MORE FROM STARTUP BASICS
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Maybe you can tell something about the Zeitgeist of the business world by looking at what business people are reading at airports. In the white-collar recession angst of the early 1990s, for example, they were desperately flipping through the cost-cutting manifesto Reengineering The Corporation. During the China panic a decade ago, it was Thomas Friedman’s The World Is Flat. When the financial crisis exploded in 2008, and blew their neat little spreadsheets to smithereens, they turned to Nassim Taleb’s The Black Swan, about the power of the unpredictable, to find out why.
Today, the Nasdaq is surging, young companies such as Facebook and Twitter and Uber and AirBnB are turning established industries upside down, and a new generation of dot-com wannabes are dreaming of starting their own revolution. So Silicon Valley serial entrepreneur Peter Thiel has probably picked the perfect moment to publish Zero To One: Notes On Startups, or How to Build the Future.
Thiel has a remarkable track record. He co-launched PayPal and sold it to eBay for billions. Then, as a venture capitalist, he was among the early backers of Facebook, LinkedIn, Spotify, and Yelp. It says something about Thiel’s clout that the marketing materials for the book have come with gushing reviews from Mark Zuckerberg, Elon Musk, Nassim Taleb, and even GE CEO Jeffrey Immelt.
Okay, so you’re a young dot-com wannabe in San Francisco—or New York, or London, or Taipei—thinking of jumping on the bandwagon and launching your own venture. Your company will be the next Uber or Square or so on. What advice does Thiel have for you?
Lots. Some of it is buried, or revealed in passing. And upon looking back through Zero To One I realized most of the really interesting advice is negative. Don’t.
So… don’t try to “disrupt” an existing industry: instead, try to fill a need that nobody else knows exists. Don’t get overwhelmed by uncertainty. Don’t diversify. Don’t hire consultants.
Don’t have part-time employees (“Ken Kesey was right: you’re either on the bus or off the bus.”) Don’t pay your CEO too much and don’t pay staff lots of cash instead of stock.
Don’t have a board of more than three to five people. Don’t offer incremental advances. Don’t bother launching a new technology unless it is “an order of magnitude” or “10X” better than what exists today.
Don’t play little ball—swing for home runs. Don’t listen to the mainstream. Don’t be afraid of the unknown. Don’t try to be a big fish in a big pond before you’ve been a big fish in a small pond. Don’t start a company with people you don’t really like. Don’t neglect sales and marketing.
And, my favorite bit of advice: Do not, under any circumstances, create a complex or confused organization. “The best thing I did as a manager at PayPal,” Thiel writes, “was to make every person in the company responsible for doing just one thing. Every employee’s one thing was unique, and everyone knew I would evaluate him only on that one thing.”
This, of course, is applicable to people in any organization or business whatsoever, in the old economy as well as the new. I am constantly astonished at how many big companies are so badly organized and how few follow sensible management techniques. Maybe if more established companies adopted a little more of the thinking of successful startups, there would be fewer successful startups.
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4 Reasons Your Business Plan Might Need to Be Trashed
MORE FROM BUSINESS PLANS
You’ve done it. You’ve created a business plan. Maybe you’ve even made it official by having it laminated and bound. After all, nothing makes a plan feel more real than Venn diagrams, charts and timelines as you set off to explore the daunting and unfamiliar territory of turning your idea into a scalable, repeatable business model.
While preparation is always good, no amount of charts can protect you from the realities of a 21st-century business world in permanent beta. In this brave new globally networked economy, the name of the game is "flexibility." So when you set out to startup your business plan, it’s essential that you keep some key factors in mind:
1. Consumer needs are constantly evolving.
As the Dude puts it in The Big Lebowski, "New s**t has come to light" and your business model should evolve based on the “new s**t." Startups that embrace this will stand a better chance at survival.
Pinterest, which was founded by a designer, is always evolving and improving in response to user needs, including adding better search capabilities to tailor your experience. Tweaks like this may seem minor, but they’re the difference between thriving and floundering in a competitive market.
2. Being psychic is a tough job.
Anyone who claims to be able to accurately predict the future will fail if they base that prediction on data that is no longer relevant or current. While the future has always been uncertain, the rate of change is greatly accelerated even from 10 years ago.
The rise of the lean process and agile software methodology as major influences on business models helps us adjust to change rather than to predict.
3. Business ideas are never fully baked.
When developing a new business, it’s important to have a clear vision of where you want it to go. That being said, not even Steve Jobs could predict what Apple would one day become, and frankly, that’s what helped it grow into what it is today.
Related: 5 Tips on Planning Amid Rapid Change
Business plans often detract from grandiose visions because they are inherently formulaic. Let your vision lead.
4. Experimentation lives outside of a pie chart.
While the goal of a startup is to mature into a model that is scalable and repeatable, this needs to be balanced with experimentation and innovation that can’t be measured in a pie chart or line graph.
The Business Model Canvas looks beyond those charts and is especially useful because it combines a practical and tangible approach in covering the various areas and aspects of planning a business but emphasizes the need to iterate as conditions change.
Conclusion
Business models per se will not be going away -- but how we see them and how we use them has already radically changed. Now more than ever, businesses must focus on the demand side as well as supply side. It is crucial to place an early emphasis on identifying the customer and developing product research and development with early adopters who function as beta testers.
Competition and opportunity are now globally focused but at the same time personalized. Terrain and market share can change rapidly. So the lifespan of a particular business model can be very brief, as it will need to remain open to changing conditions and developments and iterate to remain relevant and profitable.
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