Mastering scale – doing things that don’t scale is the path to scaling!

Masters of Scale - doing things that don't scale

Masters of Scale Episode 1:

“In order to scale you have to do things that don’t scale.”

Brian Chesky of AirBnB

 

[icegram campaigns="8224"]

The purpose of this blog is to offer a summary of the key points of each of the episodes of Masters of Scale, together with a few insights. In the first of the series, Reid Hoffman talks to Bran Chesky of AirBnB about getting early customers.

I think it is a great example because we all know AirBnB as a tech-industry giant now, but like most startups it was not easy in the beginning. The founders had maxed out on their credit cards and only had a bout ten to twenty users. Their strategy: really get to know these users and what they wanted (and did not want) and hunt down new users one by one. Was that scalable? Definitely not - but it allowed them to build a firm platform off which they could then find more automated ways of getting new users - and they could not do that until they were sure they knew what their customers really wanted and loved.

Key lessons:

1 Get personal  and detailed feedback from you early customers as early as possible - that mens talking to them.

2. Use judgement in terms of what you take on board - you should not try and implement everything you hear.

3. Understand what might be the perfect user experience - and then try and build in an appropriate level of "magic" to your product. (Click the link if you would like a free tool to help you design the experience: "the 11 star customer experience template"

4. Do not start with a product that is immediately scalable (it will probably be wrong anyway), but using Chesky's words: "Do everything by hand until it's painful". There are plenty of examples of founders using their own phones or emails as the primary customer service touchpoint.

5. Designing a customer experience and scaling that experience are two different skill sets.

6. When you finally do reach scale, do not lose the ability to innovate as you did in the pre-scale phase. Large organisations quickly kill innovations that do not look operationally efficient.

7. I really like this final point they make as it resonates with so many of our early stage entrepreneurs. If you are "pre-traction" - do not despair. This is the best opportunity you will have to really design a product that your users will love. The impact you can make at that pre-traction stage has the potential to have a massive multiplier effect on the future of your business.

Pulling these ideas into "lean startup" thinking, we offer the basic diagram below as a guide:

 

Steps to scale

For those looking for another example of gaining customers in a non-scalable way, have a look at this article (and the additional material below):
"Why I spent hours conducting research for my first clients - before I was paid a dime"


Tip for university entrepreneurs/professors:

If you are going to start a business at university (while you are studying), select your initial market in close proximation such as other university students, people in the community or local businesses. This will allow you to far more easily "do things that don't scale" with early customers than if they are difficult to get to.
For more about our programmes for universities, visit: Mashauri for Universities.


 

Look out for our next article from the Masters of Scale podcast, coming soon:

"Always raise more money than you need."


You can listen to the podcast by subscribing at Apple iTunes or the Android store; but you can also go to the website at Masters of Scale and listen to the podcasts.


 

Additional material only for those seeking more in-depth knowledge and cases on doing things that don't scale.
(This material is not part of the podcast.)

Doing things that don't scale - part II

A few years ago, Y Combinator launched an excellent video series on starting startups. In our old Mashauri site, we ran a series of blogs on the series (similar to what we are doing on Reid Hoffman's podcast). One of their videos was on "doing things that don't scale" - so we have reproduced the article (with video) below for those readers who want an even more in-depth look at the topic.

 

This is an interesting video lecture with 3 different speakers:

> Stanley Tang from DoorDash – a company that undertakes deliveries for small businesses. Stan discusses doing things that do not scale.

> Walker Williams from Teespring, a startup that makes T-shirts for organisations without “risk, cost or compromise” – you can see our previous blog on Teespring at Teespring Case Study. Walker also discusses doing things that do not scale

> Justin Kan, founder at Kiko and Justin.tv, talks about the tactics of getting publicity.

 

If you are short of time, I would listen to Walker Williams first, then Stanley Tang and finally Justin Kan. Although Justin has some interesting views, most are pretty straightforward and may be less relevant for early founders – but you can skim our notes below and make your own call on what you watch.

Here are my key take-aways from the video lecture:

Stanley Tang: DoorDash

> Get the most minimum “minimum value product” out there – especially if you are not sure if there is a real market (and that goes for most of us).

> Mashauri caution – we recognise that not all products can be entirely basic if that does not allow you to deliver a good customer experience; so work out what really is the minimum for you. The advice in this video though is that your product requirements are probably far more basic than you think.

> Remember that if customers do have to struggle a bit to do what you want them to do, if they still try then it is probably a stronger sign of an underlying, unmet demand.

> Do not worry about automating your product or delivering seamless service at first. Rather use the method of simply doing it yourself. Not only is this cheaper in the short-term, it also prevents you from building things that people do not want. The example is the founders taking calls and making all the deliveries themselves.

> Another big advantage in doing it yourself is you get to understand what is really required before you build the model. It plays to a previous lecture where the advice was to become a real expert in what you are doing.

> Finally, Stanley reminds us that doing it all yourself is a competitive advantage you have against more automated customers. You have the chance to deliver a really tailored service and get instant feedback.

Walker Williams: Teespring

Walker focussed on three areas - we summarise each in turn below:

Finding your first users
Turning those users into champions
Finding product/market fit

Finding your first users

It is really tough to find your first users and there is no silver bullet. It all boils down to the founders spending time and effort. It could be sending hundreds of personal emails, sitting on the phone or trawling events for people to talk to. It is simply a hard slog – but “scrappiness” is what makes good entrepreneurs.

Do not think in terms of ROI when winning these customers – you will spend huge effort for limited numbers in return. Just make sure that you have users who really value your product (if possible, DON’T give it away for free).

You are probably going to be bad at selling, you will not really understand customers pain points and do not even have testimonials or cases to help you. Tough it out. (Or as I overheard a friend saying to his daughter: “suck it up princess”)

It will get easier as you get more users; but certainly for a long time the way that you win new customers will not be a scalable strategy.

Turning your first users into champions

Delight your users with an experience they have never had before and will remember – do whatever it takes to make this happen.

Spend as much time talking to customers as possible – and really listening. Answer all mails and queries yourself. Scan social media to find out what they are saying about you – and if something goes wrong: make it right!

Proactively reach out to those customers who leave. If you cannot get them back, at least you can find out what was wrong and do something to stop others leaving for the same reason

Finding product/market fit

Realise that the product you finally ship is unlikely to look much like the one that takes you up to the point where you think about scaling – so do not get too fussed about perfection. Speed is more important than a clean product.

A rule of thumb is only to worry about the next order of magnitude of customers – so when you have ten users, think about the next 90, not the next 900!

Do things that do not scale for as long as possible – keep talking to users, keep iterating as fast as possible; only give up doing un-scalable things when it is finally “ripped from you”.

Justin Kan: Kiko and Justin.tv

> Be aware of what you are trying to achieve with public relations – that should guide everything from resource spent to the media that you target.

> Remember, outside of achieving specific goals (eg awareness in a certain town among a certain sector), the rest of publicity is just vanity. Something that makes your mother happy.

Justin is a successful entrepreneur and his advice is not bad, but unless you are specifically looking for publicity now, you can probably skip this part of the lecture.

 

 

Mastering scale – getting from startup to corporate

Masters of Scale - an introduction

Reid Hoffman - LinkedIn boss

 

A while ago we produced a series of articles around Y-Combinator's excellent series on how to start a startup. Now I am pleased to say that we are starting a new series based on Reid Hoffman's (co-founder at both PayPal and LinkedIn) new podcast "Masters of Scale.

First acknowledgement to Tim Ferris (4 hour workweek, etc) whose podcast highlighted the series for me - it is well worth listening to Tim's series too.

There are a lot of really rubbishy articles, videos and podcasts that come out of Silicon Valley - many misleading, often overly-hyped and some frankly dangerous to a new founder who might take them to heart. But Reid is clearly different. He has been part of a number of incredibly successful businesses, part of a number of failures and has an eye for angel investing that is almost magical - some of his early investments include Facebook, AirBnB and Flickr. His insights are sharp and he is not afraid to take a contrarian view and so you will generally find his work really interesting. The excellent part of this series is that it takes place through interviews of top entrepreneurs who share their own experiences and wisdom including the likes of Mark Zuckerberg (Facebook), Eric Schmidt (Google / Alphabet) and Brian Chesky (Air BnB).

The focus of the Masters of Scale series is about scaling i.e. rapidly growing a business where the business model has been tested. However,  there is plenty (maybe 50%) of information around the startup phases as well i.e. where you are searching for and trying to find the business model that works. In Tim Ferris' podcast he briefly goes through all "ten commandments" - listening to this is a useful way of getting an overview. The commandments (and time in Tim's podcast where they appear) are: 

Commandment 1: Expect rejection. [09:14]

Commandment 2: Hire like your life depends on it. It does. [19:26]

Commandment 3: In order to scale, you have to do things that don’t scale. [25:37]

Commandment 4: Raise more money than you think you need — potentially a lot more. [36:18]

Commandment 5: Release your products early enough that they can still embarrass you. Imperfect is perfect. [44:45]

Commandment 6: Decide. Decide. Decide. [1:00:16]

Commandment 7: Be prepared to both make and break plans. [1:03:13]

Commandment 8: Don’t tell your employees how to innovate. [1:07:21]

Commandment 9: To create a winning company culture, make sure every employee owns it. [01:12:32]

Commandment 10: Have grit and stick with your hero’s journey. [1:23:22]

Bonus Commandment 11: Pay it forward. Use the momentum of your own success to move the success of others. [1:26:03]


You can listen to the podcast by subscribing at Apple iTunes or the Android store; but you can also go to the website at Masters of Scale and listen to the podcasts. Finally, for fuller immersion, I recommend the Entrepreneur.com site where they host the series and add some of their own perspectives as well - Entrepreneur Masters of Scale.

I know many of you are time-strapped and would like to get an overview of the episodes before investing your time in listening to them - and so over the next few weeks, we will produce short summaries here to give you episode highlights peppered with our own views. Look out for our next blog:

Masters of Scale Episode 1: “In order to scale you have to do things that don’t scale.”


Note to university professors and faculty heads: Mashauri work hard at ensuring our programmes for students contain the type of material that is encompassed in this series. Not only do we believe that the practical experience we give student entrepreneurs in their courses is essential, we also believe that exposure to true entrepreneurial experts is a critical part of the learning process. For more about our prgrammes for universities, visit: Mashauri for Universities.


 

Achieving startup success through problem solving

The achievement habit : how to be successful by solving the right problem through reframing.

Bernard Roth is the co-founder and academic director of Stanford University’s d.school. He recently presented at Stanford’s eCorner a talk called: reframing problems and getting honest. I was so struck by the importance of the talk for entrepreneurs (and non-entrepreneurs) that I thought I should summarise the key points in a blog, but also publish the talk itself (see below). Read the summary if you like, but the video is definitely worth watching.

From an entrepreneurial perspective, we face problems and challenges practically everyday. Although there seems to be a never-ending supply of support on the web or from experts, sometimes we need to step back from the technical aspects of the problem (especially if you are an engineer) and think about the problem itself. This is where this article will stand you in good stead – and why it should be essential entrepreneurial reading.
Roth starts by establishing credibility through an introduction to himself and giving a bit of his background. He then talks briefly about design thinking which although is all the buzz today, has actually been around for decades in one form or other; although it is now being applied in fields far beyond design, including acting as a problem solving methodology.


The heart of the talk is about problem solving and he challenges the Stanford (mostly engineering) crowd to answer the question: “If we are so bright, how come there are so many problems that worry us, appear unsolvable over time and may even keep us awake at night?”

His answer: “Because you are trying to solve the wrong problem!” The way to address this is then to reframe the problem by asking yourself: “What would it do for me if I solved the problem?”. He goes on to offer up some of his own examples, but let me offer one I have seen. This may be simplistic but it illustrates the method.

Entrepreneur: “I cannot get funding for my startup”

Mentor: “You can keep banging on VC doors or ask yourself the question: ‘what would it do for you if you solved the problem.’”

Entrepreneur: “I could hire a developer to build my product”

Mentor: “How else could you get this done if you have no funding?”

Entrepreneur: “Well I could find a developer and offer them equity. Or I could find an off-the-shelf product and adapt it. Or I could find another way of testing the idea through a different MVP. Or I could learn some code and do it myself. Or …..”

In this case and the one’s that Roth uses, by asking the question a far wider range of solution spaces opens up and suddenly there are plenty of other potential solutions available – not just the one with which you started. If you do not believe me, stop reading for a moment and give it a try with a problem you have been facing for some time.

He also makes the point that we get locked into this particular way of looking at a problem and often find it hard to let go – but often when we do manage to re-frame, the solution becomes obvious. He uses a familiar joke as a metaphor to our behaviours. A drunk is walking home, bumps into a tree and falls over. He gets up and bumps into the same tree and falls again, cursing the tree. He gets up ….. and so on. Eventually, he sits down on the floor and says: “I give up. They have got me surrounded!” Which is how Bernard claims we often act when worrying over and over about a problem we are not solving. We hit the same obstacle without trying to get around it.


The second key point is that we often use reasons as to why we do or do not do things. He says: “All reasons are bullshit.” There is never simply one reason, life is too complex but we hone in on one reason (even if it does feel logical) and that is what stops us changing behaviour. His example was that he was on a Board of a company and always arrived late. His rationale was that the traffic around San Francisco always held him up. After a while he had an epiphany and that was he did not give the Board meeting enough valence or respect. He allowed himself to be interrupted or left late. He realised that if he really cared enough, he could get there on time (and eventually did!). This holds true for many things. If you really care enough (either externally or internally motivated), you can do something – especially if you are prepared to re-frame the problem.


The third point is that “Yoda is wrong!”. Bernard says there is a try and there is a do – and both are OK states. The problem is when you confuse trying with doing.

He offers up a few useful examples such as when he and his wife stopped to see a concert. She was not really keen and there was a queue. He dropped her off to buy tickets but when he returned she was waiting around and said that they were all sold out. Bernard then went off and bought tickets (he Yoda: Do or do not. There is no try.does not say how, but we assume he bought from some ticket holders or something like that). His point is his wife was trying when she thought she was doing. If you want to “do” you do not let obstacles get in the way. You go around them, over them or through them – whatever! You make it happen because that is your mind-set. Trying is attempting to do something but giving up if you do not succeed – and possibly not feeling too bad because at least you “tried”. He does not say that trying is wrong, but simply encourages us not to confuse trying with doing.

From an entrepreneurial perspective, we face problems and challenges practically everyday. Although there seems to be a never-ending supply of support on Google or YouTube, sometimes we need to step back from the technical aspects of the problem (especially if you are an engineer) and think about the problem itself. This is where Bernie’s teaching can come in useful.

Bernard Roth The Achievement Habit

 

Bernie has also written a book around the topic: The Achievement Habit: Stop wishing. Start doing. Take control of your life. It covers this topic and is full of other useful ways of living a successful life – click on the image to reach Amazon.

 


A final example may be if you are an entrepreneur starting a business, your problem may feel like: “I do not know how to go about launching a successful business.” That might be better framed as : “Where do I find the best resource to help me be successful in my new business?” Then the answer becomes obvious. Mashauri! 

Have a look at our free programme to test us out!

 



The full e-Stanford video can be seen here:

 

Mashauri offers accelerators and training programmes for early stage entrepreneurs who want to learn how to conceive, launch and grow in the right way to maximise their potential to succeed. Why not give our free programme a test drive? Click on the image below and sign up now.

 

 

 

 

Startup failure rate is too high – and it’s NOT OK!

News article version of startup failure article

Mashauri (Mashauri.org) is an organization with a mission to significantly increase the success rate of startups across the globe.

Infographic: startup failure rate is too high

They have written a number of articles about startup failure rates – and why Silicon Valley and others are not right in the accepted view that the majority of startups must fail and that failure is “good” because it is simply a learning experience.

Although they recognize that there will be failures and that it should be a learning experience, they believe that we can learn how to be better at launching and growing businesses – and in fact that we can learn from other founders’ success and failures and do a better job at developing viable businesses. They also claim that failure is far less of an option for many entrepreneurs than is the case in perhaps Palo Alto where funding is more plentiful and entrepreneurship is a choice, not the only option.

Mashauri have recently conducted an investigation into UK Government statistics where they have combined a number of databases to  paint a picture of what is the actual failure rate of new businesses and when are they likely to fail. There are good reasons for using these particular datasets and they believe that the learnings are translatable to other countries, although the results might need to be adjusted for local factors.

Their overall findings are:

  1. About two thirds of all businesses fail within the first five years
  2. Almost one third of new businesses never gain traction (ie receive income from customers or receive funding)
  3. We are not getting better at helping new businesses become successful– in fact we are getting worse

These are shown with the relevant charts in the infographic below.

The full article can be found at: Startup failure rate is too high.

Or click the link at: http://wp.me/p7JRbh-IW

The next article in the series is going to look at the “why” of failure and try to map this onto the “when”.

To receive notification about the new article and other research, sign up here.

 

The author, Simon Gifford, is CEO at Mashauri, Director of Genesis management Consulting and an adjunct professor at IE Business School in Madrid.