Archive for the ‘Intellectual curiosity’ Category

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Heartbreak and principles

February 7, 2009

Sometimes what we work so hard to accomplish and produce, even in the face of relevant experience and exquisite talent, just doesn’t materialize. How sad to view that as failure. Or rather, how sad to view the outcome as the only measure of success, when you have the opportunity to measure success by examining how you are working along the way.

One of my favorite short stories is “Ball of Fat” by Guy de Maupassant. It concerns a group of six citizens fleeing the oncoming Prussian army by stagecoach, attempting to find safety in a town far away. One of the characters is a plump prostitute nicknamed “Ball of Fat”. The others in the carriage are a range of upstanding citizens who view her with equal parts contempt and curiosity.

As they make their way the group gets hungry. The other five become irritated and cranky, hoarding what little food each has brought. Eventually Ball of Fat produces a veritable travelling feast, and generously shares the food she’s thought ahead to pack. A change in her status takes place, that day’s journey ends with the group treating her almost as an equal.

They don’t make the progress they expected, and have to stay the night in a town that they discover is occupied by the very army they’re fleeing. Circumstances are dire. Will they be held for ransom? Imprisoned? It turns out Ball of Fat is well known to the commander, and when he indicates he will set them free in exchange for an evening with her, the group takes a principled stand protecting her. But time wears on, and it becomes clear there is only one way out of this town. So Ball of Fat, against the protests of her carriage-mates, agrees to this bargain for the good of the group.

In the morning, all is well, the carriage is provisioned, and the group boards, but unlike the sense of shared destiny of the day before, the group shuns Ball of Fat, passing severe judgment on a woman who would “sell” herself. The atmosphere is cold and harsh in the carriage. They make their way along, and members of the group get hungry.

This time the others have planned ahead, and produce a wonderful array of food. Except Ball of Fat, she had no time to think about food (she was busy securing their freedom).  But no one offers food to her, in fact, food is shared liberally to everyone else, but her. The scorn heaped upon her is overwhelming. She slowly begins sobbing. The story ends.

Well, one reaction is “jeez, how bleak and sad”.  But is it really?  Ball of Fat acted generously and bravely, with a clear sense of herself and her values. She made her way through uncertain and ambiguous circumstances making clear decisions and tradeoffs based on principles that were transparent and honest.

My former assistant thought it was “the worst blog idea she’d ever heard”. And she’s partly correct. The message – it’s not about the destination it’s about the journey – is obvious and well trodden. Except because it’s so familiar, I think we spend a lot less time examining this than we would like to admit.

It’s easy to focus on the journey when the terrain is familiar, with familiar unpleasant junctures.  But when truly severe shocks occur, it can be hard to hold onto those principles to guide you. 

This is why I love working with people who have experienced spectacular failures.  You learn a lot about yourself and those around you when the product you’ve been developing and counting on doesn’t work and you miss your revenue plan, strain or destroy customer relationships, and all you know is only time and more hard work will solve the problem.  How you respond then matters a great deal.

Because Ball of Fat is so heartbreaking, it’s too easy to focus just on the heartbreak, and not on how she navigated the heartbreak.  Those principles produced honest and generous responses in the face of stingy and uncomfortable circumstances.  There’s no heartbreak in that.

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Posted in chicken killer, Empathy, Failure, Intellectual curiosity, meaningful failure | Leave a Comment »

Anticipation and resiliency

February 3, 2009

Big and unexpected changes are frequently less “unexpected” than we would like to admit sometimes, whether they occur in our personal lives or in our professional lives.  Sure, there are true shocks whose probability of occurring are so slim that they’re hard to anticipate, but much more often, the times when you have to confront an unpleasant change is something you knew was coming.

Henry Blodgett wrote a sober and ego-free article about why market bubbles happen, and will continue to happen.  A key point he makes is that bubbles happen naturally, for factors that in the long run will never be fully predicted or avoided, even though they may be anticipated.   He quotes investor Jeremy Grantham who sums it up well.  “We will learn an enormous amount in a very short time, quite a bit in the medium term, and absolutely nothing in the long term.”  The anticipation referred to here is anticipation of a bubble bursting, and the fear of the loss that will result. 

I love Henry Blodgett 2.0 (his role Merrill Lynch analyst was version 1.0).  He’s honest and humble, in a “serious scar tissue” kind of way.  I found his article refreshing because he was so direct about knowing the housing bubble was there, but that awareness provoked only a messy and clumsy understanding about what he should personally do about it that was best made sense of only with hindsight.  But by anticipating it he was able to see beyond the here and now, to the more pleasant and hopeful medium term, regardless of his near term decision making or consequences.

Early in 2008 we were advising our companies to expect a very hostile fundraising and operating environment in the second half of the year.  All we knew was something bad was coming, didn’t know the magnitude of the shock or the timing, just that it was coming.  What did we do differently?  Well, a lot, and nothing. 

Our companies applied a lot of scrutiny on expenses and revenue, for sure.  But they also continued to sell aggressively and keep product development schedules tight. 

So when October happened?  That was beyond bleak, but the companies in our portfolio methodically revised 2009 plans, optimized around a different set of variables (cash conservation, getting to profitability), and they addressed the very unpleasant tasks of expense and headcount reductions.  The entrepreneurs I was meeting with who were incubating new companies or raising money? They had a tough time of it, but by November, they were back, also with revised plans, showing how they could envision success even with so much less of everything to count on in their plans and assumptions.

Anticipation of an unpleasant outcome didn’t inhibit the responses of those of us in the startup community, anticipation enhanced the response.  It helped sharpen the focus more firmly on the fear of not succeeding, and fostered the resiliency we all need so very badly now, and enabled us to see beyond the near term. 

Over the holidays I confronted an earth-shattering shift in my personal life, and an unpleasant one I’d anticipated for many months.  What did I do?  Well, I focused myself on how to work through this, and to understand that the medium and long term are where to apply my focus.  Did the anticipation affect me or my response?  I think it did, I think it helped me move more quickly to focus on where success could be found beyond the near term. 

I find life in the world of startups fascinating and inspiring, where productively making use of anticipating an unpleasant outcome, having it serve as a means to provoke adaptability, provide a “stretchiness” to your thinking and ability to respond all comes so naturally.  We’re in a world where resiliency will matter a lot, and where for the foreseeable future there will be much to anticipate, a lot of it unpleasant.  But in the medium term there is much inspiration and excitement to be found, and resilience will help speed us from here to there.

[the holidays and ensuring rapid start to the year took me off line, blog-wise, so I am glad to get this first post off for the year, and look forward to resuming the active pace of November and December.  Thanks to all of you for your patience!].

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Posted in Business planning, Failure, fear of not succeeding, Intellectual curiosity, meaningful failure, Success | 1 Comment »

Shaping your sense of giving

December 18, 2008

Where does our sense of giving come from? How is the act of giving shaped and sized?

One of my family’s holiday traditions is an open house we put on in the second or third week of December. It’s an opportunity to bring our family’s “community” together; all walks of life, people who normally might not run into each other. This followed us from Boston to Seattle, and when we moved to the small town in the Midwest we live in, it found a home here too.

With a backdrop of a worldwide financial crisis and looming hardship in the New Year we asked ourselves “what would be appropriate this year?”. So, my wife rolled up the expenses for last year’s holiday activities and we called a family meeting to talk this through. As we walked through the numbers we saw our party accounted for 20% of the holiday budget last year.

It was gratifying to see our children balance what they knew was happening in the economy with their own fondness for the party. Our fourteen year old son was the first to verbalize what they all seemed to be thinking: “Let’s not have the party and donate the money to the food pantry”. There was a lot of back and forth, but that’s essentially where everyone ended up.

So, instead of sending out an invitation, my wife created an “Un-Invite” in the same invitation format as in years past. It told people we wouldn’t be holding our holiday party this year due to the hardship many are or would be facing and we’d be donating to the food pantry instead. We put instructions on the back letting folks know that they could drop off their own donations with us and we’d deliver these to the food pantry as well.

We got interesting responses. The people at the upper end of the income brackets seemed to hear “You can’t afford to put the party on this year” – and told us so either outright or indirectly. The people on the lower end of the income bracket seemed to hear “You’re focusing on the needs of others” and mailed us checks or dropped off food. Those who gave generally have little to begin with – but found a way to mail $10 or $20.

This range of responses shocked us.

I did some digging and it looks like this is more the norm than not. A paper on charitable giving in America written for Google’s philanthropic foundation makes some interesting observations:

  • “Average” income folks (<$100K) are generally the greatest dollar givers or the most active givers as a percentage of the population, representing 36% of total giving.
  • “Above Average” income folks ($100K – $200K) are the least giving and least active givers than any other income group, representing 8% of total giving.
  • “Average” income folks contribute 49% of the giving to meet basic needs of the poor, while “Above Average” folks contribute 13% of the total. “Wealthy” folks ($200K – $1 million) contributed 28% of the total given.

How does one’s giving “call to action” get shaped and sized? Do some people see a need and respond with an action shaped by the nature of the need? Or do some people see a need and shape their response by their own circumstances (budget, social status,…)?

Why is it that folks closest to feeling the needs of the poor found it easiest to hear the rationale for canceling our party? Is it as simple as realizing they could be there too if circumstances changed? Are folks on the next rung up on the ladder more cognizant of the distance they’ve created? Is that why the focus shifted to “affording a party or not” – which is really a social status issue that has little to do with the needs of the poor.

If it was gratifying to see how our children realized we should cancel our party this year. It’s been equally gratifying to see them ask these questions with us – none of us know the answer.

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Posted in Empathy, Intellectual curiosity, Self-knowledge, Success | 1 Comment »

Why the numbers in your operating plan are wrong

December 9, 2008

Startup companies begin life with operating plans – the spreadsheets that outline how revenue will be generated and expenses will be allocated. But in the end it’s all a very well calculated guess. So much is unknown.

A phrase I use a lot when I meet with startup companies is “the only thing we know for certain about your plan is that the numbers in it are wrong”.   It’s a disarming statement, it generally sets everyone at ease.  How could you possibly know what your revenue will be in month 33, when you haven’t even shipped your first product?

And it’s true, in a good way. It’s not the values in the cells that are important, but the set of assumptions and principles that underpin the numbers in the cells that are. I mentioned this in my first post. It sounds and is obvious.

Why bother with the plan? Some CEOs I meet take this path, and use their operating plan as a “check off the box” deliverable on the way to getting funded. But if you go there I think you blow right by critical insight about your business. You need that plan, even when you are far off it, to help you understand which assumptions are still valid, and which may need to change.

An example of an assumptions is “we’ll have larger companies distribute our product for us, and each company will deliver 50,000 end users to us”. That’s important to remember, especially if after six months, they’re only delivering 5,000 users.  It’s even more important to understand if this is just a factor of how long it takes to ramp demand (in which case that assumption needs scrutiny) or of it’s because that’s all the demand these companies can produce for you (ditto).

Your plan is a tool that has a limited useful life, at some point your business (and assumptions) change so much you need to pull out (or rather create) a new one. The right tool, for the right circumstances matters, a lot.

If the right tool is critical, the right mindset produces it. Successfully running a startup requires a resilient open mind and cultivating a sense of intellectually curiosity. You need to want to understand the “why” and “how” the numbers in the cells fail to match reality.

So, examining the failure of your plan, and finding the meaning in the failure, enables you to construct new, more valid assumptions, so you can discard the old plan and create a new one. This can be harder than you think, the plan you have now is was slaved over, polished, and is so “done”. But this new plan has a clearly defined lineage connecting it to the old one, and is the new “right tool” for your business.

Missing your plan is different. Plan “failure” is fundamentally different from missing your plan. Missing your plan comes from poor execution, poor discipline and poor vigilance about understanding why you’re not performing to your plan.  It’s still failure, but failure where no meaning has been examined or made use of.  It’s where you end up using the wrong tool, and not understanding, or even knowing, why you need a new one.

Missing your plan is like trying real hard to use that shovel that worked so well to dig the foundation of a house you’re building to hammer the nails into the framing. Sure it might work, for a while, but over time it’s just not going to do the job you need done. Missing your plan is insisting that you just hit the nails harder and faster with the shovel, and not realizing you hold the wrong tool to begin with.

This is why one of my partners coined the phrase “teams that miss plans generally continue to miss plans”. It’s because they don’t realize its their tool that’s wrong, not their intentions or efforts.

The best CEOs I work with are wonderfully disciplined about creating and appropriately discarding their plans. They measure their performance relative to their plan, and they’re vigilant about clearly delineating the key assumptions supporting the plan. When they’ve measured enough to know the assumptions are no longer valid, they revise their plan, and gladly leave that old plan behind. It becomes all about their new plan, and new tool.

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Posted in Business planning, Failure, Intellectual curiosity, meaningful failure, Success | 7 Comments »

Why “I don’t know” is a great answer

November 27, 2008

Here’s a news flash: You can learn a lot about someone by asking a question and seeing how they answer it.

 

That’s so obvious, and we’ve all heard it a million times. I spend a lot of time listening to pitches from startup company CEOs, as well as spend a lot of time with the CEOs of my companies, and in both cases, end up asking a lot of questions.

 

The questions, that’s where the really hard part of making productive use of time is. Anyone who has the ambition and the drive to start a company is generally smart, and has spent so much time on their business that they’re awash in information about it. Anyone who is CEO of a startup is the same way, except they’re not pitching a vision to you, they’re living and managing it. In either case, it’s their job/role to have anticipated the key questions, and have the answers to them.

 

So, it’s hard to ask questions that dig below the surface, that reveal something that hasn’t already been thought of. If you’re lucky enough to have thought of one, it can accelerate everyone’s understanding of the business and the people running it. Conversely if you’re the CEO, when those questions are asked, it will put you in a potentially awkward position. Do you have an answer, and should you have had an answer.

 

This is true about life in general, so while what follows is specific to my job, I find it’s the same calculus with friends, spouses, children, parents….

 

I love it when we get to that juncture and the CEO says “I don’t know the answer”. It’s even better if they then say “there are a number of ways to try and answer it, let’s start….”. Now you’re about to take a trip to a very rich landscape indeed. A landscape where you’ll find out something potentially valuable about the company, about the CEO, and about your ability to work together to solve problems.

 

But there’s another direction that frequently gets taken. When the CEO produces an answer. I choose that verb deliberately. The answer is produced right there, like a big patch applied over a void. The void is hidden, not explored. This is where ego and insecurity hijack intellectual curiosity and drive it right past a tremendous source of opportunity.

It’s where the person being questioned feels the need to have an answer for every question, that somehow exposing that they don’t know is bad or weak.

 

Once you become familiar with the “answer for every question” mentality, it becomes a warning sign of significance. I hate it. It spoils all the fun. Worse, it destroys credibility at an alarming pace, but in a very quiet and nuanced way – because you can’t possibly have all the answers in a company that’s still more vision than substance.

 

And it turns out, the people who most often fall into this trap are the folks who have left the large technology companies to start up a company. It reveals the culture they had to navigate through to succeed in the “big company” world. The problems generally were so well understood you could have and were expected to have all the answers. And if you didn’t, you could “patch and pivot”, loop back, and get the answer – accountability was so diffuse, and decision cycles so long.

 

But what gets missed here is that the answer isn’t important, at all. It’s seeing that juncture where you don’t know the answer – that’s the super valuable piece of information. That may tell you about a core set of assumptions that are off, or an area of opportunity that’s been missed or overstated.

 

I love the landscape that is revealed in not knowing the answer. I love working with people comfortable with traversing it. I love it when a CEO sits me down to talk through a tough problem, and will state the truth: “I know I’m missing something here, help me figure it out”. When I hear that, I know the fun is about to begin.

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Posted in Business planning, Intellectual curiosity, Self-knowledge, Values, Venture capital | 3 Comments »

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