a 2-hour interview agreed to work with us (as he said, he “didn’t want to waste his time or our money on a fools errand.”)
We estimated it would take 12 months and cost $100,000 or less to fully develop. We met with potential prospects to validate the idea (it would have been illegal to pre-sell the system) and then got to work. Twelve months turned into 18, and the $100K budget increased almost 50%. But, all indications were positive and we felt very good about this effort.
Then, the terror attacks occurred on Sept. 11th and businesses everywhere saw a decline. In early 2002 we reevaluated the project and felt that it could be completed within the next 6-8 months, and would cost another $50K. After a long and emotional debate we decided to kill the project – not because we felt it would not work, but rather because there was less of a target market and now the payback period would double or triple. This was one of the most difficult business decisions that I ever made.
A big lesson learned was that our approach had to be more analytical. From that point forward we created a budget for “time off” (we bought our own time, as opposed to waiting for bench time) and for other project related items. We had a simple system for collecting and tracking ideas and feedback. And, when an idea felt right we would create a plan with a defined budget, milestones, and timeline. If the project failed to meet any of the defined objectives it would be killed. We documented what we did, why we did what we did, and would have postmortem reviews to learn as much as possible from every effort.
We still had failures, but with each one we took less time and spent less money. More importantly, we learned how to do this better, and that helped us realize several successes. It provided both the structure and the freedom to create some amazing things. And, since failing was an acceptable outcome it was never feared.
This was much more than just, “failing fast and failing often,” it was intelligent failure, and it worked for us.
I learned many valuable lessons over the course of the 8 years that I owned my consulting business. Many were positive, a few were negative, but all were educational. These lessons shaped my perceptions about and approaches to business, and in general have served me well. This post will just be the first of many on the topic.
The lessons learned covered many topics: How to structure the business; Business Goals; Risk; Growth Initiatives and Investment; Employees and Benefits; Culture; Marketing and Selling; Hiring and Firing; Bringing in Experts; Partners and Contractors; The need to let go; Exit Strategies and more. In my case these were compounded by efforts to start a franchise for the consulting system we developed, and then our international expansion to the UK.
It’s amazing how more significant those lessons are (or at least feel) when the money is coming out of or going into “your pocket.” Similar decisions at larger companies are generally easier, and (unfortunately) often made without the same degree of due diligence. Having “skin in the game” does make a difference.
Businesses are usually started because someone is presented with a wonderful opportunity, or because they feel they have a great idea that will sell, or because they feel that they can make more money doing the same work on their own. Let me start by telling you that the last reason is usually the worst reason to start a business. There is a lot of work to running a business, a lot of risk, and many expenses that most people never consider.
I started my business because of a great opportunity. There were differences of opinion about growth at the small business I was working for at the time, and this provided me with the opportunity to move in a direction that I was more interested in (shift away from technical consulting and move towards business / management consulting). Luckily I had a customer (and now good friend) who believed in my potential and the value that I could bring to his business. He provided both the launching pad and safety net (via three month initial contract) that I needed to embark on this endeavor. The first lesson learned is to start a business for the right reasons.
More to come. And, if you have questions in the meantime just leave a comment and I will reply. Below are some of the statistics on Entrepreneurship that can be pretty enlightening: