Passion and Perseverance
Passion and perseverance are strongly linked: Passion (an attitude) and perseverance (a behavior) form a positive feedback loop and reinforce each other. Passion without perseverance is a fleeting fancy; perseverance without passion is drudgery. Passion gives you the curiosity and desire to find solutions to problems; perseverance enables you to break through obstacles or find ways around them.
If you are not passionate about your new venture, its chances of success are limited. Anyone can become passionate about something. To inspire others, you need passion for solving problems, satisfying customer needs, and making the world a better place. Passion for making money alone is not usually contagious or sustainable
All You Need Is a Need & Advantage
Why start with needs? Why not start with resources?
For two reasons. First, doing so ensures that your business really satisfies a need. It is easy to get so excited about a new idea, technology, or product that you overlook the need or don’t confirm that it is real.
Second, you have a near-infinite number of resources you can draw on—your knowledge of yoga techniques or of major league baseball stats; how to make crepes; the locations of all the McDonald’s in your neighborhood; the lyrics to Lady Gaga hits; your fluency in Basque; and your friendship with your cousin in Toledo. It is impossible to list them all, and the overwhelming majority of them are irrelevant to the needs that you will possibly satisfy. Identifying needs first guides you in specifying which of those resources are relevant.
Let a Thousand Needs Bloom
When thinking about your new venture, start with one or more real customer needs, ideally in areas you are passionate about.
A customer need is a gap between a preferable state and a current state for the customer. It has two parts: the need and the set of customers who have that need. Your customers might be individuals, businesses, or other organizations. A solution is a product or service that satisfies a customer need. To find unsatisfied customer needs and solutions for them, imagine possibilities: what might be.
Countless unsatisfied customer needs surround us all the time. Creating a needs tree is one technique to generate and validate or eliminate (i.e., select) dozens of unsatisfied customer needs and solutions.
Don’t Listen to Your Customers
Discover their goals instead. Think further out of the box—that is, more broadly and creatively—than your prospective customers do. Don’t limit your thinking to the solutions they suggest.
Understand what your prospective customers are trying to accomplish or achieve—their goals, desires, and dreams—not necessarily what they tell you. Then consider how you can help them get there (i.e., close the gap from where they are today).
Test each need that prospective customers mention to you. To pinpoint real needs, ask, “Is this the real need?” and ask yourself, “What probing questions could I ask to determine the real need?
Thinking big—upsizing the customer need you will satisfy—helps guide your business as you grow. You can upsize the customer set, the need, or both. Downsize your initial customer need, if necessary, so you can satisfy it with your initial resources or those that you can readily acquire.
Project the best path from your initial customer need toward your vision. Your vision should be tangible enough to guide you and draw you through the path. But know that the path cannot be known very far ahead and that you will need to update it frequently.
If you can’t visualize a path leading from your initial need and solution to your vision, work backward from that vision to find a new initial need and solution that do offer a path leading to your vision.
1 + 1 = 3
Your chances of success more than double with the right cofounder or business partner. 1 + 1 = 3.
Three factors to look for in a cofounder are character, fit with you, and fit with your mission. All three may take time to assess.
Character is a composite of many qualities—courage, honesty, passion, perseverance, etc. How you weight them is up to you. Character includes both attitudes and behaviors that determine and reinforce each other, either positively or negatively.
Cocreate your mission with your cofounder so your cofounder’s advantages complement yours in fulfilling that mission. Build a whole-brained, cognitively diverse team as you grow.
Your competitors are companies or solutions that satisfy the same customer needs as you do. If you and others compete along the same customer need dimensions, competitors will more likely see you as a threat, protect their turf, and even attack you. In contrast, if your solutions are different, you avoid competing directly. Competitors may overlook, dismiss, or even want to partner with you.
Be one of those different, overlooked, or dismissed competitors. Applying new technology is the best way to be overlooked or dismissed by established competitors, which is where you want to be. The more different your solution, the less you have to worry about how strong your competitors’ resources are relative to yours.
Partnering, Rightsizing, and Upsizing
Business partners can enable you to address a larger opportunity than would be possible with your resources alone. Business partners (a) can help you reach customers you might not reach otherwise, and (b) can provide information flows that can help you make better decisions or deliver greater value, but (c) require investment to develop and maintain.
Build, maintain, and evolve resources that either are or have the potential to become advantages. Outsource resources and activities that do not give, or have the potential to give, you an advantage. Reason qualitatively about decisions before turning to quantitative analyses and spreadsheets. Doing so can save you time and help you avoid unrealistic financial models.
Creating Positive Feedback Loops
Network effects are positive feedback loops in which more users (customers) attract and are attracted to more users (customers). Networks may be one or two sided and may include advertisers.
The side of a two-sided network that is more willing or able to pay, usually consisting of businesses or advertisers, may subsidize the side less willing or able to pay, usually consisting of individuals.
Any business can create and build network effects among its customers. Techniques include making personal introductions; creating online communities; facilitating transactions, commerce, and relationships; and attracting complementary users and advertisers.
Scaling Your Business
Scalability is the ability of your company to (1) generate increasing cash flow from operations for each additional dollar of capital invested, or (2) increase profit for each additional dollar of revenue.
More scalable businesses are typically more highly automated, less labor intensive, and more information intensive, than their less scalable counterparts. You can improve your scalability either by improving operational performance (execution) or by adopting a more scalable business model.
Capital investments are key to reducing your variable costs and increasing your gross margins and scalability. Use IT to reengineer business processes for greater scalability. Franchising can let you expand your business geographically with much less capital.