If you are thinking about becoming an entrepreneur, you should understand the concept of continuous innovation to create radically successful businesses.
Building a startup is an exercise in an institution building; thus, it necessarily involves management. Entrepreneurship requires managerial discipline to harness the entrepreneurial opportunity.
In real life, a startup is a portfolio of activities. A lot is happening simultaneously: the engine is running, acquiring new customers, and serving existing ones; we are turning, trying to improve our product, marketing, and operations; and we are steering, deciding when to pivot. The challenge of entrepreneurship is to balance all these activities. Even the smallest startup faces the challenge of supporting existing customers while trying to innovate. Even the most established company faces the imperative of investing in innovation lest it become obsolete. As companies grow, what changes is the mix of these activities in the company’s portfolio of work.
A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty. Anyone who is creating a new product or business under conditions of extreme uncertainty is an entrepreneur, whether he or she knows it or not and whether working in a government agency, a venture-backed company, a non-profit, or a decidedly for-profit company with financial investors.
It is also important that the
word innovation be understood broadly. Startups use many kinds of innovation:
novel scientific discoveries, repurposing existing technology for a new use,
devising a new business model that unlocks value that was hidden, or simply
bringing a product or service to a new location or a previously underserved set
of customers. In all these cases, innovation is at the heart of the company’s
success.
Perceptibly, the question arises of how we can experiment with startups. Many startups are struggling to answer the following questions: Which customer opinions should we listen to, if any? How should we prioritize across the many features we could build? Which features are essential to the product’s success, and which are ancillary? What can be changed safely, and what might anger customers? What might please today’s customers at the expense of tomorrow? What should we work on next? If you cannot fail, you cannot learn.
The goal of every startup experiment is to discover how to build a sustainable business around that vision. It needs to look broadly:
It had more accurate data about customer demand because it was observing real customer behavior, not asking hypothetical questions.
It puts itself in a position to interact with real customers and learn about their needs. For example, the business plan might call for discount pricing, but how are customer perceptions of the product affected by the discounting strategy?
It allowed itself to be surprised when customers behaved in unexpected ways.
As a startup first answer four questions:
- Do consumers recognize that they have the problem you are trying to solve?
- If there was a solution, would they buy it?
- Would they buy it from us?
- Can we build a solution for that problem?”
A startup is a catalyst that transforms ideas into products. As customers interact with those products, they generate feedback and data. The feedback is both qualitative (such as what they like and don’t like) and quantitative (such as how many people use it and find it valuable). For startups, that information is much more important than dollars, awards, or mentions in the press, because it can influence and reshape the next set of ideas.
We can visualize this three-step process with this simple
diagram:
Every business plan begins with a set of assumptions. It lays out a strategy that takes those assumptions as a given and proceeds to show how to achieve the company’s vision. Because the assumptions haven’t been proven to be true (they are assumptions, after all) and in fact are often erroneous, the goal of a startup’s early efforts should be to test them as quickly as possible.
A similar thing is true for growth. As with value, it is essential that entrepreneurs understand the reasons behind a startup’s growth. There are many value-destroying kinds of growth that should be avoided. An example would be a business that grows through continuous fund-raising from investors and lots of paid advertising but does not develop a value-creating product.
Most modern business and engineering philosophies focus on producing high-quality experiences for customers as a primary principle; it is the foundation of Six Sigma, lean manufacturing, design thinking, extreme programming, and the software craftsmanship movement.
In a startup, this is a risky assumption to make. Often, we are not even sure who the customer is. Thus, for startups, I believe in the following quality principle: If we do not know who the customer is, we do not know what quality is.
Please note Customers don’t care how much time something takes to build. They care only if it serves their needs. Our customers preferred the quick teleportation feature because it allowed them to get where they wanted to go as fast as possible.
Startups are especially at risk when outside stakeholders and investors (especially corporate CFOs for internal projects) have a crisis of confidence. When the project was authorized or the investment was made, the entrepreneur promised that the new product would be world changing. Customers were supposed to stare stupidly at record numbers. Why are so few actually doing so?
A startup’s job is to
- rigorously measure where it is right now, confronting the hard truths that assessment reveals, and then
- devise experiments to learn how to move the real numbers closer to the ideal reflected in the business plan.
Whenever, we have to startup keep in mind the three A’s of metrics --- actionable, accessible, and auditable.
Every entrepreneur eventually faces an overriding challenge in developing a successful product: deciding when to pivot and when to persevere. Many entrepreneurs are afraid. Acknowledging failure can lead to dangerously low morale.
Most entrepreneurs’ biggest fear is not that their vision will prove to be wrong. More terrifying is the thought that the vision might be deemed wrong without having been given a real chance to prove itself. This fear drives much of the resistance to the minimum viable product. Most of the decisions startups face are not clear-cut. How often should you release a product? Is there a reason to release weekly rather than daily quarterly or annually?
The startup way is totally dependent on
- People
- Culture
- Process
- Accountability
We would respond to failures and setbacks with honesty and learning, not with recrimination and blame. More than that, we would shun the impulse to slow down, increase batch size, and indulge in the curse of prevention. Instead, we would achieve speed by passing the excess work that does not lead to learning. We would dedicate ourselves to the creation of new institutions with a long-term mission to build sustainable value and change the world for the better.
Most of all, we would stop wasting people’s time.
