Last week, I was invited to the Indian Institute of Management, Trichy, to talk to the students about startups.
Given the hype associated with “starting up” today, with investors opening their purses wide and newspapers dedicating daily centerfolds, everyone wants in. And if I remember correctly from when I was a student (or even when I was working in strategy consulting), it can become difficult to separate fact from fiction when you’re looking in from outside. More so if your only source of information is a newspaper.
Therefore, I decided to speak on “The truth about startups”. Apart from being clickbait, the topic is also pertinent for a number of reasons.
Startup accounts in newspapers are almost always after the fact – they are tinted with 20:20 hindsight. There’s a lot more uncertainty when you start a business. Lots of things go wrong. All of this is airbrushed away in the ‘inevitable march to victory’ accounts you find in newspapers.
If you look for patterns only in companies that succeeded, then you’ll suffer from survivorship bias. Seeing that many successful founders are passionate today is not enough to conclude that it is necessary and sufficient for starting up. For all you know, the graveyard of failed businesses may be littered with passionate entrepreneurs (and it is, as you’ll see in the Slideshare presentation below).
As Steve Blank says, small companies are very different from large ones. A company that has just started is very different from one that has found product-market fit, which itself is distinct from one that has scaled. You hear only of startups that have found some measure of success already. Applying patterns from such companies to your fledgling company indiscriminately will at best be a waste of time. At worst, it can cause active harm.
As a founder who’s in the trenches right now, I thought I must set the record straight. When you’re trying to find your feet and learning how to build a sustainable business in an uncertain world, what do you really need to set out on the path to success?
I asked the students this question at the outset – what do you need to start a company? Almost all the answers were variants of the following:
Passion
Vision
Dedication
A brilliant idea
Lack of competition
A sound business model
Huge risk appetite
Tons of money / resources
These sound quite definitive. But they aren’t.
I don’t think you need ANY of the above to start up, as I explain in the embedded Slideshare presentation. They may become important at later stages of your startup’s life, but they are definitely not needed when you’re just starting out.
And I’m not saying this just to make a point. Some of the above factors are distractions at the start, and some others may in fact insidiously drive you to inevitable failure.
Then what do you need? You just need two things – a decent idea, and a willingness to learn. These are necessary and sufficient for most business ideas. Check out the presentation for more.
[Tweet “You don’t need passion or vision to start up. A decent idea and willingness to learn are enough.”]
The presentation also includes links to various articles for further reading. I love diving down the rabbit hole, and I hope you do too.
I’d love your thoughts on this. If you see any gaps in logic or don’t agree with something, please comment here, write to [email protected], or tweet at @jithamithra. I’m willing to learn.
PS. Thanks a lot to Abhishek Agarwal, Aditi Gupta, Akshat Poddar, Shashank Mehta and Srinivas Chaitanya for their inputs on this.
[Note: an abridged version of this appeared on YourStory last week.]
Don’t you get irritated when you make a rookie mistake?
I’ve been reading a few books and articles on product design lately (I recommended one of these in last week’s newsletter). Some recent, and some classics that designers still swear by, 30 years after first print. Comparing the two, one thing struck me. Devices, user interfaces and users have morphed beyond recognition. But the principles of good design haven’t.
Yet, we still make tons of elementary mistakes. I know I do. These were silly mistakes then, and they’re silly now. It’s a cycle we’re all prey to – make a few basic errors, learn from them (I’m optimistic), and then go make some new ones.
But, surely, reinventing the wheel is not efficient. Each time someone repeats a basic mistake, it’s a waste. A waste of our collective efforts.
So here’s my attempt at reclaiming squandered time. Here are the three most critical design mistakes I’ve made. I hope others who are building new products can learn from them (or scoff at me – I know I run that risk).
A. Not Onboarding the User (or Onboarding her, but badly)
Design gurus talk ad infinitum about the importance of onboarding users. And it’s also common sense. Therefore, in the first version of my app, I included a six-screen tour upfront to help users immediately see how they could get value from the app. But that didn’t work.
In a world where you lose 80% of your users within 3 days, users don’t just want to see the value upfront. They want to get the value immediately.
So, after a few cycles of lower user activation, we now focus exclusively on soft onboarding – guiding users as they do actual activities on the app, rather than “teaching” them before they enter.
[Tweet “Users don’t just want to see the value upfront. They want to get the value immediately”]
Another mistake we made was asking the user to invest too early.
If you ask the user to do some “work” before she’s sold on the app’s value, you’ve lost her. Let’s say you ask users to create an account. 90 per cent won’t if they’re not convinced that the app is great. What about Facebook login, you may ask. Yes, it takes only 14 seconds. But no, that’s too long.
To overcome this, we made the registration simpler in each successive iteration. First, we reduced the number of mandatory fields. Then, we removed some fields altogether. Then a couple more. Finally, we had only “mobile number” left. Just one ten-digit number, which your fingers know by rote; surely that’s not convenient? But still, user metrics were quite deflating.
It was only when we removed the login altogether that our sickly funnel began to recover. We now collect the mobile number only once the user completes her first iteration through the app – when she has already derived some value from it.
Moral of the story: Unlike your investors, your users need to see the return BEFORE they invest
[Tweet “Unlike your investors, your users need to see the return BEFORE they invest”]
B. Not Optimizing User Funnels
On the mobile screen, space is scarce. And given the vast multitude of competitors vying for your user’s attention, space in her mind is, if anything, in even shorter supply.
Therefore, you must keep things simple. Don’t make the user think about what she wants to do. Once she opens your app, the next step should be self-evident.
There are two ways to mess up here: (a) give the user too many options; or (b) put important actions deep inside the app. We paid attention to the first, but missed the second. No matter how many triggers we gave, if a functionality was two or more taps away in some menu, users wouldn’t see it.
Finally, we mapped out the possible user flows on the app. And redesigned it such that the user sees what she’s looking for on the first screen itself. And not in some corner of the header. Front and center. No brain cycles wasted makes for a happy user (and a happy me).
Moral of the story: Think about all the contexts in which the user will use your app, and make each of these as simple (one-click) and clear (visible) as possible.
[Tweet “Show your user exactly what to do – no brain cycles wasted makes for a happy user (and a happy you)”]
A related issue that several apps (including mine of course) suffer from is that funnels tend to be too long.
It’s pure wishful thinking: “I’ve placed a pot of gold at the end of the funnel. The user will jump through as many hoops as I place in the way.” Won’t happen.
We did this too. In one funnel, for example, we wanted the user to (a) watch a video; (b) answer a couple of questions; and (c) take a photo before they saw any value from the app. Some of our early adopters were enthusiastic enough to do this. But alas, this smoke did not bring fire, as our user base expanded.
Today, we’ve made our funnel much shorter, and are seeing far more users complete the journey through it. And they’re earning their (small) pot of gold.
Removing low-value actions from the user flow increases the prominence of the high-value steps
Highly optimized flows make it insanely easy to understand, “what do I do next”
The user gets to her “AHA!” moment much faster and more often. This is especially important – as Facebook and Twitter will testify, what users do in their first visit is often a strong predictor of eventual loyalty and retention.
Fewer moving parts means it’s easier to tune the engine going forward as well.
[Tweet “The shorter your funnel, greater the likelihood that users will reach their AHA! moment.”]
C. Not personalizing user messaging
I learnt early on that notifications are quite powerful. When a user first installs your app, she may not check it often. Notifications help build the habit. Make her phone buzz every day with a message from the app, and she’ll check in often.
So, armed with time-tested copywriting wisdom, I set to work. I focused each message on the user benefit, and put a clear call-to-action each time. And it worked!
For a time, anyway.
Early on, we would get a solid bump in user engagement in the few hours after a notification. But that quickly fell away. As users got more acquainted with our app, the standard daily messages, albeit highlighting user value, became just noise. Of course the user knew how she could benefit from our app. She’d been using it for a month! After receiving a stock notification for five straight days, the only action users often took was to uninstall the app. As we very heartbreakingly heard from some of our (ex) users.
[Tweet “On receiving a stock call-to-action message for 5 days, the only action you take is to uninstall.”]
The only notifications that work sustainably are personalized messages. I don’t mean just including the user’s first name in the notification. That feels clever, true. But here’s the thing – every app worth its salt does it. And the user knows it’s automated.
Instead, customize the message based on what the user does on the app. If a user comes to your app every day for five days and suddenly misses a day, then tell her you’re missing her (in a non-creepy way, of course). If she’s close to a milestone, remind her of the rewards awaiting her. Remind of her recent wins on your app to bring her back. Even if a user knows these notifications are machine generated, they still work.
Referencing users’ past activities creates a much stronger hook, reeling them in.
Today, we strive to send more personalized messages to users, uniquely tailored to their usage of the app.
D. Bonus mistake – not learning from any of the above
Since you’ve stuck with me this far, here’s a bonus mistake. This is as rookie a mistake as they come.
Over our initial few months, we made several design changes to the app in each version. So, when user behavior changed (or didn’t change), we weren’t really sure what the driving factors were. Which changes helped, and which ones didn’t? Were none of them helpful? Or were some cancelling out others? No clue.
And even in those situations when the data may have had definite implications, we weren’t disciplined about looking at the numbers and learning. Does a tree fall in a forest if no one’s around, etc.
Now, we try and make changes in such a way that we can track their impact. Make a change, wait a while, and check for variance in user behavior. That’s the only way to learn what’s working and what’s not.
I hope I’ve learnt from these mistakes, and that our bucket won’t be as leaky now. What about you? What are the design mistakes you’ve made, that now make you cringe? Drop me a line at [email protected] or @jithamithra, or just comment here. I’d love to hear from you.
No, I haven’t made a typo in the title. The age old saying “Winners don’t do different things. They do things differently.”, made famous by Shiv Khera in his book You Can Win, is wrong.
I remember when the book came out, everyone quoted it as gospel. Every individual can be great. All you need to do is work hard, and work smart. And they would all nod knowingly at the last clause. So that’s what I did – studied hard, went to a good B-School, got a great job and worked hard (and smart) there.
But unfortunately, this saying isn’t true. And it’s becoming more false as technology eats the world (to co-opt Marc Andreessen’s pet phrase).
This mentality of doing things smarter now pervades all aspects of our life. But it suffers from one fallacy – what I call ‘focusing on the numerator’.
It’s like a company that focuses only on improving its profit margin. It brings in cutting-edge efficient machines, implements Just-in-time production techniques, and what have you. But with all these productivity improvements, how much could the profit margin increase? From 15% to 20%? 40%? 100%??
Even in the best (and impossible) scenario, the upside is capped at 100% of revenue. What if you focused, instead, on the denominator? What if you looked for ways to achieve a step jump in revenue? Suddenly, there’s far more value to capture, even if you are inefficient.
What you work on matters, and matters far, far more than how hard you work. This is an example of a Power law, which I’ve written about before. In the early 1900s in England, there was a profession of people called ‘knocker-uppers’ (no, it’s not what you think). Their task was to wake people up every morning. They would walk the streets with a long stick, and tap on windows till people woke up. Many of them worked hard. I’m sure they worked smart too – with well-balanced, aerodynamic and sonorous sticks. Still, they lost their livelihoods in a jiffy when alarm clocks came into the market.
Moral of the story: Do more valuable tasks, instead of doing less valuable tasks efficiently or smartly. Doing something unimportant well does not make it important.
This is how the world is today – it’s the new normal. The companies that win are the ones that innovate 10X and ‘change the game’. Not the ones who innovate incrementally. As Peter Thiel says in his book, don’t move an industry to greater efficiencies (i.e., from 1 to 1.1). Focus instead on moving something from zero to one.
[Tweet “Do more valuable tasks, instead of doing less valuable tasks efficiently or smartly.”]
Look at the biggest companies around us – Google (search advertising), Apple (iPhone), Amazon (e-commerce, e-books, etc.). They didn’t just improve search algorithms, build a better phone, or sell books through a simpler distribution chain. They revolutionized their respective industries. Not by doing things differently or more efficiently, but by doing different things.
And it’s not just companies – it’s visible in every aspect of life. No longer can you say, “Karm kar, phal ki chinta na kar” (“Work hard, don’t worry about the result”) in all honesty. If the recipe sucks, it doesn’t matter how good a cook you are.
[Tweet “If the recipe sucks, it doesn’t matter how good a cook you are.”]
This may be bad news. But it’s good news as well. Once you start looking for this ‘focus on the numerator’ behavior everywhere, you can make more valuable decisions about your company, your products, and your time.
A few examples of the implications, off the top of my head:
Product Management: Instead of A/B testing and optimizing your nth new feature, focus on getting more people to use your product. Andrew Chen puts this well in a recent article.
HR: Instead of trying to getting the best out of your team, learn how to build a better team. [This is more important in technology businesses, and less so in traditional brick-and-mortar companies.]
Health: You can try to manage your cholesterol by eating french fries cooked in refined oil or unsaturated oil or whatever the flavor of the season is. Or, you can just stop eating french fries!
Personal Finance: Focus on earning more, not spending less. A direct corollary of the revenue-profit point I made earlier. It’s ironic, but I’m the prime target for this lesson. As a Tam-Brahm, I started expense budgeting almost before I could walk. I’ve spent countless hours balancing my expenses, tracking my receipts, and strategizing lower spends, when I could have instead focused on doing more valuable things. Which means anything else, basically.
Personal Productivity: Be effective, not efficient, as Tim Ferriss says in The Four Hour Work Week. Do two important things, instead of 10 unimportant ones. Again, a slap on my face – so far, I was firmly in the ‘get more out of your day‘ brigade.
TL:DR: In work as in life, we should strive hard by all means. But we must think hard first – is what I’m doing the most valuable thing I could do? Let’s build more important things, instead of optimizing our lives away.
What do you think? Are there any other examples of ‘focus on the numerator’ behavior? Drop me an email at [email protected], comment here, or tweet at @jithamithra.
[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.
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.
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.
Buy a domain – 3 hours. [Hint: The name doesn’t matter. But we know you’ll take the time. And buy five domains.]
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.
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.]
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?
[Tweet “You don’t need to ‘build’ an MVP. You just need to ‘put it together’.”]
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
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.
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
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!
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 (!)
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.
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.
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.
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 [email protected], tweet at @jithamithra, or comment here.
I first encountered Virtual Reality in a few movies in the 90s. Characters wearing giant headsets and inhabiting virtual worlds. At that time, it seemed a creative plot device, but not much more. Till recent months, I thought of it only as a somewhat cool but clumsy gaming mechanic. It could make playing Call of Duty more immersive, sure. Till you turn your head and the surroundings pixelate.
But I was wrong.
A lot of articles today talk of the VR industry as fast coming of age. The first heavy-duty Virtual Reality headsets will hit the market in 6 months. Yes, ‘coming of age’ is a heavy cliché – Bollywood has been coming of age since I was ten. But the term has a specific meaning in Virtual Reality – ‘presence’. A VR environment achieves presence when it’s of such high quality that it tricks your brain. It’s when your mild fear of heights stops you from bungee jumping in a virtual adventure game. One minute you’re laughing at a joke from your friends. The next, you’re struck with sudden terror that a zombie’s about to eat you.
I thought this talk of ‘presence’ was idle fan-boy chatter. How can an obviously artificial image fool anyone? Then I saw this:
Looks like VR will achieve presence soon (if not already) in games. But what are the implications of this, beyond standard First Person Shooter games? Is it going to affect oldies like me who’re over games?
There’s a saying in the industry that virtual reality is the ‘last medium’. Once VR achieves presence and becomes ‘real’, you don’t need any other communication medium. You can communicate anything within VR, using just code.
If that’s the case, possibilities are limitless.
I’ve just listed a few below, off the top of my head. These are not flights of fancy. Quite the contrary. What would surprise me is if someone somewhere is not already doing all of these things.
1. Games + Motion Tracking
I lied – I’m not over games. The most immediate potential is there. But not Doom in VR. When Doom first came out, I heard of people dying from shock while playing the game on a slow PC. Imagine the same in (virtual) reality – recipe for a spike in heart attacks.
Instead, simpler games could be the way to go. Just like Wii caught on with embarrassingly crude graphics in amateurish games. Combine this with motion tracking, and this could well be Wii 2.0. Mortal Kombat, where you’re actually fighting. Tip: Make sure you do this in a large room, or you’ll bust your knee on a wall.
2. Physical Fitness & Development
This follows almost immediately from gaming. How would you port Temple Run to Virtual Reality? With a treadmill. And what better way to learn a martial art than to spar with Morpheus? (Plus it would be a virtual rendering… of a movie about virtual reality).
But not just physical development. VR could also improve your confidence. Could a VR simulation where you defuse an atomic bomb and save a billion people improve your self-esteem?
Peace of mind is also not far away. No longer will your meditation guru say, “Imagine a sylvan paradise…” He’ll say, “Wear this headset.”
3. Tourism
This could well be the ‘killer app’ that brings VR to the mainstream. Can’t spare the cash for a trip to Easter Island? Experience it in VR instead. You’ll feel like you’re there. You could also make the long pending pilgrimage to Las Vegas with your best friend. Sitting at your respective desks 500 miles apart. Always scared of skydiving? Do it virtually and enjoy the thrill (and terror) from the comfort of your sofa.
But why restrict yourself to places on Earth? You could even travel to distant stars, stopping over at Pluto on the way.
And talking of space, can time be far behind? I visited some Indus Valley ruins last year and got mighty bored. What if, instead, I could go back in time and walk among the people who lived there?
Having explored all four dimensions of reality, why stop there? (Can you tell I’m enjoying this?) Dive into a book instead – Sophie’s World Redux. Experience To Kill a Mockingbird from Scout’s eyes. Or Atticus’ – take your pick. What about movies? I don’t know about you, but I’d love to say, “Why. So. Serious?”.
4. Education
Education also smacks of potential for virtual reality. When I was a kid, my dad got me a Dinosaur encyclopedia CD. It had videos that you could watch with 3D glasses. I loved that almost as much as Jurassic Park. But tomorrow’s kids will be able to experience all this in VR.
VR will also pave the way for a better understanding of the micro-world. A biology student will be able to take a roller-coaster ride through the esophagus. Then fall into the stomach, just in time to see digestion happen. Or zoom in a little more and see how the body’s cells function.
5. Occupational training – Simulators
Simulators have been in use for a long time to train pilots. But VR would bring a step-change in training and testing. You’d be able to place the trainee under pressure with a stalling engine, and see how they react. It’s one thing to know what to do in a theoretical exam. But when you actually believe you’re going to crash, we’ll see what stuff you’re made of.
We could also use simulators for physical rehabilitation after severe injuries. Re-learning movements would be much easier (and more enjoyable) if you’re playing a game.
Parental training is another area to explore. VR and motion tracking could help test how well you’d handle a child, and teach you what to do. Maybe in the future we’ll have parent certifications too? OK, maybe I’m getting a bit ahead of myself.
6. Augmented Reality
Augmented reality (AR) is a close cousin of Virtual Reality. Instead of a completely artificial world, you overlay simulated objects on the real world. But good AR is at least five or ten years away. With current processor speeds, it’s much harder to overlay virtual objects on your surroundings in real-time.
But once Moore’s Law does its thing, great AR will become possible. Once that happens, we could do a lot of interesting things:
We could have real-life navigation in our cars. The correct turns would be highlighted on your glasses. Yes, this may be distracting. But we can have our little fun, before self-driving cars make all this redundant.
Games could become a lot more engaging. Imagine: you’re in Rome, and you play a treasure hunt across the important monuments. The ‘treasures’ don’t have to placed anywhere. The moment you reach the right place, you’ll see them on your glasses.
The next Farmville won’t be on Facebook. It may be in your drawing room.
There would be business implications too. Virtual meetings will finally become a decent substitute for actual presence. You’d see perfect holograms of your colleagues around your table, as you brainstorm on the next VR product you’re going to create.
Finally, the way you consume content would change completely. Remember Minority Report? A company in Florida, Magic Leap, is working to create exactly that experience. Check out this video:
I’m excited about Virtual Reality, and the many new frontiers it will unlock. But it will also unlock several opportunities to make a ton of money.
Every new communication platform creates several industries in its wake. TV created filming technology innovators, video content companies, and network behemoths. iOS and Android have fueled sharp growth in many industries – app design and development, mobile advertising, and even frameworks and systems to make app development easier.
Virtual reality holds even more promise, as it combines both technology and visual depiction. The main platforms are emerging – Oculus Rift, Sony’s Project Morpheus, and Samsung’s Galaxy Gear. Others will appear soon. This will create opportunities in many areas, including:
Creation of VR content. Whether games, tourist content, or any of the ideas mentioned above.
Technology to help capture the content.360-degree camera rigs to capture VR-ready videos, apps to help you create VR videos using your phone, etc.
Programming architectures to write code for VR, and frameworks / SDKs to help in VR app development (like PhoneGap for Android and iOS).
Thus, VR could be the next big thing. It could change how we consume content and travel, and afford tremendous business opportunities. And then they’ll start using it for porn.
Hope you had as much fun reading this article as I had writing it. I didn’t think VR was a big deal, till I got to reading about it. What’s your reaction – comment here, tweet at @jithamithra, or email me at [email protected]. Also, before I forget. I’ve put together a few interesting articles on VR in my newsletter this week. Check it out here.
Strategy consultants are a much maligned lot in the startup and business world. Over the five years I spent at the Monitor Group (a strategy consulting firm started by Michael Porter), I heard various complaints:
How can a young consultant say anything useful to an industry veteran?
What’s the use of a plan that’ll take five years to execute?
Consultants don’t do anything except make slides.
You don’t know how to make decisions. Sure, you can advise people…
You never put your money where your mouth is. (I think Paul Graham meant this, when he called management consulting a version of ‘gaming the system’).
I heard many such comments during my tenure, from friends, relatives, and chatty fellow travelers on long flights. And seeing how we addressed these complaints at Monitor – while advising large conglomerates in established industries, paradoxically enough – prepared me for starting up.
1. It doesn’t matter who you are or what you know. You need to have a hypothesis, and be ready to learn.
When I started in strategy consulting, the first thing that struck me was the novel, hypothesis-based approach.
Hypothesis-Based Approach
Coming from an engineering background, I was used to the deductive approach – start from what you know, and proceed towards conclusions. But a hypothesis-based, inductive approach starts from the other end – you make some predictions, and then proceed to test them (and modify them as needed). This data-driven learning approach is a great complement to industry understanding. That’s why companies hire strategy consultants – to hold up a mirror to their beliefs, test them, and help company executives understand how the industry’s evolving.
Performing this process – of making predictions, being proved wrong, and correcting them – repeatedly over multiple projects gives you a healthy appreciation of your own ignorance. I’ve found this invaluable when starting up – I may not know the right answer, but I know how to test my beliefs and work my way there.
[Tweet “I may not know the right answer, but I know how to test my beliefs and work my way there.”]
2. You need to be OK with uncertainty.
One of the differences between strategy and operational consulting is the timeframe – strategy is more long-term. The industry trends you bank on may play out over 3-4 years – some may not have even started yet. So there will be ambiguity. But you still need to make some bets, and find creative ways to validate (or invalidate) them – talk to industry experts, observe trends in related industries and evolution of similar economies, etc. But none of these will give you the perfect answer – you need to ‘satisfice’. Thus, not only do you not know the answer starting out, but you also may never know the answer with certainty.
And it’s the same at my startup – I don’t know if my product is going to be loved, hated, or worst of all, ignored – first by early adopters, then by followers, and then the rest (if I get that far). But I’ll keep plugging away, and figure out ways to run small tests often to ensure I’m on the right track.
3. Serving your clients’ needs is your foremost objective.
Ignoring the double entendre for a bit, client service is the priority in consulting – I heard this all the time from Partners at Monitor. Whether it’s sudden weekend work or an ill-timed field visit, you do it if it benefits the client.
Today, I have a consumer-facing Android app. Every once in a while I get a caustic review, or a needlessly harsh 1-star rating. But it’s not my place to rail against unreasonable users – if I focus on serving them well, then I hopefully won’t have to worry about these ratings in the future.
4. Brevity is the soul of communication.
Naysayers are true when they say consultants make a lot of PowerPoint slides. Boy, did I make a LOT! But the thing about slides is that, unlike a Word document, there’s limited space. So you need to make your point succinctly. And you need to say first up why that message is important(or as they say at Monitor, you need to bring out the ‘so whats’).
I’ve done my 10,000 hours of slide-making. I’m still far from a genius at it (Gladwell was wrong), but knowing how to deliver the key message upfront and in as few words as possible is a very useful skill at a startup. Whether it’s in crisp emails to potential clients, high-impact copy for Facebook ads, or elevator pitches to investors with short attention spans, brevity is invaluable to startups.
5. Ideas are worthless. Execution is key.
I know this sounds very ‘global’ (and it is – I won’t lie), but project after project has taught me that the best-articulated strategy can stop making sense once you start implementing. There was one case where we designed the strategy and left, and the client came to us after a few months saying everything is shot to hell and can we please come back and help them. We could definitely have done better – it was our responsibility to devise a plan that the client could implement, and explain it to the client’s team.
But the larger learning for me was that your plan doesn’t matter so much; it probably wasn’t rocket science to begin with. But you need to be able to execute on it effectively. It needs to be ‘actionable’.
[Tweet “Your plan doesn’t matter – it probably isn’t rocket science. You need to be able to execute on it.”]
In the same article where Paul Graham says that management consulting is gaming the system, he also mentions the similarity to college. And while I may not fully agree with his first comment, his second is spot on. A strategy consulting firm is one of the best finishing schools you can go to, if you want to build a business of your own someday.
What do you think? Did these learnings resonate with you? And did I miss anything? I’d love to hear what you think – mail me at [email protected], tweet at @jithamithra, or just comment here.
[A version of this article appeared on YourStory last week.]
One of the tenets that stock market investors live by is diversification. As their advice goes – if you invest in several (uncorrelated) stocks, you reduce the risk of a sharp fall in one stock damaging your income significantly. An extension of this argument is that traders should maintain a mix of low-risk and high-risk assets in their portfolio; even if the risk materializes and your high-risk assets blow up, you still have some income. This is called the ‘barbell strategy’.
This is a very useful concept in stock investing. But can we take advantage of this in other businesses?
Before we try and answer this question, let’s understand the ‘barbell’ concept a little better.
The reason this investment strategy is called a ‘barbell’ is that all your investment goes to the two extremes of low risk-low return and high risk-high return, much like the weight of a barbell is concentrated at its ends.
Thus, you deliberately plant your feet at both ends – low risk and high risk; low payoff and high payoff; short-term and long-term.
Sounds like a great investing idea – limit your potential losses, even while pursuing high-risk investments. But, you may ask, how does this help those of us not in the financial sector? If you’re not a trader, how can you take advantage of diversification in general, much less a ‘barbell’?
There are several different avenues of business where a barbell approach can help cover downsides, and allow you to test new channels of growth.
1. Startup Marketing: There are several different channels through which you can market your product (Traction, an excellent book on the subject, lists 19!). But not all of them are equal – channels like TV advertising, SEO, and viral growth have a high ceiling on saturation (i.e., you can acquire millions of users through these channels), while others (PR, social media, community emailing, etc.) are far less scalable. But there’s a flipside – the former ‘moonshots’ are also more expensive, far more risky, and take longer to optimize.
When you’re selling a new product, you should definitely explore some of the moonshots – if any of them work, they can make your company’s destiny. But you should also invest in the more near-term, less-scalable channels, to ‘keep the wheels turning’ with a small flow of users. This also gives you time to perfect your product and plug the leaks in your user acquisition funnel, so that when one of your moonshot experiments suddenly delivers a deluge of users, you are able to effectively retain them.
2, Short vs. long-term value propositions: Sometimes, startups also need to bet on a combination of short and long term opportunities. Your product vision may be very ambitious, but you often can’t offer that proposition from day one. In fact, the more ambitious your vision, the longer it will take to start delivering it. So, if you want to survive long enough to achieve your dream, you need to sell something else till that happens.
A great example of this is Zomato – they started as a pure-play information source on restaurants around you. Gradually, as the user base grew, they began overlaying restaurant promotions. Now, they’ve just started an even more lucrative food delivery service. And I bet they’ll add other services soon – allowing you to book a table, pay for your meal through the app, etc. (I predicted this in an early March blog post, maybe 10-15 days before they started the food delivery service :P).
3. Multiple product lines: More mature businesses also employ the barbell strategy. They often have one-two cash cow product lines, which they can milk till the cows come home (I had to take the metaphor to its conclusion, didn’t I?). This gives them the freedom to invest in potential breakthrough products – many of these will fail, but a few will succeed and make up for all the losses and more.
Think of skincare brands – they all have some stable products like fairness creams and face washes, and periodically introduce more cutting edge products (e.g., anti-aging elixirs) to test the market.
4. Your own entrepreneurial career: The above examples are at a company level. But even individuals can employ a barbell strategy. For example, I have a startup, and have been working on a couple of products for 2 years now. At the same time, I also do some freelance consulting, and am about to run a taxi on Uber / Ola. Not only does this small but steady income give me the staying power to explore more opportunities at my startup, it also gives me a reserve to tap into, should any of my experiments work and I want to step on the gas. You may say I’m hedging. I don’t disagree, but I’ve found this safety net invaluable – I can apply myself to my venture in the best frame of mind, without worrying about a fast-falling bank balance.
Thus, you can employ the barbell strategy in several different situations, to reduce your risk even as you take on high-risk opportunities. And that, ladies and gentlemen, is how you can have your cake and eat it too!
I’d love to hear what you think of the barbell concept. Can you think of any other applications? Comment here, drop me a line at [email protected], or tweet at jithamithra.
I read this post by Ellen Chisa recently, on the most important things she learnt at Harvard Business School. While I did not go to Harvard, I still had the good fortune of going to IIM Ahmedabad. So Ellen’s post motivated me to compile my own list of learnings from business school. But that was only part of the inspiration. There’s a standing joke, not entirely funny, among IIM graduates that many of the top schools in India are just glorified placement agencies. I thought this was an opportunity to check if that’s true. So, did I learn anything at all from my two years at business school?
As I started reflecting on my learnings, I thought – why not crowdsource some opinions and round out the article? Plus, there’s a conflict of interest in including only my learnings – I have a blog post to complete, and would be ready to manufacture some lessons if required! But my friends and classmates would have no such motivations.
Accordingly, I put this vaguely worded question to a bunch of my classmates and friends. And interestingly enough, everyone who answered assumed I meant only non-academic learnings – and replied with timeless meta-lessons like ‘importance of networking’, ‘big picture thinking’, ‘knowing you can push your limits’. This was as strong an indicator as any that this belief – that there’s not much learning to be had from business school academics – is very pervasive. Of course, on some prodding, they did highlight some of their more influential takeaways from the course subjects.
Accordingly, I’ve put together a compendium of the top ten things we’ve learnt from business school – both academic and non-academic.
Let’s start with the academic learnings first:
1. Time value of money
As a young engineer without work experience, it was quite a revelation for me that the value of money grows with time – a rupee today is not the same as a rupee one year from now. And if you leave your cash just lying around (or in a zero interest account), it’s actually losing value. At minimum, you should try to earn a risk-free interest rate on it. I knew banks paid interest on your deposits, of course, but I hadn’t realized that should be the bare minimum.
A corollary of this is that the best use of money (other than spending it) is to make more money – make your money work for you, as financial gurus say. While this hasn’t been life-changing, it has significantly influenced how I treat money – I’m always looking for places to invest it, rather than leaving it idle in my account. And I know many classmates who keep very little money in their savings account – almost everything is invested! I can’t go to that extreme – there’s enough stress in my life as it is.
2. Value of time
But while I’m always looking for investment avenues, I’m also looking for an easy bet. I’d rather invest in a low-cost fund that just invests in the stock market index, than plough through lists of the 100 best mutual funds or research 50 undervalued penny stocks, even though the latter strategy may outperform the index by half a percentage point. Why? Because my time has value too.
This concept, of opportunity cost of time, was also something that business school introduced me to. When spending time on a specific pursuit, it’s also important to consider what else you could be doing with your time, and the value of that. When starting up, the employee salary you forego is the opportunity cost. When you invest money and developer time on some product features, it is at the cost of other potentially lucrative features. When you choose to do something, you’re also choosing NOT to do something else.
[Tweet “When you choose to do something, you’re also choosing NOT to do something else.”]
On a related note – I don’t watch TV shows. I don’t want to lock myself into watching 5 seasons of a show – there are many more useful things I could do with 50 hours of my time. (OK, it’s not completely related. But I did want to make the point that this week’s Game of Thrones spoiler didn’t affect me one bit).
A concept that is more related, though, is sunk cost. This was a very useful lesson as well – that how much you’ve already invested in a particular project shouldn’t matter in a decision of whether to continue. What matters is only future investment, payoff, and the opportunity cost of continuing. I understood this fairly well as a concept, but I properly internalized it only when my first product idea was tanking – and I faced the choice of continuing to invest or trying something else. I’m happy to say I dropped it like a hot potato. Or like I stopped watching Prison Break after one season (I promise this is the last TV show example).
3. Value of optionality
One of the most popular courses in the 2nd year was FORM, or ‘Futures, Options and Risk Management’. Everyone made a beeline for this course, primarily because it had high signaling value if you wanted an investment banking / trading job out of campus. The main topic in FORM was the Black-Scholes formula for pricing an option. But it sure wasn’t my main takeaway – Black-Scholes was BS (and I don’t mean just the acronym). Rather, I took away the sheer value of having an option – of limiting your downside but having potentially unlimited upside.
This is very similar to the concept of making a skewed bet, which I posted about here. Having an option is a great mechanism to reduce risk, which, counterintuitively, is exactly what you need to do when taking risks.
[Tweet “If you’re taking risks, look for ways to reduce risk.”]
[A sidenote: I was so taken by the concept of options in my 2nd year that I created a blog called optionalityrocks.blogspot.in. It still exists, with a grand total of two posts, the last of which was in 2009. Still, I have the option of posting there.]
4. The usefulness of frameworks or mental models
This learning wasn’t from one particular subject. But across courses, one thing I noticed was that using frameworks – like Porter’s Five Forces, 4 Ps of Marketing, etc. – made it very easy to understand intricate concepts and analyze complex business situations. Using a well-established framework makes solving a business problem far more efficient – it takes far less time than approaching it from first principles, and also ensures that you don’t miss any important factors.
Much to my dismay, I didn’t use the Five Forces framework much in my working career, even though I joined the consulting firm that Porter started. Still, there were many other, less outdated frameworks that I used there, and today, one of the first steps I take when approaching a problem is to choose a mental framework to apply to it – it helps me arrive at a more well-considered answer, far more quickly.
This concept is very similar to Charlie Munger’s mental models, which Warren Buffett, his partner in crime at Berkshire Hathaway, highlights as a key contributor to his investing genius.
5. Excel
This is not a concept, as much as learning a primary trick of the trade. Ever since Harvard pioneered the case-based learning method, many schools adopted it to cultivate more practical, less bookish managers. But a common mistake they made was to focus far too much on the big picture, while eschewing more on-the-ground tools. Sadly though, your first post-MBA job usually isn’t as a visionary CEO – you need to work in the trenches. And Excel modeling is an important tool to obtain actionable insights for your company. Thankfully, Excel training was a key part of the IIMA syllabus from the very first term – something that helped students hit the ground running in their first jobs, and differentiate themselves from recruits from other schools.
These were my academic learnings from IIMA. Some of my friends highlighted HR, Communications, etc. as subjects that helped them understand how to work with teams better. However, I’m unable to separate the influence of these subjects – I think I learnt far more about people management in my first job. I may be biased, but I’m going to leave them out.
Right, let’s move on to the more interesting stuff, shall we? What else did I learn, outside the classroom?
6. Time management and prioritization
One thing that hits you very soon after you start at IIMA is the ridiculously false sense of urgency to everything. You have a surprise test on your very first day of class (not very surprising – evidently happens every year). You have a submission or two in your first week, and a group submission (with people you hardly know) within the first two. And this pace doesn’t let up for the whole first year.
Apart from making you shake your head in disbelief, this also helps you learn about your limits, and how much more you’re capable of than you assumed. Functioning efficiently on 3-4 hours of sleep for days on end, juggling multiple submissions on any given day or running from one end of the campus to another to get your submission in before the deadline – all of these teach you how to manage your time and get things done. And the next time you face a real life crunch, you have the confidence that you can deliver, even on two hours of sleep.
7. Importance of team work
Team submissions are an important part of the syllabus, accounting for a major portion of one’s grade. If the case-based instruction approach and open book problem-oriented exams aren’t enough motivation to snap out of bookish learning, then the assignments force you to work in teams – even if you’re narrowly interested in scoring marks, you need to work with other people. You need to extend yourself to paper over their weaknesses, as surely as they do to mask yours.
Clichéd as this may sound, working with others under constant pressure teaches you a lot about yourself and your weaknesses in team settings, giving you a chance to improve and be more ready for the real world.
8. Always strive to be around people you can learn something from
This was a very strong personal learning for me. After doing quite well academically in my own small pond, I had delusions going into IIM about how well I would do there. The first month was quite a brutal wake-up call – everyone around me was much smarter. But after the initial shock of this new normal had subsided, I actually started learning a lot from them. Those two years became a time of huge personal growth for me, and I resolved to (a) always be learning; and (b) always be around people I can learn from.
It’s serving me fine so far – there’s far more opportunity in this big sea than in my small pond.
9. Perspectives can shift very easily
One thing that surprised me during my stint at IIM, especially the first year, was how easily people’s frames of reference changed. Just like the famous Stanford prison experiment, the artificial pressure changed people into strange beasts. Perfectly genial guys stopped sharing their course notes and otherwise calm folks couldn’t sleep nights, all agonizing over one measly relative grade that may or may not influence your future career (it hasn’t yet, in my case). It was incredibly hard to retain perspective. But this was, after all, just a 2 year academic course that YOU paid for, and you’d already crossed the biggest barrier to getting a great job (i.e., getting into IIM). So chill out, and focus on learning and making friends for life.
Luckily for me, I had very grounded friends in my dorm, who couldn’t be bothered to get too tense about a surprise test or a term-end exam. We all did well academically, but without losing our cool. For that, I’m thankful.
10. You can game your way through anything. The question is – do you want to?
Rigorous though the B-School curriculum feels, there are ways to fraud your way through. The 80-20 rule applies, and you can easily get a half-decent grade without studying too much. I’ve not studied at an IIT, but I’m told that’s not very different either. Honestly, the grades don’t matter – so it’s fine either way. But what matters is whether you want to learn, or you’d prefer to rest on your laurels. You’ll get a good job anyway, sure, but your professional approach gets molded in these formative years.
Of course, I’m seemingly imparting sage advice now, but even I joined a management consulting firm from campus – something Paul Graham of Y-Combinator advises you to do only if your true calling is gaming the system. I don’t fully agree, but I hope I’m making amends now by voluntarily struggling.
Those were my learnings from B-School – concepts I apply in my daily life of which I can genuinely say – Yes, I learned this at IIMA. Would love to hear your thoughts – what did you learn from your B-School stint? Comment here, drop me a line at [email protected], tweet at jithamithra, or heck, write your own blog post and send me a link. Look forward to hearing from you!
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 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?
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:
First develop a 30 sec elevator pitch
Then dive a little deeper, and think about a 2-3 min description of the product and its benefits
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.
This can be in any format, but I find making a PowerPoint presentation an incredibly useful cure for a muddled mind.
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
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.
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 MVP – the 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
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.
[Tweet “As long as your MVP delivers your core value proposition, early users will forgive everything else”]
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.
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.
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.
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 [email protected], 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 😛
Hello! I’m finally back to blogging, after a short hiatus to focus on my app’s launch. It’s been a topsy-turvy few weeks with several delays, but we’re now only a week away from launch. Hopefully.
Delays beyond your control can be quite deflating when you’re waiting for the culmination of months of effort. But it’s at times like these that it’s most important to keep your shoulders to the wheel – even when things are not fully in your control, you need to do everything you can.
In this sense, the last few weeks have been a microcosm of the entire starting up experience – unless you’re Elon Musk, luck and other external factors will play a significant role (often more than your otherwise significant efforts) in success or failure. What you can do, is stay on the field. And that requires motivation.
Motivation is a strange beast. I used to think that decent pay and bonuses are good motivators, but here I am, grinding away with no income. And I’m enjoying myself. Clearly, there are some intrinsic factors at play that keep struggling entrepreneurs in the game (hopefully not foolhardiness though).
I’ve wondered about this quite a lot over the last 2 years. But a lot of my questions were answered when I read Drive a few weeks ago. This book, written by Daniel Pink, explores what really motivates us, based on findings from scientific research. [Hint: it’s not money and bonuses]. I’d recommend this book to everyone – understanding what motivates people has pretty direct implications for how we manage our employees, our bosses, our customers, our families, and everyone else we interact with on a regular basis.
But this isn’t a book review or summary. Ever empathetic to the busy reader, Pink himself has included summaries (both Twitter and cocktail party variants) at the end of his book. Instead, I would like to dwell a little on one aspect – his discussion on extrinsic motivation. I found it fascinating to understand some of the pitfalls of extrinsic ‘carrot’ rewards like money and bonuses.
1. Money drowns out intrinsic motivation and performance.
Research shows that even if you innately like a task, being paid for it actually reduces how much you like it. I was surprised by this result, but some others intuitively get it. For example, one person I know loves baking in her free time, but doesn’t want to do it full-time – she feels that the pressure of earning money will reduce the pleasure she gets from baking.
Rewards perform a weird sort of behavioral alchemy – they can transform an interesting task into a drudge, a fun assignment into a bore, and play into work. And by reducing intrinsic motivation, they can send your performance and creativity toppling like dominoes. What’s more, you’ll now only do these tasks if you’re paid for them. [Note to parents – don’t pay your kids for household chores]
[Tweet “Money can transform an interesting task into a drudge, and play into work”]
2. Extrinsic rewards give a short-term boost. Like a jolt of caffeine, they’re particularly useful when a deadline is looming. But like the energy crash that inevitably follows a post-coffee frenzy, long-term motivation and performance will also fall.
3. ‘Carrots’ can become addictive.
Offering an extrinsic monetary reward for a task signals that it is undesirable (if it were desirable, would you need a carrot?). And this, to resort to cliché, is a slippery slope. Offer too small a reward, and they won’t comply. But offer a reward that’s enticing enough the first time, and you’re doomed to offer it forever.
[Tweet “Yes, rewards motivate people. To get more rewards.”]
But the bad news doesn’t end there. Once the initial money buzz wears off, this will feel less like a bonus and more like the status quo. You’ll then have to offer ever-larger rewards to get the same task done, just like the nicotine addict falls into the vicious cycle of more and more cigarettes to get his ‘hit’.
4. Rewards promote short-term thinking
Once there’s a carrot in front of you, that’s all you’ll see, at the expense of more long-term objectives. Just like the auto mechanics who conduct unnecessary repairs to meet their sales quotas. Or, more terrifyingly, Delhi’s monster Blueline buses which went on a killing spree, all because of an innocuous incentive to ply their routes quickly.
5. However, extrinsic rewards aren’t completely useless. If the task at hand is process-oriented, like filing documents into folders, then an incentive can speed you up and reduce your Facebook / power nap breaks. But if a task is creative, then monetary rewards have the effect of narrowing your thinking – when what you require is the exact opposite.
6. When you attach a bonus to a target, you may increase the probability that it will be hit (at least if the task is process-oriented). But you almost guarantee that the target will not be surpassed. Your teams will work hard to meet the target. But no further.
Thus, over a basic threshold of the amount needed for basic comforts and happiness, monetary incentives can work negatively. This has deep implications for how we manage our teams, employees, families, etc.
We could now talk about what does motivate people. But why don’t you read the book for that? Let’s do something more interesting instead – let’s predict what these findings mean for some of the trends in our economy.
b. Many heavily funded startups are spending equally heavily to acquire employees and customers. But these efforts may have a short shelf life.
If you’re throwing money at employees, you should expect that you won’t retain them over time, and that performance will suffer in the interim. Unlike large companies, work at startups is not algorithmic and process-oriented – you need someone who reigns in (and reins in) chaos.
In their bid to conquer the mobile space, many companies are incentivizing app downloads by the millions (yes, users actually get paid for downloading apps). Even if these investments boost vanity metrics today, results will tail off very quickly, as users begin to install apps just for the rewards, and then never use them again.
c. If you do have to use incentives, design a mix of long- and short-term targets, and make them harder to game.
App marketers could incentivize use of the app over time, and not just installs. Give a bonus on the first major activity, rather than on ‘Install and use for 30 seconds’.
In a corporate sales scenario, bonuses could be driven by both new sales and customer churn, to promote longer-term customer management vs. one-time discounts.
d. But even when promoting use, a monetary incentive is bad news. Just like Drive showed, if you create incentives around specific targets, people will work hard just to meet them, and no more.
A case in point is the Indian government’s drive for rural toilet construction (a strong interest area of mine – see this). Over the last 15 years, the government has given ever-increasing incentives for toilet construction – starting with Rs. 200-400 in the early 2000s, to Rs. 12,000 today. But they’ve seen large numbers of toilets being used as anything but – often as store-rooms or an additional room. People have just constructed ‘toilets’ to pocket the incentive.
Yes, this is a toilet!
Many stakeholders are now trying to move the incentive towards usage – e.g., a part of the reward comes to you only if you’re still using the toilet 3 months after construction. While this idea sounded great the first time I heard it, I now fear it may also be doomed to fail. This effectively destroys intrinsic motivation to use a toilet (which there otherwise would be – it is indeed far more convenient than open defecation). People will feel they’re being paid to defecate at home because that’s the less comfortable thing to do. When the incentives stop, use will fall too. Bringing us back to square one.
Extrinsic rewards are undoubtedly simpler to design – what’s easier than throwing money at a problem, in these profligate times? But Drive serves a timely reminder that as in most other areas, only the hard work of creating intrinsic motivation will bear fruit.
Hope you found this post interesting. Can you think of any other implications of extrinsic ‘carrot’ rewards? Do share in the comments. You can also email me at [email protected] or tweet at @jithamithra. Until next time, then!
