Last week I was invited to be a guest speaker at the GIBS Entrepreneurship Club.
I spoke about what it’s like to be an entrepreneur. In a nutshell, it is at the same time exhilarating, and frightening. Rewarding at times, and a long and lonely road the rest of the time. Pockets of celebration and success and long periods of hope and disappointment, lots of trial and error. But being an entrepreneur is not much different from being a manager. 90% of your activity is operational, running a business is like managing a department. The biggest difference is that when you’re employed, it’s a lot like playing soccer for Bafana. It doesn’t matter that you don’t win a game, you’re still going to get paid. For the Entrepreneur, it’s more like walking a high wire across two skyscrapers without a safety net. Blindfolded.
After the talk I fielded some very interesting questions about issues which have become so much part of my DNA as a tamed serial entrepreneur I’d forgotten that they were real issues and fears for new entrepreneurs (and managers) out there.
These were some of the questions:
How do you deal with failure?
I run two very successful businesses. However, lurking in the shadows are many business ventures I’ve started that have failed. Some of them were very expensive failures. Some of them minor. But if you consider that only 1 out of every 25 entrepreneurial ventures survives past the first 5 years, failure has to be part of the deal right from the start. The one thing the entrepreneur has to accept is that the business idea failed, but that he or she is not a failure. There is a huge distinction between the entrepreneur and the idea. Yes, it is your idea, and yes, you risked time and resources to make it into a business, but the person doesn’t become a failure if it doesn’t pan out. Separate yourself from the business emotionally.
What I learned from years at business school, and teaching managers, is that there is an approach to follow at the various stages of the business life cycle. In the same way, the business manager needs to use different tools during different stages of new product development. Doing this in the dark, or without knowing what to look out for, wasn’t a great idea in hindsight. When the businesses failed there were usually glaringly obvious signs that I ignored, refused to see, should have noticed, or didn’t know about, all of which probably could have helped avoid big losses had I paid attention to them. With a little market testing, or application of a few basic business management tools the business idea might even have been shelved before it began.
According to the innovation theorists, fail early, fail often. Early failure is a lot less costly than failure later in the process. (Read Eric Reis’ Lean Startup Methodology.) Edison had over 2000 failed attempts at making the light bulb. He said he didn’t fail. He just 2000 ways how not to make a light bulb.
How do you know when it’s time to stop?
If you buy into the idea that a new business is an unproven experiment, that it’s all about testing a multitude of unknowns, then you can approach the rollout of a new business more scientifically and less emotionally. Set performance markers that determine whether or not you advance to the next stage. If the results of your initial marketing don’t advance you to the next stage, make sure you fully understand what didn’t work before you throw more money and effort away by trying a different approach on something that ultimately isn’t going to work. Read Eric Reiss’ Lean Startup Methodology for a well laid out approach to building experiments to test your assumptions before you lay out fortunes on an idea you haven’t fully proven. From my own research most small businesses do not do thorough market research before embarking on new business ventures.
The final word for this week’s newsletter is Believe. Not every venture works out. The statistics prove that undeniably. Ignoring this statistic before going into a new venture or launching a new product is pure folly. The odds of new business survival are slim. But believe in yourself, no matter what. An idea may have proven to be something people don’t want to spend money on, but that doesn’t mean you’re a failure. Analyze the data, find out where your assumptions were off, and try a new experiment to prove or disprove your assumptions. But never stop believing in the power of your own creative ideas. Your ideas can still change the world. Don’t give up, but advance sensibly when perusing your idea.
Do it smartly, and be patient. Finding the right pathway to the masses doesn’t happen overnight and the product you had in mind when you first thought up your business idea may not necessarily be the one you end up with. Make sure you only spend what you’re prepared to lose and that you have enough cash coming in while you’re testing new markets and spending money on R&D. Don’t raid successful cash flows to pursue untested ones.
This week, I’m lecturing on a program for up and coming managers. I’ll share some of the learnings from these lectures in next week’s newsletter.