A Bolder Approach to Entrepreneurship
We got to hear a great deal from UFC superstar Connor McGregor in the weeks leading up to his epic boxing match against undefeated champion Floyd Mayweather.
We heard all about his plan to unseat the record-holding Mayweather using his superior mixed martial arts skills.
But then he got punched in the face.
McGregor’s loss reminded me of the quote from another champion boxer, Mike Tyson, about having plans. And while Tyson’s quote seems straight forward enough, it also packs a powerful punch for entrepreneurship today.
But let me back up for a quick moment.
Years ago, when I first decided to leave the more traditional forms of martial arts to try my hand at mixed martial arts (MMA), I figured I would be ahead of the curve.
After almost a decade of practicing Jiu-Jitsu, followed by several more years of Krav Maga, I was set to excel in MMA.
But soon after the bell rang at the start of my first match, I realized how ill-equipped I really was: you see, there’s no greater stress than staring into a 6’1” tattooed baldie on the other side of a tiny cage, ready to rip you in half. I’ll spare you the details, but for the following six weeks, friends lovingly called me stitches.
This left me confused.
How, after years of martial arts training, could I get beaten so badly? I thought back to those years and realized I was unprepared for the ring. I thought about how my teachers would always pair me up with people my own size for sparing, as opposed to those who were bigger and stronger. And there were so many things we weren’t allowed to do, like looping kicks to the face that transitioned into single leg take-downs, skills necessary to compete in MMA. You know, all the cool stuff!
I realized that I was learning how to defend myself, but in a very controlled setting, a bubble of sorts, and not really learning how to fight. I had no practice against realistic opponents with realistic attack moves. So ironically, the very training that I received to defend myself actually left me unable to succeed in the ring.
My training was flawed. I had to break free of my bubble and evolve. If a match wasn’t going my way, I needed to develop multiple back up plans that will help me find a way to win.
Working in a Bubble
Similarly, many entrepreneurs today are suffering from a flaw in their training and have created a bubble of their own.
The numbers bear this out: from the early 1980s to the mid-2000s, there were 500,000 to 600,000 new companies created every year (US Census). Today, approximately 543,000 new businesses launch every single month (National Bureau of Economic Research).
But despite this explosion in entrepreneurship, nearly 60% of venture backed start-ups fail (Cambridge Associates).
So what’s happening?
For one, many entrepreneurs are mistakenly substituting their business plan for real world interaction and learning.
This starts at the beginning. The process we’re taught is straight-forward: once we have a great business idea, we immediately begin writing our business plan. This is a 25-30 page manifesto, complete with sales projections for the next 3 to 5 years. We use this document to raise money from family, friends and investors, and then start building our product or service. When all is said and done, we expect our target customers to flock to our offerings in droves, all according to our killer plan.
But when you try to predict how customers will react, especially 3 to 5 years in advance, in a bubble, you’re going to get punched in the face.
It’s All About The Marshmallow
Here’s what I mean: when I was in graduate school, one of our management professors challenged us to the Marshmallow Game. We broke off into teams of five, each armed with dry spaghetti, string, masking tape and a single marshmallow. We were tasked with building the tallest structure possible within fifteen minutes. Most groups achieved heights of 8-12 inches, with one even building a 14-inch tower that leaned slightly to the right when the marshmallow was placed on top.
But imagine our embarrassment when we learned that our professor’s wife, a first grade teacher, tried the game with her class and got even better results. One team of first graders built a superstructure that reached as high as 22 inches. We were outperformed by 6 year-olds!
How did this happen?
It has to do with how we’re taught to manage our time. Our class of MBAs spent the majority of the time assigning roles and planning on how our structure would look. Then, with only a few minutes left in the game, began building the structure and placing the marshmallow on top.
In contrast, the first graders spent most of their time actually building their structures, trying out different patterns and ways of achieving the most height without risking collapse from the weight of the marshmallow.
You see, our class of professionals was so confident in our respective approaches that we waited until the very last minute to interact with the most important piece in the game: the marshmallow. We left no time to make any adjustments, just in case we got the structure wrong and it crumbled.
The first graders took a different approach. They started with building a small stable structure with the marshmallow on top, allowing them ample time left in the game to experiment and grow. Unlike the MBAs, they didn’t begin by trying to determine the one right answer to completing the game, but played around to discover what worked best. So in the same time it took each of our MBA groups to build one structure, it took each group of first graders to build 3 or 4. That’s how they outperformed our class.
The lesson here is clear: the more you work on your business plan in your self-created bubble, the more you ignore real world experimentation, the more likely you will fail.
Remember, you can execute perfectly on your plan, but if it’s flawed, you won’t succeed.
Stepping Out of the Bubble: Customer Validation
So consider this instead: forget spending the next 3 to 6 months writing your business plan, trying to convince investors (and yourself) that you’re right, and reach out to potential customers and experiment like those first graders.
Explore the habits of your target customers; test your beliefs on how you think they will behave. After all, predicting human behavior is not easy. Certainly more difficult than predicting how that marshmallow will behave on top of the spaghetti sticks.
For example, some of your target customers may like your product or service better than others and for different reasons. Figure out why and adjust your approach to maximize your opportunities.
What you’ll soon realize is that your business plan is just the starting point. Once you exit your perfect bubble of planning, and rejoin the world, you’ll be able to make the adjustments needed for your business to succeed.
Entrepreneurs aren’t supposed to be clairvoyant, able to see around the corner before anyone else. Instead, they are more like private investigators, who use facts from real world interactions to back up their claims on how customers will react.
So if you think that workout enthusiasts will go crazy over your new energy drink, then why not presell a few dozen cases before running a full production line?
If you think busy families will spend $50 per day on your new subscription meal-kit service, then start with a simple web page to test their responses and track customer retention.
We need more than hope that our ideas will be successful, we need proof that our assertions about customers are based in fact.
Business planning gets you half way there, but it’s the ability to then manage and adapt your plan that ultimately determines success.
Being punched in the face is part of launching any business. Just make sure when that punch comes, you’re not like Connor McGregor and get caught flat-footed.