Entrepreneurs: Learn from the averages, don’t succumb to them

Keith Schacht| December 26th, 2013
Post to Twitter

As an entrepreneur you spend a lot of time telling other people about your business. Early on you do this to learn—you solicit feedback from people smarter than you—while later the feedback may be unsolicited. But regardless, there is a common pattern in the feedback that you will hear from people who are outside your business. It is is important to identify this pattern or you risk drawing the wrong conclusion from it. Here are the telltale signs:

“Companies in your space need to …
“Given the stage you’re at, you should …
“No one with your background has ever …

When you’re talking with wise people, these statements are generally true so it’s worth listening. But they are also admissions of ignorance and you must treat them as such. These are attempts to draw a conclusion about your business based on a general pattern you seem to fit. It’s a form of statistical thinking.

Statistics are generalizations about the world which are helpful when you are ignorant of the particulars. As soon as you have knowledge of the particulars, the generalization is mostly useless.

For example, if you find a lump in your neck and you go in for a biopsy, while waiting for the results your doctor may tell you there is a 90% chance it’s cancer based on its size and location. But as soon as the biopsy results come back negative, the lump is not cancerous, now the statistic is irrelevant. It’s still true: 90% of lumps of this size and in this location do turn out to be cancerous. But the cause behind this pattern is unknown which is why it was possible for yours to be an exception.

In business, just like in medicine, it is helpful to understanding what the typical outcomes are for people who have already walked the path you’re heading down, but only while you are ignorant of the underlying cause which determines where you will fall in the range of outcomes. Want to predict your net margins? Look at competitors in your space. Want to budget for hiring a senior engineer? Talk to startups who have hired similar people and learn the typical salary. Want to evaluate a term sheet from an investor?

But if you plan to change the world–to achieve something no one before you has. Then you need to figure out ways to achieve a different outcome than those who have ventured before you. Understanding typical outcomes is a starting point, not a constraint. Most people who give you advice about your business will treat them as laws of nature and think you are naive for thinking they don’t apply to you.

But you can be the exception. The key is to understand the cause behind the patterns you see. Once you understand the cause and can control it, then historical outcomes are irrelevant.

Find the competitor who has exceptional net margins and understand what they’re doing differently. Or if you plan to be the first in your industry, then look to industries where net margins are in the range you’re targeting and learn how they’ve achieved them. Want to hire a senior engineer but can’t afford the typical salaries? Understand what’s driving the price up. Is it because most senior people are older and have kids? Then reach out to the youngest in the field or find those without kids.

Work to understand what drives the typical outcomes if you wish to be atypical. Do this by learning to ask questions that reveal the cause behind outcomes. And seek out the exceptional cases as key examples to study and learn from.

You can be the exception. Now go forth and change the world.

Entrepreneurs: Learn from the averages, don’t succumb to them

Keith Schacht| December 26th, 2013
Post to Twitter

As an entrepreneur you spend a lot of time telling other people about your business. Early on you do this to learn—you solicit feedback from people smarter than you—while later the feedback may be unsolicited. But regardless, there is a common pattern in the feedback that you will hear from people who are outside your business. It is is important to identify this pattern or you risk drawing the wrong conclusion from it. Here are the telltale signs:

“Companies in your space need to …
“Given the stage you’re at, you should …
“No one with your background has ever …

When you’re talking with wise people, these statements are generally true so it’s worth listening. But they are also admissions of ignorance and you must treat them as such. These are attempts to draw a conclusion about your business based on a general pattern you seem to fit. It’s a form of statistical thinking.

Statistics are generalizations about the world which are helpful when you are ignorant of the particulars. As soon as you have knowledge of the particulars, the generalization is mostly useless.

For example, if you find a lump in your neck and you go in for a biopsy, while waiting for the results your doctor may tell you there is a 90% chance it’s cancer based on its size and location. But as soon as the biopsy results come back negative, the lump is not cancerous, now the statistic is irrelevant. It’s still true: 90% of lumps of this size and in this location do turn out to be cancerous. But the cause behind this pattern is unknown which is why it was possible for yours to be an exception.

In business, just like in medicine, it is helpful to understanding what the typical outcomes are for people who have already walked the path you’re heading down, but only while you are ignorant of the underlying cause which determines where you will fall in the range of outcomes. Want to predict your net margins? Look at competitors in your space. Want to budget for hiring a senior engineer? Talk to startups who have hired similar people and learn the typical salary. Want to evaluate a term sheet from an investor?

But if you plan to change the world–to achieve something no one before you has. Then you need to figure out ways to achieve a different outcome than those who have ventured before you. Understanding typical outcomes is a starting point, not a constraint. Most people who give you advice about your business will treat them as laws of nature and think you are naive for thinking they don’t apply to you.

But you can be the exception. The key is to understand the cause behind the patterns you see. Once you understand the cause and can control it, then historical outcomes are irrelevant.

Find the competitor who has exceptional net margins and understand what they’re doing differently. Or if you plan to be the first in your industry, then look to industries where net margins are in the range you’re targeting and learn how they’ve achieved them. Want to hire a senior engineer but can’t afford the typical salaries? Understand what’s driving the price up. Is it because most senior people are older and have kids? Then reach out to the youngest in the field or find those without kids.

Work to understand what drives the typical outcomes if you wish to be atypical. Do this by learning to ask questions that reveal the cause behind outcomes. And seek out the exceptional cases as key examples to study and learn from.

You can be the exception. Now go forth and change the world.

Entrepreneurs: Learn from the averages, don’t succumb to them

Keith Schacht| December 26th, 2013
Post to Twitter

As an entrepreneur you spend a lot of time telling other people about your business. Early on you do this to learn—you solicit feedback from people smarter than you—while later the feedback may be unsolicited. But regardless, there is a common pattern in the feedback that you will hear from people who are outside your business. It is is important to identify this pattern or you risk drawing the wrong conclusion from it. Here are the telltale signs:

“Companies in your space need to …
“Given the stage you’re at, you should …
“No one with your background has ever …

When you’re talking with wise people, these statements are generally true so it’s worth listening. But they are also admissions of ignorance and you must treat them as such. These are attempts to draw a conclusion about your business based on a general pattern you seem to fit. It’s a form of statistical thinking.

Statistics are generalizations about the world which are helpful when you are ignorant of the particulars. As soon as you have knowledge of the particulars, the generalization is mostly useless.

For example, if you find a lump in your neck and you go in for a biopsy, while waiting for the results your doctor may tell you there is a 90% chance it’s cancer based on its size and location. But as soon as the biopsy results come back and it’s negative—the lump is benign—then the statistic is irrelevant. It’s still true: 90% of lumps of this size and in this location do turn out to be cancerous. But the cause behind this pattern is unknown which is why it was possible for yours to be an exception.

In business, just like in medicine, it is helpful to understanding what the typical outcomes are for people who have already walked the path you’re heading down. But only when you are ignorant of the underlying cause that drives the range of outcomes. Want to predict your net margins? Look at competitors in your space. Want to budget for hiring a senior engineer? Talk to startups who have hired similar people and learn the typical salary. Want to evaluate a term sheet from an investor?

 

Entrepreneurs: seek to change the world. Set out to achieve something no one before you has. Bring about some change in the world you want to see. To accomplish this, you need to figure out key ways to achieve a different outcome than those who have ventured before you. Understanding typical outcomes is a starting point, not a constraint. Most people who give you advice about your business will treat them as laws of nature and think you are naive for thinking they don’t apply to you.

But you can be the exception. The key is to understand the cause behind the patterns you see. Once you understand the cause and can control it, then historical outcomes are irrelevant.

Find the competitor who has exceptional net margins and understand what they’re doing differently. Look to industries where net margins are in the range you’re targeting, learn how they’ve achieved them, and figure out which of these learnings you can apply. Want to hire a senior engineer but can’t afford the typical salaries? Understand what’s driving the price up. Is it because most senior people are older and have kids? Then reach out to the youngest in the field or find those without kids.

Work to understand what drives the typical outcomes if you wish to be atypical. Do this by learning to ask questions that reveal the cause behind outcomes. And seek out the exception cases as key examples to study and learn from.

You can be the exception. Now go forth and change the world.

Entrepreneurs: Learn from the averages, don’t succumb to them

Keith Schacht| December 26th, 2013
Post to Twitter

As an entrepreneur you spend a lot of time telling other people about your business. Early on you do this to learn—you solicit feedback from people smarter than you—while later the feedback may be unsolicited. But regardless, there is a common pattern in the feedback that you will hear from people who are outside your business. It is is important to identify this pattern or you risk drawing the wrong conclusion from it. Here are the telltale signs:

Companies in your space need to …
Given the stage you’re at, you should …
No one with your background has ever …

When you’re talking with wise people, these statements are generally true so it’s worth listening. But they are also admissions of ignorance and you must treat them as such. These are attempts to draw a conclusion about your business based on a general pattern you seem to fit. It’s a form of statistical thinking.

Statistics are generalizations about the world which are helpful when you are ignorant of the particulars. As soon as you have knowledge of the particulars, the generalization is mostly useless.

For example, if you find a lump in your neck and you go in for a biopsy, while waiting for the results your doctor may tell you there is a 90% chance it’s cancer based on its size and location. But as soon as the biopsy results come back and it’s negative—the lump is benign—then the statistic is irrelevant. It’s still true: 90% of lumps of this size and in this location do turn out to be cancerous. But the cause behind this pattern is unknown which is why it was possible for yours to be an exception.

In business, just like in medicine, it is helpful to understanding what the typical outcomes are for people who have already walked the path you’re heading down. But only when you are ignorant of the underlying cause that drives the range of outcomes. Want to predict your net margins? Look at competitors in your space. Want to budget for hiring a senior engineer? Talk to startups who have hired similar people and learn the typical salary. Want to evaluate a term sheet from an investor?

 

Entrepreneurs: seek to change the world. Set out to achieve something no one before you has. Bring about some change in the world you want to see. To accomplish this, you need to figure out key ways to achieve a different outcome than those who have ventured before you. Understanding typical outcomes is a starting point, not a constraint. Most people who give you advice about your business will treat them as laws of nature and think you are naive for thinking they don’t apply to you.

But you can be the exception. The key is to understand the cause behind the patterns you see. Once you understand the cause and can control it, then historical outcomes are irrelevant.

Find the competitor who has exceptional net margins and understand what they’re doing differently. Look to industries where net margins are in the range you’re targeting, learn how they’ve achieved them, and figure out which of these learnings you can apply. Want to hire a senior engineer but can’t afford the typical salaries? Understand what’s driving the price up. Is it because most senior people are older and have kids? Then reach out to the youngest in the field or find those without kids.

Work to understand what drives the typical outcomes if you wish to be atypical. Do this by learning to ask questions that reveal the cause behind outcomes. And seek out the exception cases as key examples to study and learn from.

You can be the exception. Now go forth and change the world.

Entrepreneurs: Learn from the averages, don’t succumb to them

Keith Schacht| December 26th, 2013
Post to Twitter

As an entrepreneur you spend a lot of time telling other people about your business. Early on you do this to learn—you solicit feedback from people smarter than you—while later the feedback may be unsolicited. But regardless, there is a common pattern in the feedback that you will hear from people who are outside your business. It is is important to identify this pattern or you risk drawing the wrong conclusion from it. Here are the telltale signs:

Companies in your space need to …Given the stage you’re at, you should …”

“No one with your background has …”

When you’re talking with wise people, these statements are generally true so it’s worth listening. But they are also admissions of ignorance and you must treat them as such. These are attempts to draw a conclusion about your business based on a general pattern you seem to fit. It’s a form of statistical thinking.

Statistics are generalizations about the world which are helpful when you are ignorant of the particulars. As soon as you have knowledge of the particulars, the generalization is mostly useless.

For example, if you find a lump in your neck and you go in for a biopsy, while waiting for the results your doctor may tell you there is a 90% chance it’s cancer based on its size and location. But as soon as the biopsy results come back and it’s negative—the lump is benign—then the statistic is irrelevant. It’s still true: 90% of lumps of this size and in this location do turn out to be cancerous. But the cause behind this pattern is unknown which is why it was possible for yours to be an exception.

In business, just like in medicine, it is helpful to understanding what the typical outcomes are for people who have already walked the path you’re heading down. But only when you are ignorant of the underlying cause that drives the range of outcomes. Want to predict your net margins? Look at competitors in your space. Want to budget for hiring a senior engineer? Talk to startups who have hired similar people and learn the typical salary. Want to evaluate a term sheet from an investor?

 

Entrepreneurs: seek to change the world. Set out to achieve something no one before you has. Bring about some change in the world you want to see. To accomplish this, you need to figure out key ways to achieve a different outcome than those who have ventured before you. Understanding typical outcomes is a starting point, not a constraint. Most people who give you advice about your business will treat them as laws of nature and think you are naive for thinking they don’t apply to you.

But you can be the exception. The key is to understand the cause behind the patterns you see. Once you understand the cause and can control it, then historical outcomes are irrelevant.

Find the competitor who has exceptional net margins and understand what they’re doing differently. Look to industries where net margins are in the range you’re targeting, learn how they’ve achieved them, and figure out which of these learnings you can apply. Want to hire a senior engineer but can’t afford the typical salaries? Understand what’s driving the price up. Is it because most senior people are older and have kids? Then reach out to the youngest in the field or find those without kids.

Work to understand what drives the typical outcomes if you wish to be atypical. Do this by learning to ask questions that reveal the cause behind outcomes. And seek out the exception cases as key examples to study and learn from.

You can be the exception. Now go forth and change the world.

We’re all nodes on the network

Keith Schacht| December 16th, 2013
Post to Twitter

While walking down Mission St the other day, my plans changed unexpectedly and I needed to get to Market St. I pulled out my phone and within 2 minutes a Lyft driver was pulling up and giving me a ride. It hit me that this is now possible because we’re all nodes on the network. Between 2000-2005 every computer that was out there became a node on the network, but people weren’t nodes. Even though everyone was on AIM, I could only reach you if you were sitting in front of your computer. But in the last 5 years, now that we all have internet connected devices in our pocket, it’s funny to realize that *we* are now nodes on the network.

However, right now our nodes are not that interesting. Most of us only have one port open. It’s the “chat” port. I can call/text everyone but that’s about it. This is like the internet when interacting with computers consisted of Finger and Gopher.

But thanks to Lyft there are now ~10,000 people in the city of SF who have the “driving” port opened on their node. And Lyft runs a directory service where I can scan all open ports and benefit from a people node on the network in a way I never could before.

What other ports will soon be open on the people nodes? What other directory services need to exist? Facebook Graph search looks all the more interesting from this perspective.

We’re all nodes on the network

Keith Schacht| July 2nd, 2013
Post to Twitter

While walking down Mission St the other day, my plans changed unexpectedly and I needed to get to Market St. I pulled out my phone and within 2 minutes a Lyft driver was pulling up and giving me a ride. It hit me that this is now possible because we’re all nodes on the network. Between 2000-2005 every computer that was out there became a node on the network, but people weren’t nodes. Even though everyone was on AIM, I could only reach you if you were sitting in front of your computer. But in the last 5 years, now that we all have internet connected devices in our pocket, it’s funny to realize that *we* are now nodes on the network.

However, right now our nodes are not that interesting. Most of us only have one port open. It’s the “chat” port. I can call/text everyone but that’s about it. This is like the internet when interacting with computers consisted of Finger and Gopher.

But thanks to Lyft there are now ~10,000 people in the city of SF who have the “driving” port opened on their node. And Lyft runs a directory service where I can scan all open ports and benefit from a people node on the network in a way I never could before.

What other ports will soon be open on the people nodes? What other directory services need to exist? Facebook Graph search looks all the more interesting from this perspective.

We’re all nodes on the network

Keith Schacht| July 2nd, 2013
Post to Twitter

While walking down Mission St the other day, my plans changed unexpectedly and I needed to get to Market St. I pulled out my phone and within 2 minutes a Lyft driver was pulling up and giving me a ride. It hit me that this is not possible because we’re all nodes on the network. Between 2000-2005 every computer that was out there became a node on the network, but people weren’t nodes. Even though everyone was on AIM, I could only reach you if you were sitting in front of your computer. But in the last 5 years, now that we all have internet connected devices in our pocket, it’s funny to realize that *we* are now nodes on the network.

However, right now our nodes are not that interesting. Most of us only have one port open. It’s the “chat” port. I can call/text everyone but that’s about it. This is like the internet when interacting with computers consisted of Finger and Gopher.

But thanks to Lyft there are now ~10,000 people in the city of SF who have the “driving” port opened on their node. And Lyft runs a directory service where I can scan all open ports and benefit from a people node on the network in a way I never could before.

What other ports will soon be open on the people nodes? What other directory services need to exist? Facebook Graph search looks all the more interesting from this perspective.

We’re all nodes on the network

Keith Schacht| July 2nd, 2013
Post to Twitter

While walking down Mission St the other day, my plans changed unexpectedly and I needed to get to Market St. I pulled out my phone and within 2 minutes a Lyft driver was pulling up and giving me a ride. It hit me that this is not possible because we’re all nodes on the network. Between 2000-2005 every computer that was out there became a node on the network, but people weren’t nodes. Even though everyone was on AIM, I could only reach you if you were sitting in front of your computer. But in the last 5 years, now that we all have internet connected devices in our pocket, it’s funny to realize that *we* are now nodes on the network.

However, right now our nodes are not that interesting. Most of us only have one port open. It’s the “chat” port. I can call/text everyone but that’s about it. This is like the internet when interacting with computers consisted of Finger and Gopher.

But thanks to Lyft there are now 10,000 people in the city of SF who have the “driving” port opened on their node. Lyft runs a directory service where I can scan all open ports and benefit from a node on the network in a way I never could before.

What other ports will soon be open on the people nodes? What other directory services need to exist? Facebook Graph search looks all the more interesting from this perspective.

The Elusive Early Adopters

Keith Schacht| June 11th, 2013

It’s accepted wisdom in the startup space that you begin by testing your product on early adopters and over time you work to expand to the mainstream users in your market. But if you’re struggling to bridge this gap, maybe what you think are early adopters are actually just mainstream users in a small niche. The people who are using your product first may not be the beginning of a larger opportunity.

How do you tell the difference? I was curious about this myself and last week I had a chance to talk with Steve Blank. I asked him this question and he shared some insights that were clarifying to me. (This is what I took away from our conversation not Steve’s words.)

You start by talking to a random group of potential customers in your target market. A small number of them are willing to try your product and the rest of them have some reason for saying “No.” You need to focus on the reason that some customers say “Yes” and some say “No.” What are the attributes which differentiate the adopters from the decliners?

Are these attributes temporary conditions which will cease to be relevant over time? Or are they attributes which will keep you relegated to a niche market.

For example, maybe your decliners like the value your product offers but want backwards compatibility, validation from other high profile customers in the space, SLAs, or time to get comfortable with the idea of change. Your adopters agree these extra details would be nice but they are willing to use your product without them. This is a classic case of early vs late adopters. The extra requirements of your late adopters will naturally be addressed as your product evolves while catering to your early adopters.

But if your decliners don’t feel like your product addresses a pain they have or are indifferent to the idea whereas your adopters are excited by it, something different is probably going on. Is it because your adopters use a technology that your decliners do not? Or your

. Whereas your adopters are excited about your product because of a unique workflow they have. This may well be a case of niche market. As you work hard to keep your adopters happy and further address their needs, it’s not getting you any closer to addressing the objection of your decliners.

Th

have some unique workflow

or other things which you’ll address over time but