Knowledge vs Experience

Self-explanatory.. knowledge_vs_experience

source: unknown

This is what Steve Jobs said in his popular Commencement Address in 2005 at Stanford University regarding “connecting dots“:

..you can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something — your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.

Startups vs Corporations, and what happens in between

Why founders of startups get replaced by the board when the startup starts to grow fast? Why many startups fail to integrate into the parent company after the acquisition? And why big corporations struggle to launch a successful startup from within?

Concept of RPV

RPV stands for Resources, Processes and Valuves.

Resources

At the initial stage of a company, all you need are good and reliable people that can get the job done i.e resources. At this stage resources are crucial, if you have a web technology startup and happen to find a great coder and UX developer then you are in luck. On the other hand, if you happen to hire the wrong developer, you will have a tough time launching that MVP (minimum-viable-product) of yours. Similarly, if your lead developer leaves at this stage to a competitor startup, it can greatly affect your product and even your startup as a whole. But this is also the stage where it’s easiest to solve your company’s problems, because most of the problems will be related to resources and usually they can be settled by hiring a new guy or firing an existing employee.

Processes

When your startup is at the stage where it has a product or service that is selling like hot cakes, and you start hiring a lot more people to grow both your company and its revenue, that’s where the processes come in. That’s because you want your operations, customer service, support, billing etc to be run efficiently. That’s when you start to setup company wide processes, different processes for different teams and departments, KPIs (key-performance-indicators), SLAs (service-level-agreements), SOPs (standard-operating-procedures) etc. This is the stage when efficiency is most important to the company, because efficiency is directly related to company’s revenues.

rpv startup

Values

The final stage is when a particular startup has become an established corporation. At this stage “company values” are normally setup to guide the employees in their daily work, dealings and most importantly in decision making. Values are guiding principles that dictate how the company is run in all walks of its life. At this stage, while still important, resources won’t be as important as they were at the “resources stage”. Hiring and firing happens quite often. Individual opinions within the company doesn’t really have any weight unless the person is a c-level. Continue reading

Competition is for Losers

Peter Thiel is no stranger to Startup World. He is the co-founder of PayPal and investor in Facebook, Quora, Artsy, PandoDaily, AdRoll, Reddit and many more.

He has an interesting viewpoint when it comes to Startups and how they should be managed, in order to be successful. For the past decade, methodologies like Customer Development and Lean Startup have been popular. The central idea in these methodologies are around customers, and that your idea (hypothesis) must be tested against potential customers in order to be successful, and based on customers’ feedback you should tweak your initial idea (pivot) to achieve a sustainable and repeatable business model that generates revenue.

Peter Thiel is sceptical about these methodologies. He says that customers might not always be right and listening to them to guide your business’ destiny might not be the right approach. He encourages entrepreneurs to start startups that do in order of magnitude better than the existing competitors, rather than doing incremental improvements as the Lean Startup methodology suggests. He also advises entrepreneurs to go for monopoly when starting a startup, doing something that dominates the market i.e avoiding competition and aiming for monopoly. He says “Competition is for losers”.

He also questions the education system in leading Universities that teach Entrepreneurship, he says that currently our education system instills and inculcates in future entrepreneurs to compete and to be a better competitor rather than doing something unique that makes competition irrelevant or difficult for others to compete with your startup.

Personally, what he puts forward is definitely something interesting and somewhat refreshing. It kind of reminds me of Steve Jobs’ beliefs. He was the type of person where he would say “customers do not know what they want.. etc”. But I think Customer Development and Lean Startup Methodologies are not mutually exclusive to what Peter Thiel is suggesting, in fact they can still be used to help reach product-market-fit.

Below is a video of him giving a lecture in Stanford in “Business Strategy and Monopoly Theory” where he expounds on the above mentioned ideas of his:

Note: If you are based in Malaysia, you can order his book from Bookurve with free shipping. I ordered mine already together with Eric Schmidt’s “How Google Works“, should be arriving next week.

Wikipedia’s Initial Idea and How it Evolved

Wikipedia as we know it today, with more than 3.7 million articles for english version alone, had a different idea and business model altogether in the beginning that many people may not know it now.

As the story goes.. In 1999, Jimmy Wales had an idea, he wanted to create a free encyclopedia to be written by experts and PhD holders, it was called Nupedia. He reasoned, only scholars, academics and experts in a particular field would be able to write such articles. It made sense, as scholarly articles needed a lot of referential data and research, not everyone would be able to write such articles. However, in its first year, his team of “experts” were able to write only a dozen articles. They were simply too slow. This was due to many reasons, most of the academics were too busy, it was difficult to convince them to write for Nupedia, research normally took few years..etc.

So, Jimmy Wales saw that it was not working, something had to be done. He came out with a new idea. He suggested to his team, why not make it in a way that anybody can create an article, others can edit it, etc… basically early years of crowdsourcing. But the editors of Nupedia and Advisory Board were not very supportive of the idea. For them it was the opposite of what they were doing at the moment. Non-academics, and uncontrolled editing and creation of articles, they thought, would jeopardize the credibility of the articles and company as a whole. They reasoned, there would be too much error in the articles, which would render the articles useless for any scholarly reference or research.

This new idea ended up separated into different project and was called “Wikipedia” (wiki – hawaiian for quick). Within a year, there were more than 20,000 articles in it. Clearly it was a success and it was working. As for the margin of error, it was 3.86% per article, compared to 2.92% for Encyclopedia Britannica according to 2005 research by journal Nature, which is acceptable. And usually these errors get corrected over time.

Eventually, Nupedia was shutdown in 2003, and it had only 23 articles at the time of closing. And as they say, the rest is a history…

Lesson to Startups and Entrepreneurs..

Sometimes the initial idea for your startup may not work out, and you might end up doing something totally different for your startup and its direction. And this phenomenon is actually very common in startups. As Jawed Karim of YouTube said in SVC2M event in Kuala Lumpur, their initial idea for youtube was “a dating site with videos“.

So, if your first version of your product (MVP) didn’t take off, don’t despair. Find out why it didn’t take off, get feedback from your potential customers/users on what they want, after that iterate and try again!

Note: If you want to read more about wikipedia story, check this Business Week article here

Please feel free to comment about your own experiences or of any companies that you know which changed their business model, direction, idea drastically from the original one.

Invest in R&D, it’s vital for your business’ survival

If your business is running smoothly and if you have some great products that sell like hot cakes, should you stop investing in R&D? Maybe reduce the investment in R&D and reap the profits that is generated from your cashcow products? The answer is “No”. You should keep investing in R&D, you should keep coming up with great innovative products. Because success lies in continuous innovation, not in one-time innovation.

If Xerox stopped investing in Research & Development, it would be earning 60% less revenue:

More than 2/3rd of Xerox’s revenue comes from products launched in the past two years. source

Some companies like Sony believe in innovation so much, that, they would introduce new products even if those new products are going to kill its own current (cashcow) products. Because, Sony believes in creating “new markets” and not creating products for the existing markets.

Between 1950 and 1982 Sony successfully built 12 different new-market, disruptive-growth businesses. These included the original battery-powered pocket transistor radio, launched in 1955, and the first portable solid-state black-and-white television, in 1960. Plus: videocassette players, portable video recorders, the now-ubiquitous Walkman and 3.5-inch floppy disk drives, launched in 1980. source

So, as you can see, continuous investment in R&D is very important. Unfortunately, many small-to-medium businesses and some startups are usually stuck with few products. After developing few successful products they simply stop investing in R&D and stop coming up with new products. Rather, they resort to fixing and polishing the existing products. In some cases, years would past and the company would be still working on the existing products. What a sad situation that is.

If you start your own company don’t make this grave mistake of not investing in R&D!