David Piccione.com

I read an article yesterday from the Financial Times via Hacker News at YCombinator. In it, the author Kevin Allison argues that in order to keep a lid on your great idea, you should guard it as something valuable when pitching to investors and the like. Nonsense I say.

Entrepreneurs have a tenancy to place a tremendous amount of value in the ideas they generate. While this is helpful and motivating, it also places the idea itself on an undeserved pedestal. The truth is, you probably aren’t a genius and your idea isn’t unique. There are 6 billion people on this planet, and the odds are quite high that your unique idea has circulated in the heads of many people before it made it to you.

Thinking Millions

People like Paul Graham put zero value in ideas. For them, execution is all that matters. I’m not as harsh in my thinking, but it’s safe to say that ideas are like penny stock; there’s always potential.

There’s little more than potential until you act, however. That acting isn’t continuing to dream and build out the idea, it’s putting it into something that can be tested. When your idea is in motion, you begin to make assumptions about how that idea will play out. If you figure the idea is poor, you tend to berate it until you figure it isn’t worth perusing. On the flip side, if you figure your idea is strong, you build it up to the point that you’re heading a 100 Million dollar company in your head. Everything working just as you envision - all thanks to your idea!

Projecting your million dollar vision into reality doesn’t really help matters, because nobody really shares it. It doesn’t exist.

Stop Thinking and Do

The fastest way to get over your insecurities is to put them in motion. For many people, this becomes the time for operating in “stealth mode” for extended periods, or looking for VC’s to give you money, while at the same time not sharing too much of your grand master plan. Someone might steal it after all.

Once you get into this trap, you start to impart value onto what might be and not what is. One of the biggest assumptions that you made when you came up with your idea is how the market would react to it. You assumed this, because if you actually had empirical evidence of how exactly the market would react to your product, you wouldn’t have an idea, you would have an existing business.

You were most certainly wrong in this assumption. No matter how well you know your space, you have no idea of the subtleties in market preference that will emerge in reaction to the change you’re about to introduce. You need to be able to react to these and take advantage of them. Your business isn’t going to be what you think it will be, the goal is to make sure that whatever it is you build is successful.

Fail Fast and Prove Your Assumptions

The best way to avoid placing too much value in your idea is to remove that market assumption as soon as possible. You can do this by taking your master plan, reducing it to its core elements and building and releasing a real product. These days, the entire iteration could be done by a dedicated team (or individual) in less than a month. That means you’ll release your idea into the world then, warts and all. If there is interest, you can develop it. If there isn’t you can re-evaluate it. Either way you’ll start to judge a real product and not a figment.

You’ll be one month ahead of the game when it comes to the competition. If it took you a month to get to this point, it will probably take them just as long. If Big Corp loves your idea, they’ll probably ship something next quarter - if they are lucky. Odds are if they’re smart they’ll just invest in you.

There is no reason to hide your idea, because you now have a product to evaluate.

But I Need Money!

No you don’t. You need time and effort and a real product, but not money. You can worry about money at a later stage, once you have something to actually invest in. The research is in, and the less money you spend up front, the more likely you are to succeed. Take a look at this.

“Only 65% of the companies that started with more than $100,000 were in the black in 2001, compared with 83% of those businesses that were launched with $1,000 to $10,000.”

Those are pretty compelling numbers.

Ideas Are Nothing Until They Are Something

The idea in your head isn’t worth much more than you are right now until you make it worth more. You do that by creating a business from it. The only way you can do that is to expose yourself. If you choose to attach a value to your idea, you’re only attaching dollar figures to an arbitrary notion instead of an actual product. In other words, you’re wasting your time.

If your idea has passed the “you” test (i.e. you’ve thought it through and figure it has potential) you should be building. You need to know if you’re right. Once you’ve done that - then you’ve created value.

In my previous post about goals, I focused on using goals as a defined endpoint. In other words, having a clear destination that we intend to reach. As with many things though, understanding where you would like to end up is only half the task at hand. Actually getting there is the other half, and to be successful in getting to your destination you need to be as purpose driven in the journey as you are in defining that destination.

In order to achieve your goals, you need to live by a strategy.

Execution Matters

Your strategy will dictate how you execute your life. It will allow you to make individual and independent decisions in a manner that moves you closer to your goals. It enables you to accept risk where necessary, play to your strengths, avoid your weaknesses and most importantly, enjoy the journey of achieving your goals. A clear strategy will allow you to act purposely, in control of your situations, as opposed to reacting instinctively to short term awareness. Whenever you find yourself reacting and not acting, you probably aren’t moving towards your goals.

Dealing With Yourself

Think of a great king preparing to do battle with a foe. Behind him, his army. He has spent months if not years preparing his troops for this day. During his training, he’s learned that they do some things very well, but are poor at others. They may have the best fitness, but lack enough cavalry. They might have great leaders, but wavering loyalty. The whole army might be sitting in a bad position; weaker than normal, or they may be on top of a hill with the best possible sight-lines.

In the same way, understanding yourself is the foundation to creating a good personal strategy. You’ll get the most out of things if you work in favour of your strengths and interests, and focus less - but at the same time be aware of - your weakness. This personal assessment process is continual, and the results vary depending on what type of environment you are currently in. Not only does it matter what you are, it matters where you are.

Dealing With Information

There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.Donald Rumsfeld

This quote was ridiculed with great glee by those who figured they knew better. Although it won’t win any awards for literature, it is nonetheless an important truth. When you live strategically, you need to classify incoming information in one of the three categories that Rumsfeld refers to in order to successfully process it and act in on it.

Known Knowns are things that you are aware of: your strengths, your weaknesses, the givens of a situation. Let’s think again about our king. He knows that his army has strong infantry, but no horse support. He knows the terrain in front of him, since he can see it. He also knows that he’s got a reserve division hiding behind the next ridge.

Known Unknowns are like blank lines in a sentence. We know that something goes there, we just don’t know what it is. Our king knows that his enemy is in front of him, but he doesn’t know their size, composition or shape. Known unknowns are the things we try to react to by anticipation - the king sends riders to peer into the forests ahead, looking for answers.

Unknown Unknowns are the gotchas of life. These are the events that hit us from out of left field. Our king doesn’t know that the division hiding on the other side of the ridge has been destroyed by the main enemy force. He can’t react or anticipate this event because it doesn’t fit with the information he is receiving from his current vantage point. Unknown unknowns can only be reacted to, and never anticipated.

Strategically dealing with information means understanding the known, seeking the “need to know” and reacting to the unknown when the time comes. Understand that which you must, anticipate the things you can, and disregard the unknown until it becomes relevant.

Dealing With Individual Situations

If we understand ourselves, and we understand how to process information, we can deal with situations as they arise in a manner that is purpose driven and not haphazard. The key here is to deal with life by anticipating outcomes whenever possible. When we’re hit with too many “unknown unknowns”, we move into fight or flight mode. When this happens, we start to make individual decisions based on the fastest possible positive outcome: thinking on how to make our current situation better.

The problem is that we often lose sight of our goals and end points when we’re forced into this mode of thinking, and this becomes even more true if our goals and strategy for achieving them is poorly thought out and understood. As our king learns that the enemy is a lot closer than he thought, and he’s now down a third of his army, what action should he take? The answer depends on his goals, and his strategy to ultimately achieve those goals. If he’s attempting to crush his enemy, he may well decide to join the battle, hoping that a tired and bloodied foe is now weaker. But if his goal is to take the closest city, he may decide that it’s best to ignore the fighting and race to the unprotected treasure.

His decisions are guided by what he’s trying to gain, and how he’s already decided he wants to get there.

Focus on the Big Picture

Without a strategy, our king will make haphazard choices in reaction to the situation he is faced with, instead of controlling the situation based on his larger objectives, regardless of what is thrown at him at a given time. How you lead your life can be controlled by having a clear and concise strategy to achieve your defined goals.

There is no magic bullet that is a guaranteed winning strategy because there are no two people that are living the same lives. Your strategy should be designed by you in conjunction with your goals and expectations for life.

It’s all about acting on purpose, even in times of great doubt and uncertainty. If you can do this, you’ll be all the more successful at reaching your goals.

Last Friday, Dharmesh Shah from On Startups wrote a piece that rather interestingly questions the sudden loss of buzz from the 37 Signals camp.

I found this particularity interesting for a couple of reasons. First, I flat out admire 37Signals, their products and philosophies and second, because I’ve noticed this effect as well.

If you aren’t familiar with the company, you’d do well to take a look at their site and get a feel for who they are and what they do if you want what I say here to make any sense. If you are, you know that they create simple, “opinionated” software and generally rail against established software development methodologies - to great success.

I really like their “Getting Real” mantra. I’ve tried to follow it in my own work and generally it helps the process of development. Thinking about what Dharmesh was saying, I wondered aloud at Hacker News if perhaps lack of buzz was simply due to the fact that the team is reaching its work threshold. With only so many people and so many hours, you can only do so much. 37Signals hasn’t added all that many new staff members, but if what they say is to be believed, - and I do - they’ve increased their business reach quite a bit. They’ve got both more products and more active users now than they did in 2006.

When Growth is the Enemy

For most businesses, growth is an appreciated challenge. But when you run your company on the mantra of being simple and using small teams, the pressure to grow takes on a whole new meaning. 37Signals runs the very real risk of turning into the one thing that they are trying to avoid - the large, lumbering company.

To complicate things further, anyone who understands developers knows that none of them want to do maintenance. It’s the next big thing and cool project that they what to be coding, not fixing an overflow error on software that’s 3 years old. Too much fixing and not enough creating sends good developers far, far away.

Finally, 37Signals are masters at marketing. They’re so good a creating demand for their software that they could probably launch another full book on the topic. This skill almost demands that they continue to launch products. It also means that they utilize the press coverage and buzz they receive directly - they translate it into sales more than others would. Losing the buzz they had in 2006 isn’t exactly something they can ignore completely, regardless of the health of their business.

Issues and Options - Growing Real

So what do you do when you have a growing client base, almost as many products as staff (they have 6 products to 8 employees) and a commitment to avoid becoming just another development shop?

It’s a good question, and not one that I’m sure I can properly answer. One of the most obvious things is that there are three options, two of which are not appealing at all, and one that would be as revolutionary as “Getting Real” was when it saw the light of day.

First, one could always decide to “become the corporation” and continue to grow, adding staff to accommodate. Unfortunately, this would mean abandoning their lean and mean strategies, at least to the point that they cease to be as groundbreaking as they are now. I doubt they will choose this option.

Second, they could refuse to grow any more and focus on the products they have, maintaining the philosophies that made them what they are. I can imagine that this is a very real option for them right now, or will be in the near future. I’d be disappointed if they chose this route, because I think it ultimately means they stop innovating. There’s only so much you can restrain the talent on that team, pretty soon they’ll find something else to do. Additionally, this would mean completely abandoning some great skill in marketing and product launch that these guys are really starting to harness. Although it’s an option, I’d like to think that this isn’t the direction Fried and company are planning to take the organization.

Evolution

The third option would see the team continue to release new products at the expense of existing ones. Although this is probably the trickiest route, I believe this is what we will begin to see from 37Signals in the near future.

There are a myriad of ways this can be accomplished, and here are three for example:

1. Discontinuation - They may decide that “6″ products is the most they can support in their desired state. This means that as a new product is released, another - under used/low profit/high maintenance - is discontinued. The trick becomes customer management - whom do you offend, how, and when? a variant of the theme would be to open source older products.
2. Product Sell-off - Perhaps another option would be to sell older products off to a company or companies that would be willing to continue offering the service. This is rather interesting in that 37Signals could then continue to innovate and possibly even finance new projects with the proceeds of the sale. The danger here again becomes the customer. If the “buyer” doesn’t offer the same level of service, then 37Signals itself may see push back from offended clients.
3. Acquisition - 37Signals have repeatedly stated that they aren’t interested in selling their company. But in a near future where they run the risk of growing into something they don’t want to be, this is always an option. Sell the farm, keep the team together and work on the next new thing using the principles they’ve become accustomed to.

Choices, Choices

I’m not under the illusion that this post is anything but conjecture. I don’t pretend to know intimate details of 37Signals or their current situation, but it seems clear that if they aren’t already battling with the paradox of being successful yet remaining small and nimble, they will be.

I’d be really interested to see how they would handle this challenge, or if they see it as being relevant at all. Clearly, lots of companies start out nimble and “real” and evolve into bureaucratic behemoths with success. Will 37Signals buck this trend, or will they be as revolutionary growing as they were at “becoming”?

Regardless of the outcome, I hope they continue to succeed building software that people pay money for to accomplish real tasks. They continue to be an inspiration to many of us, myself included.