Failing Before You Start - The Struggle Of Never Having Stood A Chance

G+D #18 | Corporate Variant #17

I love Harvard Business Professor Tom Eisenmann’s article Why Start-ups Fail. What stands out in his piece is he doesn’t try to over-simplify something complex.

Instead he focuses on the recurring patterns he’s found to be the most common and consistent reasons for why businesses end - the ideas that can help explain observations and issues across a literal planet of use-cases. One of the examples he provides comes from his own classroom, with two former students forming Quincy Apparel with the goal of producing clothing that mimicked tailored garments, providing affordable and stylish fashion choices for young professional women (this was in 2011).

The Quincy founders seemingly did everything right:

• Had a novel idea

• Market tested their idea to validate it

• Accurate market research and business plan modeling

• Secured sales and customer feedback before quitting their full-time jobs

• Presented their progress and raised nearly $1M in venture capital funding

Despite all of this - their prep, their pedigree, and their persistence - Quincy became another failed start-up. Why? The theory Eisenmann applies to the Quincy scenario is “Good Idea, Bad Bedfellows”.

Besides the founders, a range of resource providers were culpable in the venture’s collapse, including team members, manufacturing partners, and investors.

Within this range of issues was the fact that Quincy didn’t have any full-time co-founders or leaders who had fashion industry experience or connections, VCs came short on funding and then pushed Quincy to a growth model that didn’t apply to their industry, and without industry connections, manufacturers regularly delayed Quincy’s orders.

Another pattern is the idea of “False Starts” - situations with the right resources, but the wrong opportunity. This is what happened with dating start-up Triangulate. They wanted to make a dating engine that would match social media users based on their profiles. Not convinced without licensing, investors balked. So Triangulate built their own dating platform to prove the engine worked - which led to investments and Triangulate now building their own dating app. Over time, they had a couple unique ideas on how to serve users (pivots) - which ended with user engagement plummeting because users just wanted the interactions provided by traditional dating sites. Triangulate eventually ran out of money before they could pivot again.

The real highlight for me in these examples is the fundamental idea of how do we avoid ruin before we even get started. Even though neither scenario had incapable founders or bad ideas, when you comb through what’s presented in the article, it builds to this unified feeling of “oh, they never really had a chance”. To me, that’s worst case, something I’ve experienced, and something I’m determined to avoid in the future. A situation where our positioning, decisions, or strategic choices at the starting line put in an automatic ceiling on what we could achieve, how we’ll feel about what we build, and find us playing the entire game with a handicap - maybe even without even realizing it.

Being in a “never had a chance” scenario places us into a function of futility - we’re always fighting an unnecessarily challenging battle. It creates a circumstance from which problems that are bound to pop up are automatically compounded, lessening the already dire odds of survival.

Sticking with Eisenmann’s approach of giving overarching theories or patterns to work with, I’m going to outline a few concepts I think can result in anyone looking back and realizing they shot themselves in the foot right as the race started.

Expertise

Sticking with the Quincy example - they did a lot of things right with their prep and overall launch.

But a fatal flaw, and something that pushed them toward a “never had a chance” (NHAC) situation, is that they were missing industry expertise. It’s not that they didn’t know this or didn’t try to mitigate it, but without a connected fashion expert on the team full-time, they didn’t have insider information. This led to a cluster of mounting issues that a seasoned veteran with solid connections likely could have solved, but instead became huge strategic hurdles for Quincy.

The critical function of expertise which goes beyond making a product or brand work, is having some working knowledge of your information gaps. Expertise let’s you know what you don’t know - making risks more quantifiable and approachable, and informing strategic decisions and timing.

You probably don’t know as much as you think you do. When put to the test, most people find they can’t explain the workings of everyday things they think they understand.

Don’t believe me? Find an object you use daily (a zipper, a toilet, a stereo speaker) and try to describe the particulars of how it works. You’re likely to discover unexpected gaps in your knowledge. In psychology, we call this cognitive barrier the illusion of explanatory depth. It means you think you fully understand something that you actually don’t. - Farnam Street

Fun examples like the ones in the quote highlight with immediacy and simplicity what it means to really know something. Having this knowledge is crucial when doing something complex and with stakes like managing a team or operating a business.

You need a functional level of awareness of as many blind spots and pitfalls as possible - that’s what expertise gets you. Plenty of people venture into new industries for the first time and succeed, but they often have another domain expertise they can lean on (like branding for Liquid Death). In these ventures with limited industry expertise, the initial execution requires a lot more caution and precision. You don’t have to know everything, but it’s good to know what you don’t know or have someone you trust who compliments your skillsets on hand to tell you as much.

Speaking of people to help you out…

People

An important lesson that’s hard to internalize is that businesses are people. Literally. And don’t sit there and think “duh” like I’m saying something ridiculous - there’s a huge difference between knowing people are important and knowing they’re the difference in everything an organization does.

There’s no business that doesn’t have a person behind it, and there’s no business that’s immune to the immense complexity and importance of managing the quality and dynamics of its team.

When you’re starting a business (or even a new special project at work), who you work with is everything. It is the endgame.

Launching a start-up is embarking on a path that statistically is not going to work out how you want. It’s a path that is an unpaved, fog soaked minefield with winding turns where the mile markers are essentially a person waiting to mug you. It’s an endless, shifting collection of problems.

So between dealing with constant problems, the odds of success not being in your favor, and, oh yeah, the desire to actually build something you’re proud of - the most important decision ends up being the one you likely made at the beginning - who you decide to work with.

The team you build is the company you build, not the plan you make. - Vinod Khosla

And the people you work with don’t have to be your best friends. That actually might be a terrible move, especially if you can’t be honest with each other when things get uncomfortable. In fact, you don’t even necessarily need to like each other as friends; it’s far more important that you respect each other, understand your goal, and work well together.

Building a start-up is an infinite set of problems that are being thrown at you. There comes a day when you realize I can’t even look at every problem, let alone think about it, let alone solve it. It’s not even possible. - Naval

The importance of who you work with is critical for any team looking to achieve a lot, but it’s magnified 1000x for a start-up. You have to trust the person with your life. You have to believe they’ll do the right thing when you’re not there or when things get hard. They have to be someone you want to be calling at 9pm, and they’ll understand why they have to pick up. And they have to be someone you can shoot straight with - someone who’s willing to call the baby ugly when its pragmatic to do so. And it’s all a two-way street.

Speaking of ugly babies…

Quality

Without devolving into a semantic argument about things being subjective, getting serious about quality quickly is critical in any business.

When discussing quality, restaurants always stand out to me. There are so, so many inexplicably bad restaurants out there. Many in extremely viable and competitive markets. When I sit down at an Italian restaurant and I get clipped for a $28 plate of pasta that can be put to shame by a room temperature jar of Rao’s - I lose a piece of my soul.

The internet is a endless pipeline training videos, recipes, guides, personal stories, and opportunities to market test your ideas - you do not have an excuse to offer substandard products or services. You don’t have to be the best, and often can’t be right away, but you shouldn’t be getting stomped on by products sitting on the shelf at the grocery store.

Please note: this analogy is a little tricky because if you’re opening a restaurant or launching a physical product, you should be stellar before shipping to customers. But you can practice in discrete experimental batches that you can incrementally pilot locally or in a home kitchen. No one is the best at anything the first time they do something.

After hearing the sonic masterpiece Is This It by The Strokes, The Killers front man Brandon Flowers scrapped 90% of what was at the time going to become Hot Fuss, only to start over (with the only surviving track being Mr. Brightside). That decision was made because after seeing what The Strokes put out and taking an honest look at their current creation, it simply wasn’t good enough. It wasn’t who they wanted to be or what they thought they were capable of.

I’m not recommending being paralyzed by perfectionism. There’s a threshold of acceptable excellence that permits you to enter the arena, and then you can continue to learn, refine, and optimize from there. To do anything great you need to be your own biggest supporter, your most honest critic, and your most diligent experimenter. If you can’t, and you lie about the quality of what you’re doing, you risk everything by potentially offering up a trash product or experience. An app that doesn’t solve a problem. A service that leaves clients feeling taken advantage of. A plated dinner that can’t compete with a glass jar.

Do the uncomfortable work up front so you can do something truly great and develop some ravenous, true fans.

Theories, Not Answers

Eisenmann provides us with theories - frames and ideas that can be applied to a vast array of scenarios and be useful in your circumstances

Clayton Christensen talks about this same idea in his book How Will You Measure Your Life?, articulating that we have such diverse experiences, we need to be extremely skeptical of anyone offering “answers”. After getting a call from then Chairman of Intel, Andy Grove, Christensen was sent to HQ to explain some of his theories and how it could help Intel. Grove wanted a direct answer, and Christensen refused to give it, knowing that Grove had forgotten more about Intel’s business than Christensen could ever hope to learn. An answer from him would have been pointless.

That meeting with Andy changed the way I answer questions. When people ask me something, I now rarely answer directly. Instead, I run the question through a theory in my own mind…then I’ll explain how it applies to their question. To be sure they understand it, I’ll describe to them how the process in the model worked its way through an industry or situation different from their own, to help them visualize how it works. People, typically, then say, ‘Okay, I get it.’ Then they’ll answer their question with more insight than I could possibly have.

Never look back, and to the extent it was in your control, have to say, “god damn, I never even had a chance.”

With love/paranoia,

Nick