5 remarkable ideas that transformed how I think in 2015

Ideas_Bookshelf

Regular readers of this blog and my newsletter (subscribe here if you haven’t!) know that I’m an avid reader. 2015, for me, was a year of quantity. I read 60+ books, and at least ten times as many articles.

Some of these were bad, some good, and some changed my perspective on work and life.

I could list the top 5 books I read in the year. But instead, let me present the top 5 ideas that transformed my thinking, and the books I found them in.

[Note: You can find my 2014 list here.]

1. Keystone Habit – One Habit to Rule Them All (The Power of Habit)

I’ve written before about Thinking, Fast and Slow, and the difference between System 1 and System 2 thinking. The former is rapid, automatic, instinctive and judgmental. The latter is slower, more considered and analytical, and more effortful.

In most situations, we tend to use the quick-and-dirty System 1. The more methodical System 2 is quite lazy.

This proclivity to use System 1 underlines the importance of habits. Such sequential, repetitive tasks are so ingrained that we do them without thinking. The essence of System 1.

For instance, do you think when you’re brushing your teeth in the morning? More likely you’re so woozy you can’t walk straight. Still, your teeth are sparkling clean by the end of it.

That’s the power of habits – you can do certain tasks without thinking.

To understand more about habits, I read two books this year – Hooked and The Power of Habit. They talk a lot about the structure of habits, how to build good habits, how to break bad habits, etc.

But the most powerful concept to me was that of the keystone habit. Keystone habits are small, narrow habits in one area of your life that impact several other areas in a significant manner.

As Charles Duhigg says in The Power of Habit:

Some habits have the power to start a chain reaction, changing other habits as they move through an organization. Some habits, in other words, matter more than others in remaking businesses and lives. These are “keystone habits,” and they can influence how people work, eat, play, live, spend, and communicate. Keystone habits start a process that, over time, transforms everything.

A few examples of this are:

  1. Exercise. When you start exercising, even if only once a week, it triggers changes in various other areas. You start eating better. You become more productive and confident at work. You show more patience towards your family and colleagues. All because of a few push-ups once a week. That’s a keystone habit.
  2. Making your bed every morning. It’s a tiny, almost irrelevant change. But studies show that this correlates with better productivity, greater well-being, and more willpower.
  3. Willpower. This is the most important keystone habit. Studies show that willpower in children is the most accurate indicator of academic performance throughout their student lives. Even more accurate than IQ.

At an organizational level as well, keystone habits can have transformative impact. The book cites an example of how a worker safety program at Alcoa ended up not only improving safety, but also turning Alcoa into a profit machine.

How do these small, unrelated habits have such widespread impact? In Duhigg’s own words:

Small wins fuel transformative changes by leveraging tiny advantages into patterns that convince people that bigger achievements are within reach.

So what are your keystone habits at life and work?

Books: The Power of Habit, Hooked

Further Reading: Pregnant mothers – the holy grail of retail; Keystone habits: why they are important, and how you can build them effortlessly

2. Rewards and their Unintended Consequences (Drive)

Incentives are strange, powerful beasts. Whether it’s pocket money we give children for doing household tasks or bonuses our bosses give us for exceeding sales targets, incentives play a key role in driving us to perform.

As Charlie Munger, legendary investor, says in his famous Psychology of Human Misjudgment speech,

I think I’ve been in the top five percent of my age cohort almost all my adult life in understanding the power of incentives, and yet I’ve always underestimated that power. Never a year passes but I get some surprise that pushes a little further my appreciation of incentive superpower.

Given the immense power of incentives, it becomes all the more important to design them right. If they’re even slightly misaligned, they can “damage civilization” (Munger’s words, a tad hyperbolic).

I read Drive earlier this year – an insightful book on the powers of rewards. The book also talks about the negative influences of incentives, if not designed well.

  1. Incentives can drown out intrinsic motivation, even when you’re doing a task you enjoy. If you receive an incentive for doing something, you also receive a subliminal message that the task is not worth doing without the incentive. End result: incentives transform an interesting task into a drudge, and play into work.
  1. Incentives can only give a short-term boost. Like caffeine, they’re useful when a deadline looms. But beware the energy crash that will inevitably follow.
  2. Rewards can become addictive. As Daniel Pink, the author, says – Yes, rewards motivate people. To get more rewards.
  3. Incentives do have their uses, but only for process-oriented tasks. In fact, incentives for creative tasks can impede progress. They narrow your focus at the exact moment when you need broad thinking.

The book captures many more interesting and significant implications of an innocuous, innocent incentive.

Book: Drive

Further Reading: Yes, rewards motivate people. To get more rewards.

 

3. Your MVP can be more “minimum” than you think (Lean Startup)

Most people working in the startup ecosystem are familiar with the Minimum Viable Product. The MVP is the most basic version of your product that still delivers your core offering.

It’s an important concept to keep in mind as you build a product. You don’t want to spend too much time building the first version, before realizing customers don’t want it.

I thought I’d understood the concept well. I congratulated myself as I built my first product in three months, found that people didn’t need it, and junked it. And again when I built my next product in four months, tested it with customers for three, and then pivoted it to its current form.

Then I read Lean Startup.

I realized then that I’d taken far too long to build my MVP. What’s more – so had everyone else I know. Why do we all take so damn long to build an MVP?

The reason is that we’ve got the concept wrong. You don’t need to ‘build’ an MVP. You just need to put it together.

What does that mean?

Let’s say you want to create a website offering fashion tips. You can launch in one day or less.

  1. Buy a domain. 3 hours (the actual purchase will take 2 min. But I know you’ll agonize over names for the remaining 2 hours 58. And no, the name won’t matter.)
  2. Build a landing page with Unbounce where people can ask questions or upload photos. 1 hour.
  3. Run a small Facebook campaign publicizing the site. Or tell 10 friends, and tell them to tell 10 more each. That’s your test audience. 2 hours. 

Thus, you can be up and running tomorrow! Even if you’re slow because this is your first time.

Many popular products of today hacked together such makeshift MVPs when they started. Check out the article in Further Reading for examples.

Books: Lean Startup, Four Steps to the Epiphany (focused more on the actual process of building a company in the Lean Startup way)

Further Reading: Your Minimum Viable Product can be more “Minimum” than you think; Have a great business idea? Don’t quit your job yet.

 

4. Pareto Principle & the Minimum Effective Dose (Four Hour Work Week)

Four Hour Work Week, by Tim Ferriss, is THE book to read on personal and business productivity. Unlike most productivity books and blogs, he eschews all the standard life-hacking methods (of the “shake your hips while you brush your teeth, to get some exercise” variety).

All he has to say about traditional time management is, “Forget all about it.”

Instead, he focuses on using the Pareto Principle, or the 80/20 rule. He uses this to introduce the concept of the Minimum Effective Dose – the smallest amount of effort for the most impact.

Whether your customers, your vendors, books you read, anything – choose the few that give you the most value, and forget about the rest.

He should know. He puts the Pareto principle on steroids. Sample this:

  1. In his nutrition products business, he “fired” the least profitable 97% (!) of his customers, to instead focus on the 3% most promising ones and double his income.
  2. He eliminated 70% of his advertising costs and almost doubled his direct sales income.
  3. He discontinued over 99% of his online affiliates.

Eliminating the least value tasks and business relationships helped him free up his time to do more productive tasks. And achieve the Holy Grail of less work but more profit. That’s how you do productivity!

Side note: In his follow up book, The Four Hour Body, Ferriss uses the concept of the Minimum Effective Dose to illustrate how to become more healthy. Check that out too.

Books: Four Hour Work Week, Four Hour Body

Further Reading: Winners don’t do things differently. They do different things., The Power of the Minimum Effective Dose

 

5. What’s your BATNA? (Getting to Yes)

One skill I tried to build last year was negotiation and persuasion. I read three great books on the subject. I’m still to have the investor conversations where I’ll use this skill, so I don’t know how much they’ve helped!

But one concept that has stuck is that of the BATNA – the Best Alternative To a Negotiated Agreement. In simple terms, the BATNA is your fall-back option in case talks fall through.

Your BATNA is tantamount to your leverage in the negotiation. It works in two ways.

1. The better your BATNA, the more leverage you have.

Let’s say you’re negotiating the sale of your house with a prospective buyer. Your alternative to this is to (a) rent it out; (b) sell it to a land developer to make a parking lot, and (c) live there yourself. If option (b), say, is the most attractive of these, then that’s your BATNA. The value the land developer offers you should form the baseline for the negotiation.

As long as the buyer’s offer is higher than this, you can reduce your price (after making a big deal of it, of course).

Far more important though, is that if the buyer pushes you below this BATNA, you can and should refuse. This is difficult. We tend to over-invest emotionally in a long negotiation. But with this hard stop in mind, you can overrule your emotions and walk away.

2. The worse you make your opponent’s BATNA, the more leverage you have.

Improving your BATNA gives you leverage. Straightforward. But there’s a more interesting insight here. You can improve your leverage by worsening your opponent’s BATNA.

Let’s say you’re the prospective buyer in the above transaction. You know that your seller is holding out because of the safety net of the land developer.

So, you remove that safety net. For example, you could sell one of your own other properties to the land developer, so he’s no longer making an offer to your seller.

By removing the most promising alternative your seller has, you’re weakening his leverage. And strengthening your own considerably.

Books: Getting to Yes, Influence, Bargaining for Advantage

 

6. [BONUS] Focus on strengths, not lack of weaknesses (The Hard Thing about Hard Things)

By default, we are all risk averse. In fact, Loss Aversion is one of the strongest, most deep-rooted cognitive biases there is, squirming deep inside our brain’s reptilian core.

This loss aversion manifests itself in several ways. Holding on to bad-performing stocks in the hope of a turnaround. Not making bets because of high risk, even if the reward is much higher.

In the corporate environment, this results in a preference for well-rounded candidates. We tend to choose such people over others who are spiky in some areas, but middling in others. We choose average programmers with great communication skills over 10x programmers who are introverts. We reject uber-salesmen just because they don’t know much about tech.

As Ben Horowitz says in this book, that’s the exact wrong approach. That’s not how great organizations work. Instead, such organizations look for excellent candidates, who are in the top 1 percentile of their roles. Never mind that they’re not good at other things.

“Identify the strengths you want, and the weaknesses you’re willing to tolerate.”

Your Product team should have the best programmers. Even if their communication skills could be better. For sales, hire the best salesmen out there, even if they’ve not worked in your industry before.

We also tend to paper over the weaknesses and focus on repairing them. Again, not the most optimal approach. Instead, focus on honing your employees’ strengths. Plug the weaknesses (If they’re important. They often aren’t.) by hiring superstars in those areas.

Books: The Hard Thing about Hard Things


So, those were the books and ideas that captivated my thinking in the last year. Here’s to many more brilliant ideas and books in the new year. Of course, you’ll be the first to know of any great books I find (sign up here to receive regular updates!).

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Your Minimum Viable Product can be more ‘minimum’ than you think

[A slightly abridged version of this appeared first in YourStory.]

Minimum Viable Product, or MVP, is sure to show up in any startup glossary. It would be the first word in the glossary if glossaries weren’t alphabetical. And like most other jargon, it is often misunderstood.

Final00001

But before we get into that, let’s come up to speed on the popular notion of the MVP.

An MVP, or Minimum Viable Product, is the most basic version of your product that still delivers your core offering. You build a bare-bones product fast (emphasis on ‘fast’), so you can get validation early before investing more time and money. Thus, the product needs to be as ‘minimum’ or basic as it can, but it also needs to be ‘viable’ – i.e., it still needs to solve the one problem it was created to solve.

Aiming for an MVP helps entrepreneurs (especially first-timers like me) avoid the rookie mistake – building too much product before validating market need. We all want the ten revolutionary features in our first version. But not only will these features take five extra months to build, most users will also not see them.


So that’s the concept of an MVP – sounds simple, right? I thought so too. I congratulated myself many times as I built my first prototype in three months, found that people didn’t need it, and junked it. And again when I built my next one in four months, tested it out over the next three, and pivoted it to its current form.

But when I took a step back recently, a thought struck me, “Four months to build an MVP? Sounds excessive.” We’d done all the right things – cut the feature bloat, honed in on the two key functionalities, and built them. But that’s how long it took. Notwithstanding my obvious bias, we couldn’t have done it in less than three months.

From talking to other entrepreneurs, I see that this is a common conundrum – why does the damn MVP take so long?

The reason is that we’ve got the notion all wrong – for all but the most tech-intensive products, you don’t need to ‘build’ an MVP. You just need to ‘put it together’. And this often doesn’t need much coding at all.

Final00003

Let’s say you’re starting a website that offers personalized fashion tips. You can launch in one day or less – you don’t need the full website right away.

  1. Buy a domain – 3 hours. [Hint: The name doesn’t matter. But we know you’ll take the time. And buy five domains.]
  2. Build a one-page website with LeadPages, where people can upload photos or ask questions – 1 hour. No need to create an account or browse any content – they can ask fashion-related questions, and you can email your replies.
  3. Or, you know what? Ditch the website. Just have a number that people can Whatsapp their snaps or questions to. 1 hour [for you and your co-founder to fight over whose number to use.]
  4. Run a small Facebook campaign publicizing this site / phone number. Or tell ten friends, and have them each tell ten more. That’s your test audience. 2 hours.

Thus, you can be up and running tomorrow – even if you’re slow because this is your first time. What are you waiting for?

I know what you’re thinking – why should we listen to this guy? What has he done?

I’ll tell you what he’s done (yes, it’s normal to talk of yourself in the third person). He’s compiled a list of companies that hacked together an MVP. You may recognize some of them.

 

A. Started with an incomplete product

  1. Zappos is a US e-retailer specializing in shoes. When it started, the founders visited a few shoe stores, took photos of their merchandise, and put them on their website. When customers purchased the shoes, they would buy them from the stores and ship them.
  2. I’ve heard this about Flipkart too. At the beginning, they went out and bought books themselves when they received orders, and couriered them.

Back then, they still had to build the e-commerce website. Today, with Shopify, you can do even that in a jiffy.

 

B. Started by combining existing products

Final00004

  1. Angellist is a LinkedIn for startups – a marketplace that connects startups and investors. How did they start? Their MVP was good old email. They made intros connecting a startup looking for funding to an investor looking for investments. That’s it!
  2. Amazing Airfare helps you find ridiculous bargains on airfare. The company put together its MVP with text messages, PayPal, Excel, and email. No code.
  3. Saralmarket is a fruit procurement company. They don’t have an ordering website or complex prediction algorithms. They use Whatsapp to send out market rates and take orders.

 

C. Started without a product (!)

Final00002

  1. DropBox started as… a video! No product – just a clip of the founder shifting files between folders. Interested people could sign up for updates. And tons of people did, so this was strong validation.
    1. Wait, there’s no product! So how can this be an MVP? You’re right – this may not be an MVP. But it is a great example of how to validate your product without a single line of code.
  2. Kickstarter campaigns do exactly this. You put up interesting product ideas before you build them. Others demonstrate their desire by supporting you. Validation complete – go build the product now.
  3. Buffer, a tweet-scheduling tool that manic tweeters swear by, also started as a two page website ‘MVP’ – the user could see what Buffer would do, and could sign up to learn more. When several people signed up, Joel Gascoigne knew he was on to something.

We’ll see more and more of this, as social media makes it ever easier to test your product. Even when it doesn’t exist. As Ryan Holmes (CEO of Hootsuite) demonstrates, you can simply ask Twitter.

 

This list can go on. But I’ll stop here with an anecdote. A friend told me a couple of weeks ago that he had a great business idea. He’d planned it in detail – he already knew the 12th feature he’d introduce in month 22. But he hadn’t launched yet – seemed too daunting. So this is what we did – we took one of these to-do books (check them out – the irony is delicious), and made a list of starting tasks. It wasn’t that long – only three items, one of which was finding a name – which he had, so we ticked this with a glorious flourish. You’ll hear from him soon.


I hope to build many MVPs over my career, so any lessons from your experience would be quite handy. Mail me at gt.jithamithra@gmail.com, tweet at @jithamithra, or comment here.

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Have a great business idea? Don’t quit your job yet.

A friend called me out of the blue a few days ago, and said he had a great business idea. Before I could get a word in edgeways asking him what it was, he blurted “And I’m quitting this Friday.” As I controlled my surprise and readied to respond, I flashed back to the time when I quit my job, two years to the day.

I Quit

I first got an idea for a new venture about 6 months before I quit. My co-founder and I spent a couple of months testing the idea with friends working in the target sector. Once we got feelers that we may be on to something, we spent another 2 months finding a good guy to helm product development. And then we started building the product. By the time I quit, we had a prototype ready, and our website also went up the same day – I could proudly mention it in my farewell email.

Less than 6 months later, we shut the business down (surprised you with the shock ending, didn’t I?). As we pitched the offering to prospective clients and started a couple of customer pilots, we saw severe structural limitations to the idea, and decided to shelve it. As the military saying goes, “The best laid plans seldom survive first contact.” Or to quote this generation’s premier philosopher, Mike Tyson – “Everybody has a plan, till they get punched in the face.”


 

All of this is to say – there’s a lot of uncertainty when you’re starting up. And while the uncertainty will never go away, there’s a lot you can do while still at a 9-5 (or 9-8 in case of this friend) job to answer the most primary question regarding your startup – is there a paying customer who’ll find value in your service?

Before you quit

1. Build out the product concept

Outline clearly what the product will do. This will be very useful later when pitching customers, but it is also important at the initial stages to make sure you’ve thought of all sides of the idea. If you have a co-founder, then it helps make sure you are on the same page.

You also need to think about the concept at different levels – now that you’re going to execute on an idea and it’s not just a castle in the air, you need to descend from your 20,000ft view. I found it useful to do these three things:

  1. First develop a 30 sec elevator pitch
  2. Then dive a little deeper, and think about a 2-3 min description of the product and its benefits
  3. Develop a 5-10 min presentation on the product – at this stage, you’ll start detailing how you plan to successfully and scalably deliver your value proposition.
    1. This can be in any format, but I find making a PowerPoint presentation an incredibly useful cure for a muddled mind.
    2. You can use the template below to sketch out your product concept and business model – it ensures that you think through all the elements of your business model.
Based on framework from strategyzer.com

Based on framework from strategyzer.com

2. Test the product concept with prospective customers

Unless you’re building a visionary product that people don’t yet know they want (are you the next Steve Jobs?) or there are strong reasons to be in stealth (e.g. Siri), you must absolutely talk to a lot of customers or industry experts. You’re not selling anything yet – this is more about validating the idea itself and ensuring that this is something people would pay for.

I would hesitate to put a number to these interviews – it really depends on the space you’re in and where in the value chain you’ll play. But, roughly speaking, let’s say at least 50 customers in case of a B2C product, and 5 in case of a B2B one.

The aim should be to rapidly iterate on the idea and improve it. For instance, when we were validating our idea, there were times when we would meet one person, return home and change the pitch, and then go to the next meeting. Such early conversations are invaluable in refining your idea significantly, before you spend a single penny on development.

Customer Feedback

You should also use these conversations to test your financial assumptions. How much would people pay for this product? How much would it cost to acquire the customer – distribution costs, marketing costs, etc.?

 

Let’s stop for a bit – at this point, all you’ve done is understand your idea, and test it with a bunch of people. No need to quit yet. But let’s move on.

3. Design a strawman / prototype

Once your customer interactions show that your idea has legs, and you refine your idea with customer inputs, it’s now time to design the product. You’re not actually building it right now – you’re just giving your product concept some form and shape. You can use Just in Mind for this – this tool allows you to draw out your product’s different features, and create the usage flow (I used this tool to create the first design for my current app). For example, if you’re building a mobile app, you can create a series of screens with the rough functionality you envisage. You can also map buttons to specific other screens – so that when you’re showing the prototype to someone, you can also demonstrate how the app transitions will take place.

Doing this can be challenging – it’s the first time you’ll be doing something concrete about your idea (and even more so if you’re a first-time entrepreneur, like I was). But if you don’t start enjoying it soon, then that’s a valuable learning too – maybe you’re not yet ready for the uncertainty and vagueness of starting up.

4. Test the prototype with customers

Once you’ve built the prototype, you hit the road again. Test it with the same or different customers – would they actually use this product? How much would they pay for it? You’ll learn a lot – just like creating a concrete design helped you clarify your own thinking on the product, users will give more actionable feedback when they can actually see the product in some form. All of which will improve the first version you launch significantly – without quitting your job yet.

5. Build out your initial financial model

I’m biased towards drowning in large excel models, and therefore I hesitated to put this down – is it really necessary so early on? But on second thoughts, it absolutely is. Not only does it help you acknowledge your assumptions, estimate the cash burn rate and plan your runway, it also gives you one more concrete element to test in the market – running this by customers can again help you verify that your business is attractive. And as long as your assumptions reconcile with user opinion, you can continue to the next stage – developing the product itself.

6. Start developing an MVP

Assuming the previous steps went well (i.e., people liked the product and you liked the experience), you then start building the Minimum Viable Product, or MVPthe most basic product that fulfils your core value proposition.

If you’re the technical lead, then this may be the time to quit your job – but only if you can’t manage this in addition to your regular job. And if you’re not the technical lead, then there’s still not enough for you to do at the venture to justify quitting. Spending your weekends working with your team and meeting customers is more than enough. In my case, our tech lead worked closely with a couple of freelancers to build an MVP – while it wasn’t ready yet by the time I quit, we were more than halfway there. (There may be divergent opinions regarding using freelancers / outsourcing initial tech, but let’s leave that for another day).

An advantage of hacking together an MVP quickly is that you can validate and refine your product much faster, which brings us to the next point…

7. Test the MVP with initial pilot / alpha customers

Testing

The next step is to share this MVP with some of the customers you spoke to in the previous steps, and see how they use the app. You’ll find that if you did the previous steps correctly and the customers are indeed captured by the product vision, they’ll forgive a lot of UI issues, buttons that don’t work, etc. – as long as the core value proposition is delivered satisfactorily.

Only once this MVP works do you really need to quit – before this, there’s more than enough time on the weekend.


 

Thus, there’s a lot you can do to get your product off the ground before you even quit your job. In retrospect, I think even I quit too early. I could very easily have continued working till the time we found that the idea didn’t work!

Now, delaying your resignation is certainly easier said than done. I had a very supportive employer, and I could keep my boss in the loop from the very beginning. As long as I fulfilled my responsibilities at work, no one had a problem with my moonlighting. But other companies may be different, and I can easily imagine cases where this may be frowned upon.

Another factor that could make juggling everything difficult is the intensity of your day job. If that itself requires you to burn the candle at both ends, then you may not have any energy left to fuel your own venture. In such a situation, you may need to take a leap of faith, and take a short sabbatical (if you have a great equation with your bosses) or quit with the confidence that you’ll find another job if your venture doesn’t succeed.

And of course, there is the mental angle – most of us, to begin with at least, can’t compartmentalize our different roles. In such situations, one may feel that cutting a bond, however tenuous, with the previous employer is critical to fully seizing the new opportunity. So it’s definitely not as simple as I make it sound.

 

But to tilt the scale yet again, there are a few more underrated benefits of quitting later.

  1. If your entire career thus far has been a salaried job, a clock will start ticking in your head the day you quit – especially if you’re paying a salary to your team. It makes a difference whether you’re paying this salary out of your (paltry) net worth, or from your own monthly salary. This happens to the best and best-paid of us – there’s no escaping it. Delaying your exit till a time when your product value proposition and customer validation are more solid can do a lot to assuage those frayed nerves.
  2. This cash in hand aspect is particularly important early on, when you’re still experimenting. Having a fixed cash inflow gives you the staying power you need to try different value propositions, business models and consumer interfaces. Otherwise, every next experiment will pinch you – not the best frame of mind to unleash your creativity. In my case, I had already quit when my first idea failed! So I went back to working as a freelance contractor for 1-2 days a week, to fund my next product and keep me in the game.
  3. You’ll have to work very hard initially, juggling your job and startup. Those few 100 hour weeks, working yourself to the bone, will tell you whether you’re really passionate about your venture, or just interested in the hype!

What do you guys think? Do you feel it’s hard to work on your business idea while also doing a day job? Would love your perspective – mine’s based on only a few sample points. Comment here, email me at gt.jithamithra@gmail.com, or tweet at jithamithra.

Thanks to Abhishek Agarwal for providing inputs on an earlier draft of this post. And for sharing this excellent article, on the same theme. Just as I was ready to publish this post 😛

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