Don’t Hit On 19…(and other thoughts on incrementalism)

9 Oct
At first aunch, sometime good enough needs to be

Upon launch, sometimes good enough needs to be

Incrementalism has gotten a bad rap. I am not sure where this all began. I suspect the blame can be spread fairly broadly across academia, business book publishers (often one and the same), and the mainstream business press. This comes from the notion that ‘Go Big or Go Home’ is not simply a hackneyed bumper sticker slogan but an actual business philosophy that drives a lot of the decision-making by countless CEOs and founding teams.

That age-old ‘strive for excellence, not perfection’ axiom has been turned around (literally) to the point where perfection can often be the only thing that leaders and their teams are interested in striving for. Like so many things, this is a powerfully romantic notion — swing-for-the-fences, go it alone, and all that.  Sounds great. Has a certain puffy-shirt-wearing Errol Flynn-swinging-on a rope-saber-in-mouth je ne sais quoi, right? Problem is, too often this is disastrous as a business strategy if you want your company to still be around two or more years from now and actually become one of the technology juggernauts. This is especially the case in the current market environment where caution, capital efficiency, and cost controls are the order of the day for start-ups.

First, let’s set some ground rules. Context is critical in this discussion, as is semantics. It might be easier to explain what it is I am getting at by first explaining what it is I am NOT saying. This is not a treatise on eschewing innovation…or large markets…or big, hairy, audacious goals (BHAGs to those in the know). No, pursuing those things is a matter of survival in any market, but most especially in the market we are in currently and in the one to follow which will almost assuredly be a recessionary one. Not being innovative? Not pursuing a big enough market? Not willing to challenge long-held assumptions about the market you inhabit and how it functions? Thanks, but good luck getting a meeting with any venture investor worth his or her salt. These are givens. I am not seeking to challenge the laws of physics here, people. Small, interesting business ideas abound but they usually make for lousy venture investments.

My point is that I have been sensing recently a pre-occupation on the part of founders and management teams with the notion of (1) holding out for perfection; and (2) to get noticed in the environment one needs to be bold in all things. This needs to stop.

That said, I get it. Look around at where the culture has gone in recent years — both the macro culture reflected by mainstream media and the micro-culture of where we work, live and interact — and you will find that little heed is paid to those people or companies that do excellent work quietly without flash, controversy or over-exposure. To be heard above the din, too often the common strategy is to say, do or propose something outrageous whether you can ever execute it or not. While the mainstream media can be (fairly) accused of over-weighting interest in things salacious and controversial, the business community (and their investors) can too often be pre-occupied with companies that offer a ‘great story’ rather than whether the company is addressing a key problem that may not be terribly sexy, or bold, or likely to be featured in the next issue of Wired.

This entire topic grew out of a heated series of discussions I had recently over the proposed business strategy of a company my fund was (briefly) interested in backing. The core elements were there: a solid team; a track record of previous success; a market ripe for a novel solution and a team uniquely positioned to deliver that solution; sleepy, entrenched competitors more concerned with preserving their cushy franchises than being innovative; fat and predictable margins; and on and on. Where talks broke down was around approach.  I found myself in the fairly uncommon position (at least for a venture capitalist) of advising a cautious, measured approach in how the first product should look, what functionality it should have, how it should be priced and marketed, how fast to ramp things up, etc. Much of this came from the knowledge that — in this particular market, anyway — there were too many unknowns. The team, for their part, clung assiduously to the notion that they could only be successful if they launched with their idealized version of their product, no expense spared, with a full (perfectly hand-selected) team in place, a sizable first institutional round (at a lofty valuation), a high-priced PR campaign, the boldest possible strategy and approach, and on and on. Granted, a venture investor expects (and often insists) that their entrepreneurs be driven, optimistic and self-assured. Where this can run into problems is around embracing the notion that every journey begins with a first step — often, a baby step — and that what assumptions a company has at launch rarely reconcile with market realities in the ‘fog of war’ of a given marketplace once competing in that marketplace. Additionally, many companies often end up two or three years down the road in an entirely different business with an entirely different product from what they originally intended or conceived — assuming, of course, that the company is lucky enough to still be around in two or three years after initial launch. Welcome to the jungle. 

This all plays, at least to my mind, directly to the belief that most great companies grow through an iterative process that often involves product and strategy mis-steps, course corrections, and management changes. Years ago, while seeking counsel as a first time CEO, I was told by an early mentor, “There are 100 ways a start-up company can fail, Jonathan; if you can think of 50 of them, you’re a genius.” He did not need to add the rejoinder that I was no genius, but I got his drift. No truer words on the subject of start-up failures have ever been uttered, to my mind.

Which brings me to title of this post. Sometimes good enough needs to be good enough — at least for now. Most great companies (just make a list; you’ll find it fairly accurate) were built not through blistering technology or innovation, but through execution. The clearest and oft cited example of this is Microsoft. For all its gifts and qualities, Microsoft will never be feasibly considered by many knowledgeable observers as a great technology company; but, on the matter of strategy and execution, there is none better.

Products (and services) need, first and foremost, to hit squarely on a market need in a market seeking to fill that need. A version 1.0 of anything is expected to have flaws and leave customers lacking — at least to a point. Having a great team in place may be a pipe dream at this stage. You don’t have a great CEO in place, but perhaps you have a decent biz dev guy that can pinch hit, knows his way around a P&L, and has done a partnership or two in his day? Great, that might be all we have to work with. You don’t have the resources to bring on all the salespeople you’d like on Day One? Well, you’ll need to figure it out; and, by the way, who better to sell your product or service that you, the CEO? Make it happen. The bottom line is that if you can execute on your most humble vision and actually prove that your business is viable and you have a clear path to profitability, you will have plenty of resources to execute on ‘bolder’ initiatives and have no problem recruiting almost anyone you want — and that includes venture investors.

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One Response to “Don’t Hit On 19…(and other thoughts on incrementalism)”

Trackbacks/Pingbacks

  1. Another take on Sequoia’s R.I.P. presentation « Adventure Capitalist - October 13, 2008

    […] a challenging environment, but not an impossible one. As I have posited in recent posts (here and here) while there are obvious drawbacks to launching and growing a new enterprise in a rough economic […]

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