World has a new reality now.
Time to shake your beliefs. Does not matter what experience shaped those for you. Two weeks ago you may have had validated demand, unit economics, a well working distribution and a model for scale. If you think you still do, then you are in denial.
Founder CEOs must make surgical decisions. It is 50% voluntary cut now or a 100% forced severance later. It is like cutting a limb to save life.
Whole world has turned into a Bermuda triangle for previous mental models. All known mental models are not reliable anymore.
No one knows any better. Well-meaning advisors from last week face new incentives now. Unless their skin in the game continues to exist, their advice is suspect.
In times like this founders must go to basics. Founders #1 job is making decisions. Decisions under conditions of risk or uncertainty.
There are many types of startup paths, each exhibit different levels of uncertainty. In normal times building a startup is like building a railroad. Complex but mostly execution risks. Or climbing Mount Everest, where only few have walked the path in the past. A Sherpa’s help can increase odds of reaching the summit. Despite good planning, weather can play spoilsport and create risk of ruin. Finally there is a type of startup path which is like a star trek journey. Venturing into where no man has gone before.
Startups do goal setting and create objectives. Build and organize teams through MBO (management by objective). Or through its derivative called OKR (Objective & Key Results) created by Andy Grove & evangelized by John Doerr. They work extremely well in building railroads and climbing Everest.
Now everyone is operating in the path of star treks, where the future is unknowable.
As founder you must shift to first gear in decision making.
Do First principle thinking.
First principle thinking is breaking down something to sub parts that are true (& not further divisible) and reasoning from there.
In my experience as a founder and working with many of them, a few principles has stood the test of time. A set of five principles collectively called as effectuation have helped founders survive and thrive.
Effectuation has been empirically shown to work by Dr. Saras Sarasvathy. Saras was a student of Herbert Simon, the only person to have won both the Turing Award (highest computer science award) & Nobel prize (in economics). Simon did research to find out if chess grandmaster is a human trait or skill. Saras asked the same question about entrepreneurship. Both conclude that is a skill.
Five principles of effectuation are listed below
Bird in Hand
Usual path of coming with a new startup starts with brainstorming ideas. Or even look at what are the hot ones that are getting funded ?
But founders don’t start with ideas. They start with
Who am I ?
Whom do I know ?
What can I do ?
In these times where everything looks uncertain. Ask yourself what is your current bird in hand. Ask what skills do you have, what past you experience do you have. Relook at that. You may be doing a marketing automation now yet you may have had a philosophy or even a medicine major.
Who are the existing customers, partners, employees, vendors, advisors, neighbors, or friends that you have a prior relationship with who can work with you. Together what can you do.
Always ask yourself this question. What is the downside of my action ?
As long as that is limited. Don’t worry about the up-side. This thought is plain dumb simple. But for those who are educated only through books it is counter intuitive.
Most of the world asks you to play by looking at the upside. That is the language of vision, forecasts and projections. Those beliefs were brainwashed by folks with deep pockets. Unsuspecting founders created narratives about unicorns and bet their lives on it.
Remember for those who don’t have skin in your game you are an option. For investors you are one of 10 or 100 bets. Playing upside narrative and losing you is affordable for them but for you it is not. For an investor, you are a mere statistic. But for you, your life is not a statistic. If the downside is too high, you can never try again. So limit the downside such that you can play again. Experienced founders don’t play Russian roulette.
In times like these, take bets that are within your affordable loss. Know that each individual has different affordable loss.
Downside can be in terms of money, time and relationships, integrity and reputation.
We are wired to avoid surprises. But founders thinking in first gear think the opposite. They savor the surprise. Surprise is the rock under which a lesson is hidden. Surprise is when your mental model and reality does not match. When you face a surprise, it is not time to get upset and curse reality. It is a time to update your mental model and leverage it.
In times like these, this is one of the most powerful principles to use.
Partner with self selected stakeholders. Don’t be obsessed with ‘my vision’, when exploring partnerships with anyone. Ask what vision they have. Marry your vision with theirs. You don’t shove your vision when exploring partnerships. Vision is usually a narrative bias. It is like looking at a rear view mirror and connecting the dots retrospectively. No vision has ever come true the way it was initially imagined.
Pilot in the plane
Founders don’t rely on prediction. They are focussed on activities in their own control. Experienced founders hate market research. Times like make it amply clear that no prediction will work. Remember the future is not predicted but made.
This case study of IceHotel was built is one of the most brilliant illustration of all of these at work
Putting Principles in action
- Start with an audit of your network. Go through CRM, contact address in phone, download your linkedin contacts.
- Next make a shopping list for what you want to do. For anything you don’t need money, you need what the money can buy you. From the shopping list see what you can ask and trade in favour of something else other than money with your network.
- Make a list of competitors and go set up a call with them. Find where you can collaborate.
- Ask your customers what would they like to do now, what are they willing to commit for that change ? Ask open ended questions.
- Redefine the goal based on the new shared vision.
- Using the surprise thrown at you and ask what should be doing differently to benefit from the change. Think lemonade.
- Then repeat the first step,
And that’s how with going first gear in decision making you Create new future
In times like these where health pandemic is threatening the economic fabric world, it is founders, entrepreneurs that will build the new reality, They set the foundation and boost the new economic order. Founders have to employ first thinking principles to do that to be successful.
We believe Effectuation is anti-dote for the gloominess and trauma that is created by COVID-19 pandemic. If you are founder like Jaffer Ali thinking from basics, effectually, we salute you. If you are founder who could use help in your no assumptions made first principle thinking then let us know.
Original article was posted at: https://upekkha.io/blog/founder-in-first-gear/