Teague Hopkins

Mindful Product Management

Teague Hopkins

Startup Risk and the Ego

Usually when we talk about risk at a lean startup event, it goes something like this:

Slackline by Remy Saglier - DOUBLERAY

There are two types of risk: market risk and technological risk.
Agile methodologies are used to reduce technological risk, and lean startup (and customer development) helps reduce market risk.

The discussion continues when someone adds:

Web startups don’t really have technological risk. We know we can build it. We don’t know if anyone wants it.
Biotech companies typically have tech risk, but no market risk. Everyone wants a cure for cancer, but we don’t know how to build it (yet).

But I found myself in the middle of a very interesting conversation at last week’s DC Lean Startup Circle. We were talking about a third type of risk that is critical for startups, what Ben Willman calls “ego risk.”

From what I’ve seen, the vast majority of people working in startups have a tendency to want our work to be as good as possible before we show it to people. This instinct runs counter to the concept of a Minimum Viable Product.

We all get attached to our clever solutions, sometimes even after we’ve discovered that they solve the wrong problem (or no problem at all). Ego is why we get attached to our solutions and stop questioning, and why we want to avoid customers until it’s perfect. It’s why we conflate our sense of self-worth with the success of our product or startup.

Ben Horowitz (of Andreessen Horowitz) has written that the most difficult skill for CEOs is to manage their own psychology. He also points out that it’s almost taboo to talk about personal psychology. It’s too easy for founders or CEOs to get in their own way and prevent themselves from executing with objectivity and mindfulness.

We talk about the technical and market risks facing a startup. Why don’t we talk about this more important risk? We need to acknowledge and address ego risk.

Startups have tech risk (can we build it?), market risk (will they buy it?), and ego risk (can I get out of my own way?).

If you want to join the conversation, come check out Ben Willman’s presentation on the subject at the next DC Lean Startup Circle.

Four Lessons Learned at Lean Startup Machine DC

I had the pleasure of being a mentor and judge at Lean Startup Machine DC (#lsmdc) this weekend at GeekEasy. The participants spent the weekend learning to validate hypotheses; the winning team discovered that people would be willing to share their personal genetic data to help fight disease. They got out of the building and asked passers-by to spit into cups. They collected one sample every 3 minutes, taking the first step toward proving the viability of creating a massive genetic database to support research into personalized medicine. As they were learning, so was I. Here are a few things I learned along the way:

LSMDC at GeekEasy. Photo by Stephen Strasser, Strasser:Studio.

Lessons

  1. Lean is hard, and not everyone will succeed.

    2. Especially not in one weekend. But it’s also not a binary state. An organization can be varying degrees of lean, and the more I learn about lean startups, the more I can apply it in my own work.

  2. Small teams of experts are more prone to confirmation bias.

    3. If you know the space well, you need to be even more careful that you test your hypotheses with real data. Make sure people on your team can call you out. If you’re working solo or with one partner, set time aside to take a reality check with someone outside your team.

  3. The market you know is not the only market.

    4. It’s tempting to sell to startups because you are one, lots of people you know work for one, and you like thinking about startups. Most startups don’t have money, so think twice. There are other markets that might have the qualities you are looking for but actually have money. For example, if you are targeting startups because you are looking for companies without entrenched policies, consider embattled companies who have hired turnaround consultants instead.

  4. You are not your target market.

    5. Make sure other people share your problem. It’s great to build something you want to use, but if no one else wants it, it’s a hobby, not a business.

It’s Time for Nonprofits to Get Lean

Want to change the world, but have limited time and money at your disposal? Join the club.

You can’t drive change if you pour your heart and soul into an inefficient engine. You need to get lean.

Nonprofits and social movements need to learn from the lean methodology, or risk wasting resources and throwing away the most precious commodity, attention. The principle of lean methodology is to produce maximum value with the minimum amount of wasted resources, and nonprofits are often guilty of failing this test.

You’re not always building something for your constituents. Whales don’t use web apps.

Nonprofits have a vision of a better world, and a theory of how to remake this world into the one they envision. For a nonprofit, the goal is change, and waste is any resource spent that doesn’t help achieve that change.

Is Occupy Wall Street a Lean Nonprofit?
Occupy Wall St. has garnered a lot of attention, but is it lean?
 Photo by Bob Jagendorf

Waste can cost you money or human resources, but when your goal is change, waste can also squander attention. If your organization is getting attention and failing to use that to drive change, you are wasting attention.

In an era of nonprofit proliferation, it is even more important that nonprofits learn to be lean. Attention is a finite resource. If your organization or movement is getting attention, some other organization is not. If two nonprofits are competing for attention around a specific issue, the problem becomes even more pronounced. If you capture attention but don’t turn it into change, you are not only wasting the attention, but you are preventing another organization from catalyzing that attention into change.

Don’t just demand attention. Create change.

The Origins of Lean

The lean methodology began in the manufacturing industry. The basic principle is to produce an increment of value with as little waste as possible. In manufacturing, an increment of value is a high-quality physical good. Waste takes many forms – including defects in production, excess inventory, unnecessary processing, and rework.

The lean startup movement, pioneered by Eric Ries, applies these principles to the startup community. In a lean startup, value takes a different form. To paraphrase Steve Blank, a startup is an organization searching for a business model. Since the purpose of the organization is to discover something, not to create a product, the increment of value is validated learning. Startups create value by testing assumptions and proving or disproving hypotheses. After the business model and growth model are validated, the business ceases to be a startup, and can focus on scaling.

[For a good introduction, checkout Ries’s book, The Lean Startup]

Lean for Nonprofits

Nonprofits and social movements are another animal. They still need to reduce waste – but value lies neither in validating hypotheses (unless the nonprofit also happens to be a startup, a topic for another post) nor in producing physical goods. You’re not always building something for your constituents. Whales don’t use web apps.

For a lean startups, it’s about learning. For a lean nonprofit, it’s about impact. Lean nonprofits create increments of value by enacting, provoking, or inspiring change with as little waste as possible.

It’s time for nonprofits to be more lean.

Less waste, more change.

Want to learn more? Let THG help you change the way you change the world.

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The Startup Primer

[box]Welcome to the Startup Primer – a collection of 55 articles about the challenges of startups. If you are launching your startup, preparing to start, or if you’re already on the way to living the entrepreneurial dream, you need to read these articles.[/box]

Table of Contents

  1. Before You Start
  2. On Founders
    1. Just for Non-Technical Founders
  3. Team
    1. Starting the Team (Co-Founders)
    2. Building the Team
    3. Keeping (and motivating) the Team
  4. Boards and Advisors
  5. Marketing
    1. Social Media
  6. Product

Before You Start

On Founders

Just for Non-Technical Founders

  • Tips For Getting Started For The Non-Technical Web Entrepreneur – http://bit.ly/juR4ZG
  • How to pull your weight as a non-technical co-founder – http://bit.ly/ne66h1
  • Please, please, stop asking how to find a technical co-founder. “You don’t find a technical co-founder, you earn one.” – http://bit.ly/j9K54Z

Team 

Starting the Team (Co-Founders)

Building the Team

Keeping (and motivating) the Team

Boards and Advisors

Marketing

Social Media

Product

Special Bonus: Equity and Funding

    This primer is not intended to be a comprehensive resource for those seeking investors but these articles should give you a starting point for exploring your options.

  • Intro to Stock and Options for Startup Employees and Founders – http://bit.ly/U5Ro6z
  • Where to Look for Different Amounts of Funding – http://bit.ly/lSsHfp

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Moving to the Cloud

For most organizations, maintaining servers is not a core competency, but there are concerns with moving hosting and other services to the cloud. One of the most common concerns we hear from small businesses is the reliability or security of cloud hosting services. Several high-profile outages have made it obvious that cloud services are not infallible.

However, it is a mistake to assess cloud services on an absolute scale. Small businesses should ask themselves whether cloud service providers can do a better job keeping the servers running than they can. Almost always, the answer is yes.

If it has ever taken you longer than 24 hours to recover from a server outage, it’s probably time to move to the cloud.

It is impossible for most small businesses to match the ability and experience in server management of providers like Amazon and Rackspace. Additionally, those providers have several advantages that come from the scale of their business. If hardware fails, they have a larger pool of backups to use as substitutes than do small businesses. They can make better use of resources by spreading the cost of features like diesel generator backup and redundant connectivity across many hosted solutions, enabling them to offer more resilient systems at a lower cost than their customers could achieve independently.

What are the telltale signs that an organization should move to the cloud?


A literal cloudNot all small organizations need to move to the cloud, and there are factors to consider other than reliability and cost. However, if it has ever taken you longer than 24 hours to recover from a server outage, it’s probably time to move to the cloud. If your server uptime is worse than 99.9%, it’s probably time to move to the cloud. If you don’t know what your uptime is, server hosting is probably not a high enough priority and should be outsourced, usually, by moving to the cloud.

In addition to increasing reliability and lowering costs, there are some operational advantages from moving to a cloud-hosted solution. The potential to scale capacity quickly is one such advantage, and is of particular value to startups and other organizations expecting rapid growth. The process of spinning up an additional cloud server is significantly faster than installing a new physical server of your own, and does not incur the fixed costs of purchasing new hardware. As a bonus, if that increase in usage turns out to be a spike instead of sustained growth, spinning down that cloud server is just as easy.

Photo by Horia Varlan