Startup: An Insider's Guide to Launching and Running a Business (21 page)

• Know your options.
  
• Know your opponent’s (your competition’s) options.
  
• Know how the market and business environment can change.
  
• Have a sense of priority.
  

This makes a great deal of sense in martial arts. It also makes sense in business. In this chapter of the book I will talk about strategy—ways of thinking that can inform your decision-making and make your business life easier and more successful. These will help you to know your options and those of your competition, and achieve a sense of priority to determine which things should come first, which second, and which are not worth doing at all.

__________

¹
This strategy was a core lesson at the Integrated Arts martial arts academy in Austin, Texas, at which I was the assistant instructor for many years.

A Human Flaw: Failure to Appreciate the True Complexity of the World

The world is a complex place. The human brain is highly adept at processing information, but depends heavily on abstraction and generalization to deal with the true complexity of the environment around us. Even seasoned veterans of any given specialty will find that unforeseen details will pop up and affect their plans. Account for what you don’t know in your planning by adding in extra time and resources.

Even in a familiar environment, with a cohesive team, doing a project similar to projects that have been done before, there will be aspects that were unknown during the planning phase (
Figure 6-1
), and unanticipated in terms of allocating reserve resources for them.

Figure 6-1.
The three categories of events that exist in all projects and endeavors

In project management, you will see managers budget both time and money in anticipation of unforeseen problems. This is called
padding
. It never ceases to amaze me how much can be unknown in a project. I assert to you that the true complexity of the world in which we operate is
way
beyond our grasp. When we make plans and predictions for our projects and for our businesses, we make a mental abstraction of how the chaos and complexity of the world have bearing on what we are doing. This abstraction is a smoothing out of the wrinkles, a removal of the messiness, a simplification of the unknown mass of
connections and relationships that actually exist into a clean mental representation of only the most significant facts. It is in guessing what is most significant that we can make our mistakes, as it is the nature of chaos that what is significant and not significant can change drastically and suddenly in a short period of time.

Takeaway:
Realize that you will not be able to anticipate everything that will happen, and be prepared to allocate extra time and resources commensurate with the complexity. More complexity means that more will be unknown.

_________________

The 80/20 Rule

You very often get 80 percent of the result for about 20 percent of the work. For example, in the software world, a project that takes two weeks will often look done after just two days: the visible stuff will be there, and manager types will start getting excited about the deployment date being close (read: tomorrow). There is often a feeling that the developers are slacking off or even incompetent when it takes the rest of the week, and then
all
of the following week, to actually get the project code completed, tested, tweaked, retested, and deployed. As
Figure 6-2
shows, the same phenomenon occurs in all walks of life, whether painting your house, landscaping your yard, or writing a book.

Figure 6-2.
The illusion of being “close to done” can be a powerful one

Knowing to distinguish appearances from actual reality is a key skill in running a business. Learn to recognize the 80/20 rule when it is at work in your business and you will appear to be wise beyond your years. It is now time to grow a long, gray beard and stroke it pensively as you sagely predict to your employees that your project will take another two weeks.

_________________

Always Ask

Dr. Gaylen Paulsen, who taught an excellent class on negotiation at the University of Texas School of Engineering, gives one of the simplest and most
effective pieces of advice I have ever heard:

Always ask for something you want, even if you don’t think you can get it.

He would challenge his classes to see who could get the most benefit in 30 days by using this technique. I ended up with about $22,000 of value in that month that I would not otherwise have gotten—just because I was willing to ask. Gaylen was impressed. (I am not sure, but even years later I may still hold the record for the challenge.) I got a corporate sponsorship to pay a large chunk of my engineering graduate-school expenses, a new car for $4,000 less than anybody would have believed, and several other small benefits in the weeks after being challenged with this simple idea. What did I do differently?

1. I decided to expect success.
   
2. I asked for what I wanted.
   

It works. Just adopting this mindset will be worth the time spent on this book 100 times over. I promise.

Exercise
    
Always ask.
Try this yourself. For the next month, look for opportunities to ask for things that you want, but would not normally think you could get. Ask for an upgrade to first class at the ticket counter. Ask for a lower price, a better deal, or whatever. The point is to ask. The worst that can happen is that you’ll be told no.

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Ready, Fire, Aim

This method is aimed at a bootstrapped or small operation producing a less complex product with a lighter design cycle (consumer-facing web in particular). I prefer the ready-fire-aim method of management for most of my projects that fit in this category. As the name suggests, you will decide what target you are trying to build into using the best guess available at the time you start. You immediately start building something, and vigorously collect feedback along the way to create a suitable product. The comparison to artillery is
informative: old-school battleships would come equipped with big guns on their decks. To hit a target, they would turn the turret toward the target, set the elevation, and select how many barrels of powder to put behind the projectile. As far as aiming goes, they would be
done
at this point. The gun would be fired and would either hit the target or miss. This can be problematic if the target is moving in unpredictable ways. The first shot will often be nothing more than a targeting aid, to be followed by a second or third shot that will be required to home in on the target. This wastes time and gunpowder, but it was the best that the Navy could do at the time.

More recently, guided munitions solve this dilemma. A projectile is fired in the general direction of the target. Feedback (usually a laser, GPS, or RADAR) allows constant adjustment of the path in flight. Even if the target moves, so long as the feedback loop is intact, you will arrive at the intended destination. Projects can be like this.

I like to build something small and quick, gain feedback, and repeat. This cycle continues until I have a product that works. I will almost never have a complete spec before getting started. Firing first and aiming later gets you to market fast, which is critical for small businesses—especially if your first guidance was close to the mark. This speedy approach also helps you to validate the market early. You can get out there and start learning, and get engaged in the market quickly and adjust (and even get out) quickly if need be.

Ready-fire-aim is particularly appropriate for consumer-facing web businesses, as there are lots of potential users and relatively low costs associated with development. The capacity to play this quick strategy decreases as the number of potential customers decreases. If you are aiming to sell software to enterprise clients (IBM, GE, etc.), then you had better have a very well-targeted product and a clear story of how it works and why it is valuable to the customer before you deploy or package your offering. Packaged and physical products and consumer goods are the same way—do your market validation and research
before
you build!

_________________

Tensions

Tension is the resulting pressure when two or more forces are applied to a system in opposition to one another. Business is, in many ways, the management of tensions. There are examples of this everywhere around us. In government, an example would be the classic American dilemma of small government vs. big government. In raising our children, we have the conundrum of helping a child to succeed vs. allowing them to use their own strength and learn from failure.

When addressing these problems, we should recognize that there is no right answer, but rather a balance of trade-offs. There may be one or more optimal answers that are as close to right as we could hope to get. These optimal answers are elusive. In a complex system (such as a business), the optimal choices for any particular subset of phenomena change with circumstances and depend highly on what your situation is, what your viewpoint is, and in what place and time you are at. I call this type of adjustable subset a
tension system
.

An example of this elusive optimization can be illustrated by President Franklin Delano Roosevelt’s response to the Great Depression. In the long narrative of small vs. large government, he famously opened the government’s bank account and began to direct public funds toward make-work building projects across the country. In retrospect, this is appalling to the small government camp, but it arguably did provide an answer to the dire economic malaise that was threatening the stability of our nation. Moving forward in time, as the economy stabilized and private sector jobs were created, it became less and less appropriate for that kind of spending and government intervention to continue. Taking the context of the 1980s or 1990s, the same set of actions would clearly have been inappropriate. In the 2009 market collapse, a similar spending pattern was seen again with President Barack Obama.

When addressing
tension systems
, the right answer can never be ensured. Instead of focusing on right or wrong, we position ourselves on the continuum of options, watch what happens, take feedback into account, and then either update or maintain our choices.

It is helpful to visualize tension systems as a continuum or line running through an imaginary space. You could visualize a temperature scale this way, with cold
temperatures on the left, warm temperatures near the middle, and boiling hot temperatures on the far right. You can see that for a bath, the right choice would be warm, and for a margarita you would need to move left into the near-freezing region of the line.

This chapter will discuss some of the most common tension systems that entrepreneurs need to manage. The intended result is that you will: