Friday, November 23, 2012

The 4--No, Wait--6 Noble Truths of Entrepreneurship

The central truths of the Buddhist tradition are found in the The Four Noble Truths which begin with No. 1, loosely translated, "Life is difficult."  There should be something similar in entrepreneurship: a statement of the basic truths that apply in all cases.  I've attempted an itemization which I'm fairly certain will hold out and be uncontested for the rest of the day (assuming no retweets).  Here it is:

1.  Most startups don't succeed with their initial plan.  Customers will defy your expectations again and again.  Therefore the most important thing is to develop and test many plans--A, B,C, etc-- until you get to the plan that will work (its out there somewhere).  This is the fundamental startup truth and a lot follows from it. Its similar to the Buddhist "Life is difficult" and could also be stated, "Comedy is easy, entrepreneurship is harder."  But seriously, you need to get to Plan Z.

2.  Engage customers early and often.  The answers, however difficult to obtain, lie with customers.  They may not know the solution, but they live and breathe the problem and the need.  Develop your understanding and relationship with customers as you're building your product or service--not just in the beginning and not just at the end.  Don't disconnect with customers in the middle.

3.  Your real product is not your product; it's your plan.  Describe your plan simply in terms of  your value proposition, customer, market, and revenue model.  This plan is called a business model and needs to be written down before you write any "business plan".  Embrace the language of the business model and get it down on paper.

4.  Testing is the engine of progress.  Test your entire business model (which you just wrote down) starting with the biggest risks: features, customer acquisition strategies, pricing strategies, etc.  Don't just test your product.  How do you do it?  In small batches, with simple prototypes, with a product that has a few core features, with a revised product with one additional feature.  Test frequently so you don't have enough time to develop a lot of stuff.   You waste less time when the unexpected happens.

5.  Iterate fast and frequent.  Startup development IS a series of iterations with the following steps:  document your model, put something in front of customers, and measure the result qualitatively and quantitatively.  Based on the results refine your model or pivot to a different model.  Repeat the process until you run out of money or get to a working plan.  Think rapid cycle time.  The more iterations you can get in, the more pivots you can make, the more plans you can blow through, the more likely you will get to a good plan.

Paraphrasing liberally from Linus Pauling, the best way to have a good plan is to have a lot of plans.

6.  Prefer funding your startup with customer revenue over investor money.  This is the deeper meaning of bootstrapping.

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