Events Often Overtake Companies
I've found myself saying "events overtake companies" a lot this week. I'm not sure exactly why it was the phrase of the past week, but I did spend a lot of time talking to entrepreneurs running businesses that are growing rapidly, causing the founders to rethink their strategic plans.
I think less than 20% of the companies we back end up doing what they started out planning on doing. They build something, get it into the market, and then things happen. Often it turns out the market wants something a bit different than they are offering. Or that the users adopt one part of the product and don't use another part very much at all. Or developers start building things on top of the API that opens their eyes to a much bigger opportunity. Or it could simply be that the market loves what they built and they have to spend all their time on scaling and infrastructure and all the things they planned on building go to the back burner.
There are two big takeaways from this for me:
1) Don't get too attached to your strategic plan. If the market is telling you something different, go with it. The best entrepreneurs I know are great at "listening to the market" and quickly taking that input and reshaping the business to take maximum advantage of it.
2) Don't spend too much time on planning. My partner Albert wrote a post this past week about "making versus planning." In that post, he said:
I would spend as little time as possible on the planning and focus
instead on turning their prototype into a working system and getting
that out into the real world. They will learn more about the viability
of what they are working on (and more about business) then any amount
of planning could tell them.
But don't take this post as a dismissal of the value of strategy and strategic planning. Strategy is critical. Everything flows from the basic strategic plan of the business. You need to have one, but keep it really simple at the start and be prepared to evolve it quickly once the market starts talking to you. If events start overtaking the company, go with them, it's usually the best approach.
Agree. You also need investors who accept this truth. I know of a number of companies where they pitched the investors on something considered “sexier” (from an VC trends point of view) than where it’s now clear the product should really be going. It’s now really hard to shift the institutional momentum.
Albert’s quote is spot on. The only way to learn a market is to be in it. Watching and learning from the outside only gives you a fraction of the information that you get when you are in it.I think that this is one of the biggest mistakes that I see other entrepreneurs make.
I agree. IMHO Boxee is an example of a company which is going in the wrong direction right now; it appears they are following a strategic plan instead of doing what is needed by the market.2 items of feedback for Boxee which I’ve spent a lot of time testing in the past few weeks:1. They *must* get the logitech harmony remotes working. Using a keyboard, apple remote or even an iphone is wildly inferior to the logitech harmony remote. You’ll see the difference when you try it.2. Forget the social media side for now. I particularly don’t care what Avner watched last week. But I don’t want him seeing everything I watch on TV. Instead things like bookmarking should be working.(for a much better, although unfortunately still a bit unstable setup, try Plex with a logitech harmony remote. Its breathtaking!)Given Boxee is VC funded, it would be great to see them putting those resources into getting it working right. Plex needs some competition!
there’s a new version of boxee coming out in a few weeks, maybe a month, i’m not sure what the ship date is, that addresses many of its shortcomings. i think you’ll be happy when you see it. one problem with client software instead of web apps is it is harder to iterate the product quickly.
i’ll gladly try it if they have the logitech harmony remote working.
They do. Avner just told me that some of his colleagues at boxee use that remote with their app
which model of the Harmony remote are you using?maybe this thread could help http://forum.boxee.tv/showp…
I’ve seen this so many times — esp with younger folk. If you’re lucky enough to hit it over the fence, you don’t care whether it’s left field or right. Inside-the-park home runs are good too. And sometimes just getting to first is pretty nice.As you get older you learn that you control nothing, but young people still want to conquer the world. That’s not how business works. Even Steve Jobs, someone who you might say did conquer the world says “The journey is the reward.”
When I read the title of the post, I thought you were going to go somewhere else with it… you could talk a little about when events overtake companies, but from the perspective of positive (or negative) press. We had a business strategy for The Printed Blog – start small, focus on one neighborhood for distribution and ad sales, grow slowly, and organically. However, when the New York Times published a half page story, with two pictures, before the first issue came out – and then we got press all over the world, everyone told me to change the strategy (and I did). “Go big,” they said – launch in NY, Chicago, LA and SF. I got fooled (and I fooled myself, too) into thinking I could start the newspaper for the next 100 years, and raise millions in funding. Experienced people were telling me this.Ultimately, we grew too fast, spent all of my money, and no one funded us.Lesson for the founder – don’t let ANYTHING take you off your strategic vision unless you are darn sure it’s right – and, make sure you listen to the right people.
damn that sucks man. thanks for sharing your experience.
Especially if there are early signs of take up that gets all the flies around the nest in a tizzy. I’m yet to have both the fortune and challenge of a situation like this, but have seen it with close friends. Everyone has an opinion, people behaviour becomes questionable.I just read that absolutely crap book by mezrich about the Facebook founding – amongst the tripe were some poingnant examples of how Mark Z had to battle the ambulance chasing crowd – ofcourse its hard to know what was true in that book .
Fred gotta say I absolutely disagree with Albert. When I was a kid I use to win the spinning rope ladder contestsyou know where the ladder is tied with a single rope on either end) at every fair, amusement I went to. Made probably a thousand dollars over the years doing it. Building a website and putting out there is like walking up the ladder on all fours. Planning and building the managable pieces and not putting out the website …is like dragging your torso up the ladder with slow movements …others may be lucky enough to beat you if they are lucky but chances are you won’t be the one flipping over, falling off and having to start over after you charged with momentum up the ladder.Assuming the website should get out there first I think assumes the people building it aren’t skilled in what they are building it for and are relying more on users to tell them things they did wrong and taking that hit before showing /branding that they know the subject matter from the beginning.different views I guess.
I’d agree with im2b regards planning vs implementing. The balance must be in favour of planning. Have had my fingers burned going full speed ahead in getting our product pout there (because we were innovators right!) and having made costly mistakes due to an absense of proper planning. I think the same holds true for the legals and admin structuring of a start up company; you gotta plan your future funding rounds, future equity dilution, vesting terms, non-competes etc, etc.., This is all too often seen as an administrative burden by entrepreneurs (much to their regret later on) which they just outsource to a legal adviser or even worse to the investor himself.
and Fred Boxee I would argue was not about strategic planning being the wrong route… Avner (no offense to him) did not realize that the browser is going to end up being the core of that business… browser with a much wider reach are now able to deliver native video (and that is just going to get stronger as firefox and explorer become the platform). Unfortunately and no offense, Avner and other technology people (including investors) kind of ignored that a contract between a content creator and ad and aud $ trumps delivery.I would argue that Boxee may be great if they can get bought out…but as the final technology and industry leader they did not plan enough.
especially as integration and transmedia interactivity takes over…as it is. To make money you have to be involved in production and more importantly pre-production.
Albert’s comment was just a “light bulb” moment for me. I run a small company and I am always planning, but I’ve got an amazing opportunity on the horizon and I’m shifting to “making product” to be ready for the market place.I like that my new direction has been validated.
Really good post Fred. The biggest thing entrepreneurs need to be mindful is the long term prospects and that iterating is not bad. Sometimes iterating looks like changing strategies. Changing strategically is ok as long as it deosn’t foreclose the big idea. Completely rehauling is another issue because of the diseconomies of scale – just look at companies like Slide – very ineffective due to rehauling way to many times.One other venture point for entrepreneurs to be mindful – make sure your board members absolutely understand this concept that Fred is talking about because if you have board members who don’t – you will be doomed. In my experience good entrepreneurs can both listen to the market and sell customers.Nice points Fred.
Nice points back to you john
I couldn’t agree more with this post. Where you originally think you’ll end-up, and where you actually end-up are 2 different things. Speaking from experience (currently running a start-up), we’ve had to make some adjustments and changes that weren’t planned for,- based on all kinds of feedback and external market developments. But the base of the strategy was more or less stable. I guess that’s what they call “wiggle room”.
I’m fond of telling companies and entrepreneurs something similar;”Don’t be afraid to recognize the horizon your market is pointing you to”.But there are two critical points here Fred, which I see missed by today’s hot shots, on a regular basis. (And these failures are despite the historic new abilities to listen, which past entrepreneurs and businesses never had).1) The market, or the prevalent voices with an affect on refactoring a business are NOT always right. Sometimes, the feedback in reaction to a blooming startup which does havean effect on the next steering phase can be dead wrong. When a big name, or several voices in unison reach the principlesthey can seem to make sense and reformulate a young company’s strategy. This can be devastating. If the company has not yet materialized into it’s original vision, but influencers reshape for a personal fondness of a function or feature, the world shaker it could have been is never realized. Entrepreneurs need the skill of wide-spectrum listeningand contemplation. There is a talent in finding that balance. Likely, this is what happens in board meetings, but with so few patient these days, and sometimes conflicting goalsor time frames, even boards or teams end up seeing through a straw.2) A start up with extraordinary popularity and growth can start to think that they can do no wrong; so “Damn the torpedoes – full steam ahead” while self assured they are not yet brash. But if you listen to only what the commercial market seems to be telling you, and enjoin their vision for your horizon, you may not be or bring with you what you made great and embraced to begin with. If the young, albeit white-hot company forgets the subtle relationshipsand value that brought the waves of users (and magnanimous support of early evangelists), they will arrive at the redefined commercial market, all paint no wood.
So true Ed. On the second point, I’ve learned that lesson the hard way with a company called starmedia. Once burned twice shy and my job is to keep the white hot company grounded and in touch with reality. Its hard work and if done wrong can result in ‘tune out’. But it is extremely valuable to the young company if you can do it well
another great one Fred, and can we relate this this to Mark Suster’s post for hunting deer (iphone sorry no link). as we develop product (at least me on this), develop for target market, and just get it up, let market feedback determine what’s next. but Mark’s post i think focuses on the economics more, which seems a change of strategy to contradict what your saying here. im with you on this, yet his point was something to think about moving forward.
I agree, Fred. In my experience, strategic flexibility is critical when building a company. Locking oneself into one strategy is tantamount to believing that one has such superb vision and predictive abilities that nothing else is needed. Reality is that there are very, very few people — if any — that are that prescient. I recall that at comScore we adapted our strategy numerous times by zigging and zagging to take advantage of opportuntities that emerged as the Internet developed and changed. There was no way we could have anticipated it all at the beginning.Interestingly, it’s not just emerging companies that need strategic flexibility. Established companies need it also. This is vividly captured by Michael Raynor in his book “The Strategy Paradox”. Here’s a short summary:”A compelling vision. Bold leadership. Decisive action. Unfortunately, these prerequisites of success are almost always the ingredients of failure too. The reason? Managers must make choices with far-reaching consequences today, but must base these choices on assumptions about a future they cannot predict. It is this collision between commitment and uncertainty that creates The Strategy Paradox. So what should companies do? Rayner suggests that the only way to successfully plan for the future is to develop practical strategies based on multiple choices that respond to the different requirements of several possible futures, rather than single strategic commitments”.Powerful stuff.
Gian,Liked your response and particularly liked Fred’s very clear and straightforward insight.I happen to have introducted Michael Raynor at the ARF annual conference in 2007 for a keynote panel dicussion. His case of Sony Beta was perfect in illustrating the perils of being glued to an LRP.I spent the last 4 1/2 yrs. doing an online brand monitoring startup. As head of strategy, I learned the need to be flexible on a daily/weekly basis.Anyone who works for a mid or large cap company should have some start up/entrepreneurial experience to truly be inculcated with the ideas that Fred and Michael have advocated – MBA grads take note.
sounds like an interesting book, i just bought it. thanks for the tip. for anyone else who’s interested you can get it off amazon used for less than $1 (plus shipping of course).
After seeing it recommended elsewhere, I looked through it at Barnes & Noble. The book is basically that summary paragraph above plus copious supporting data. In a nutshell: companies can do everything right and still be unlucky. I’m not sure what practical value an entrepreneur can takeaway from this.
Thanks for the comment, Dave.To clarify, I referred to the book as an example of how too much reliance on one strategic plan can lead to problems for established companies as well as startups. Fred’s post addressed the issue from the perspective of startups. Bottom line, the need for strategic flexibility seems to be a universal reality of business life.I do want to address one of your comments. I don’t think the issue is luck. It’s simply that no one can possibly anticipate all the things that will occur in the future. So, to be totally locked into one version of the future is not “doing everything right”. I think it’s actually bad planning. If a single version of the future doesn’t materialize, I think it’s short sighted to say one was “unlucky”.
I’m so happy you take the time to comment here Gian. Your willingness to share your experiences at both comscore and IRI before really enhances these discussions. Thanks
Great topic Fred. How strategic and long ranging your plans are depends in some way at what stage your company is in. Regardless though, it’s always a stair step process–strategize, build, measure and respond. How big a leap each step is is a matter of successes or not that proceeded that step. A sage discussion. Thanks
Fred,Haven’t seen a post on education since your 10 commandments of Hacking education- which is still your best post. But I thought this might interest you….http://www.businessweek.com…
I think there is wisdom in what you write here. Listening to the market and avoiding dogmatic adherence to the original plan is critical.That being said, I think your comments are specifically applicable to the type of companies in which you frequently invest – consumer-facing web businesses that don’t charge for the product. For companies like Tumblr, Twitter or Zynga, absolutely go where the market leads you. But I think that in b2b companies, those that deliver product via mechanisms other than the web (software, hardware, services) and those who have existing financial relationships with customers, planning is more important and fidelity to that plan is of greater worth.Secondly, I’d make the point that the early customers or early market for a company’s product doesn’t always predict the broader opportunity. In many cases, these users will give the company very loud feedback that renders the product less useful to a broader audience.
I’m not sure I would totally agree that B2B is so different. Until a company finds its “True North”, it will wabble a bit to get there, whether it’s b2b or b2c. The degree of variation will really depend on your starting position. And if a couple of early clients make you to deviate from the broader audience, then it’s from your own making to let yourself drift that way.
Great points ericYour first point is why we are so enthusiastic about investing in consumer facing web services. We like the fact that they can be very agile and get a lot of traction quickly with very little capital investedThat said, we do have some enterprise focused companies in our portfolio and I encourage them to be agile and reactive to the market. I think enterprise saas companies can learn a lot from the consumer web servicesAs for your latter point, you must absolutely not take the head fake from the market. I’m not sure how one can recognize the head fake but your caution on that point is well taken
In total agreement here, and this is definitely already going on in our startup, but the question I have is how much of a plan do you (as an investor/VC) want to see formulated (not built, just projected) when considering a startup for an investment?In my experience, we’ve had meetings where investors want to see lots of financial projections regarding the business even when they know that those numbers are 1. pro forma 2. unrelated to greater potential financial opportunities that lie within the business and 3. likely to change with every shift of the business model.In short, I’m curious as to how much you personally weigh the potential of the planned strategy versus the latent potential of other strategies within a startup’s plan.
We don’t require anything in writing from the company prior to making an investment. If they have it, that’s great. But if they don’t, we can usually pull it out of them in a meetingThere are many examples of successful startups where the strategy was largely in the entrepreneur’s head for the first year or twoIt’s actually a bigger problem inside the company when it isn’t well articulated on paper than outside of the company. The team needs to know the strategy cold
Fred, my biz partner and I had a started to build a strategic plan when our plans were derailed basically by our options in the commercial real estate market and several other small issues, including funding. Had to shift gears, and have yet to put our new plan down on paper (i.e. formal biz plan). Instead, we’ve taken to blogging and lots of email conversations, and it seems that we’re accomplishing the same goal of a business plan without actually having one. I wrote a post a couple months back about scrapping our original plan. http://www.bgreenlifestyle….
there you go
Thanks, Fred. Great points. We did take the time to write a business plan (a great exercise) but our development has moved faster than our writing and we continue to evolve the exact implementation, while maintaing our core strategy in (all of) our heads.
Agreed, when we set out to build Edmodo we envisioned it being a private twitter that teachers could use privately with their students. Our users spoke to us after launch and number one request was threaded replies similar to facebook comments for better organization of replies and our service has evolved based on what our users are telling us. Currently we are still pretty close to what we envisioned but we have no qualms in turning on a dime based on feedback from at users. As far as scaling, we’ve been having to keep up with that too (we added a memcache recently). Due to keeping up with demand and scaling, we haven’t added as many features as we like to, but I take that as a good problem as we keep gaining adoption among teachers and students.
Posting under the name of your business is like school in summer. Even I, a social media special ed kid, get this. Better to post as Steve or Fred or whatever your name is, and then include a link to Edmondo on your blog or Twitter page or whatever. If people are interested in what you write, they’ll click through.
lol, your comment is brutal, but true. just like 9/11 truth!
Frankly I don’t what account I use to post from disqus. It really wasn’t a conscious decision and frankly i don’t care, i’ve got better things to care about than remembering which disqus account i posted to someones blog on. Please, if this was my only worry in the world…
I feel for you, Jeff. It must be complicated and confusing to juggle different Disqus accounts, in addition to Twitter, blogs, Facebook, and whatever other Social Media incarnations you have. It’s such a zoo that I have so far eschewed most of it. I’ve got a blog so far, and e-mail, and that’s pretty much it. I post here as a guest because I haven’t set up a Disqus account yet. I don’t tweet, because I don’t think anyone would care to read the mundane details of my day, or my reactions to Fred’s blog posts. If they’re interested in what Fred has to say, they’re probably already regular readers of his blog, as I am; if they’re not interested, no point in broadcasting my opinions about this to them.If it’s any consolation, it may not even matter. As I’ve mentioned here before, and elaborated on on my blog, Social Media might analogous to Public Access TV for most of us, which is to say pointless from a commercial perspective.
I’d like to learn more about edmodo. Where is it mostly used?
Fred thanks for the inquiry. Edmodo is a social networking platform that teachers can safely use with their student. We have been compared to Twitter or Facebook for schools. I would say we are similar to what Yammer is doing for the enterprise, but we are serving the specific needs of Education. Our goal is to be the biggest/best social platform for education.Most of our users are K-12 teachers and students, which is who we built Edmodo for. As of this writing we have 85,000 registered users since we launched 12 months ago. Approximately 85% of our monthly users are U.S. based.So far we have accomplished this with 2 people (my co-founder and myself), zero funding, and a lot of hard work and determination. If your still intrigued and interested in hearing more, I would love to talk sometime.
send me an emaili am intrigued
good trope — from todays (long) WSJ article a missive from a solid CEO for us old folk:…they seize such opportunities as the present affords them. Henry Singleton, chief executive officer of Teledyne Inc. from the 1960s through the 1980s, was one of these enlightened opportunists. The best plan, he believed, was no plan. Better to approach an uncertain world with an open mind. “I know a lot of people have very strong and definite plans that they’ve worked out on all kinds of things,” Singleton once remarked at a Teledyne annual meeting, “but we’re subject to a tremendous number of outside influences and the vast majority of them cannot be predicted. So my idea is to stay flexible.”http://online.wsj.com/artic…
That’s great. This isn’t a new idea for sure
if you spend too much time on planning you’ll miss the opportunity at hand in my opinion
I would strongly recommend reading 37signals’ Getting Real Book.The message “making, not planning” is one of the key messages that they have been hammering on ever since the Web 2.0 bandwagon started rolling.http://gettingreal.37signal…
“I would strongly recommend reading 37signals’ Getting Real Book.”Second that recommendation.
How applicable is this to companies serving larger enterprise customers? Seems like I hear a lot of this advice lately but every time I think about where it might fit it seems like I’m thinking of early-stage consumer-based companies, perhaps operating on a freemium or ad-supported model. Once you have big bucks coming in from big customers you’re going to run into a lot of resistance of this “guinea pig” product development model.
That’s true. Its not as easy to do this. But I would encourage you to create some kind of ‘skunkworks’ in your organization where you can still experiment on new ideas
We’ve done a variety of things — hack days, Apprentice-style contests,”ideafactory” wikis, and group contests. All work to encourage innovationin a now more slowly-moving product dev cycle.
That’s great. You are doing it right
That’s great. You are doing it right
I agree with this absolutely. However, I would also add that if you are launching a consumer site, for example, its good to get it out there as soon as possible but you also need to make a good first impression, otherwise no-one will bother coming back. So your first crack of the whip needs to pretty solid, and will necessarily involve use-case testing and planning. This is short term stuff and deserves more focus and attention in the beginning than longer term strategic planning. Once the product is out there and gaining traction, you are in a better position to assess longer term strategies. In other words, you have to be in the game to play.Thanks as always for your great posts Fred.
I’ve seen a number of companies launch quietly with pretty good success. That lets them test ideas and then do a big “launch” when they are ready
I find articles like this totally useless. Planning versus just executing (“getting something out there quickly and refining”) is dependent on so many factors that I don’t think there is a simple rule that can be applied to every situation. Smart entrepreneurs know when to the take time to get it right and when to be first to market.
Fred, I generally agree with the point, but Albert’s specific point makes a little less sense as companies get larger and older, at least for their core products
that is true.i am certain he was talking about startups
Right. There are a number of comments to that effect here. It gets a lot harder to do that when you are bigger. But I think it is worth trying to do that somewhere in your business at all times
From my previous (and current) experiences, I can only agree with your two points, especially when your product is meant to address or even *create* a new need. In the consumer internet space, it is often the case that startups are not only successful because they solve a problem, but frequently because they make people realise they had this problem in the first place. And it’s often the case that this need becomes really apparent post product launch, and is rarely exactely the one you had identified at inception. That’s probably what you mean by “listening to the market”.
The Struggle is to quickly identify the right activity, and dismiss the YAFo’s as I discuss in my blog post : http://nosmokeandmirrors.wo… Great postMark Allen Roberts
As always, a very interesting topic. I have always been a fan of “formal” planning even when the plan must be revised on a fairly frequent basis or is written in crayon on a white board. I have found that most (many?) business failures have at their core a flaw which could have been detected by a thorough assessment of their “plan”.The planning process seems to invite input, criticism and improvement while providing a structural opportunity to organize thoughts into a single coherent whole.See the putt. Be the ball. Armchair fly the approach. Visualization is useful.Execution only makes the flaws a reality. The flaws could often have been detected in the original plan.There is a huge difference between a strategic plan, a business plan, a budget and a set of notes which are just organized musings. All have their place in business. What has no place is the intellectual laziness which says we don’t need no stinking plan.In business, like combat, the first casualty of contact is the plan except that the plan provides direction even when it must be abandoned. In a deal shop, the plan may simply require getting to work on time, getting the doors open, ensuring the phone is working and fielding every inquiry. That’s still a plan. Not a complicated but an OK one when your inventory is cash.The plan has to be communicated, overcommunicated and communicated until it can be reduced to a very short tattoo on your left bicep.This is where “leadership style” becomes an important ingredient in success. Steve Jobs is an interesting example of a leader who has been able to get more out of the same combination of folks than others and his recent and earlier absences have served to reinforce this difference.Isn’t it interesting that the underlying failure of the current health care debate may simply be the absence of a single coherent plan, an easily understood plan, a plan which can be communicated quickly, a credible & believable plan and a plan which can be reduced to a tattoo.Now President Obama is trying to do the planning, packaging and education which should have been done before the effort was even announced.There is a reason the sequence is READY, AIM, FIRE rather than READY, FIRE, AIM!
Fred, again, another great post. I have found myself saying “balance” a lot the past two weeks. I think it applies to your post as well because events do overtake companies but it needs to be well-balanced and managed from the bottom up.All the best,[email protected] are an early-stage internet startup company building an online marketplace for outdoor advertising. ADstruc is looking to secure seed funding to channel into marketing and operations.
“Don’t get too attached to your strategic plan.”Often a special case of “do what your users want you to do, not just what you enjoy doing.” At least that’s where I mess up most often.