December 4, 2012
Startup White Board

Leading an Enterprise in Phase One: Getting the Idea Right

In my last post I wrote about how all enterprises must go through 4 distinct Phases in order to mature fully. In order for an enterprise to be fully mature it must be value producing and self-sustaining. Leading an enterprise from inception to full maturity is not easy, only Entrepreneurial Leaders can achieve this. I would like to get more specific in this post about how the leadership requirements change as an enterprise matures, starting with Phase One.

Phase One: The first battle of the selfish versus the selfless

This Phase starts with an idea and ends when you can describe, with a high degree of certainty, who will buy your product or service and how you will deliver it. This Phase is hard. Research indicates 70% of all entrepreneurs fail to make it to the end of Phase One!

Changing an idea that you are passionate about into another idea that is no longer ‘yours’ is difficult for most people. The reality however is that no customer wants your idea. People want products and services that will improve their lives or make them happier. The requirement to change your idea into something that other people will think will help them is the first test of an Entrepreneurial Leader’s ability to balance selfishness with selflessness.

Trying to piece together what part of your original idea can actually deliver something valuable enough that people will actually buy it is emotionally draining. You feel anxious and disoriented because you have lost control of your idea. You are exhausted because you have to consider and work through many possibilities. You also must find and contact many, many potential customers in order to validate your assumptions on who will really buy your product. Many people find contacting people they do not know to be very scary. You will need to change your prototype, or your service description, or your specifications, or your website, or your recipes, over and over as your idea morphs. This is an enormous amount of work.

As I wrote in the last post, there are good prescriptions for how to step through this phase. Steve Blank has two books and an Udemy class on the subject. There is also an Internet based platform called LaunchPad Central that does a great job of keeping all your inputs organized. Both Steve Blank and LaunchPad Central make use of a standard framework for describing the various pieces that go together to make an enterprise. This framework is described in a very visual and easily accessible fashion in a book by Alexander Ostewalder and Yves Pigneur called Business Model Generation. Unfortunately, none of these materials describe how you actually lead this effort. Matter of fact virtually no book does.

Huddle Up and Lead

Phase One is 100% project and 0% process, to use the parlance of my Enterprise 101 post. This means that nothing that happens in this Phase is routine. This drives ‘manager-personality-types’ crazy. This is also why managers with super successful careers in big corporations typically fail when they try to work with a startup – they are accustomed to working in very prescribed environments.

Idealists also have a hard time with this Phase because many of their assumptions about ‘what is right’ are challenged or rejected by potential customers.

The best way to lead an enterprise through Phase One is to use the framework of a huddle. A huddle is just an ad hoc meeting of a team. Huddles are called whenever there is a significant development, positive or negative, relative to capturing that first set of customers. Huddles do not require any formal structure or any repetitive processes. They should include everyone that could possibly be interested or impacted by the new development. Having everyone at the huddle ensures, very simply, that there are no communication issues. Huddles can be called by whoever has significant new information, whenever.

The huddle is simply a discussion about what to do next. Based upon the discussion the leader may use the huddle to adjust assigned tasks. The huddle should end with the leader reminding everyone about the purpose of the enterprise and why creating the enterprise is exciting.

Everything is constantly changing in Phase One and this can be disconcerting to many people, particularly to people who do not like change (like big company managers). During Phase One (and Phase Two) Entrepreneurial Leaders should avoid hiring people who do not like change. Fortunately people who do not like change are not normally attracted to working for nascent startups, so this is something that can easily be avoided.

Working on the early Phases of a startup is naturally exciting and motivating to people who seek change. Leadership challenges caused by repeated customer rejection or ambivalence tend to be offset by the natural team enthusiasm generated by working on an exciting project (that is why you should end every huddle by reminding everyone about the exciting aspects of the enterprise).

Leadership challenges are further mitigated in Phase One because the steps a founder should take are so well described in the references I described above. Leading a team to the successful completion of Phase One does not require prior experience.

One of the most common mistakes in Phase One is to spend time making a business plan. Until you know what customers want you do not have a business to plan. Virtually all of your time, and the time of your team, should be spent working with potential customers, or modifying your prototype or your service description, in order to prepare for your next customer meetings.

Another common mistake is to interpret that when a potential customer is nice and says nice things about your idea that they will buy your product or service as soon as it is available. Most people hate to deliver bad news. The absence of bad news does not equal good news. Only when a potential customer declares something equivalent to, “I must have this, how soon can I buy this” can you start feeling comfortable that you are offering something that someone feels will make their life better or happier. In the case of online apps, until you can demonstrate that your users are coming back regularly to use your app, you have not demonstrated that your app is adding anything to anyone’s life. Until you have found your customers your idea, whether a product, a service, or an app, cannot create value and you can go no further.

The good news is that people are eager to accept products or services that will improve their lives and make them happier. As an entrepreneur you selfishly want to change people’s lives. You must selflessly listen to potential customers throughout Phase One to understand that what they want to make their lives better is not exactly what you originally had thought. Your idea is the starting point of Phase One, not the ending point. Huddle up and lead.

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