Finding Out What You “Don’t Know You Don’t Know”
What gets most early-stage companies in trouble is the areas that
they just don’t understand that they don’t know enough about. In
other words the biggest problem is that they “don’t know what they
don’t know.” Nearly every failed company will say they ran out of
cash, couldn’t raise enough capital, or just did not get the sales
they expected quickly enough. But these situations are generally the
effect, not the cause. Generally speaking, other problems that the
company or entrepreneur does not understand very well are usually
the root cause. This situation is actually far more dangerous than
just not knowing, because you cannot tackle a problem that you do
not even know exists. The best entrepreneurs and CEOs are learning
machines and understand what they do not know. I call this the
“Prudent CEO” or person that appreciates the fact that the last
Renaissance man, or woman, existed hundreds of years ago. In this
day and age, there is just way too much information that one needs
to know in order to start any company without getting lots of help
from others. Today, knowledge is doubling every eighteen months.
Far more information is generated each year now than in the entire
first thousand years of civilized society.
Would you decide to install your own furnace or rebuild your own car
engine without having the proper experience? Of course not! Then
why do people think they can write their own business plan,
marketing plan, or design a new business model, which is a much more
complex and experience- based process, when they have never done
these before either? I suspect that the reason is that rebuilding
an engine is physical and it will clearly provide immediate feedback
of failure and probably cause confusion. However, tasks like
writing a business plan will not “fail” for quite some time, maybe
months, or even years. Of course the blind optimism of any
entrepreneur, who has to be a little nuts to go against the odds
anyway, is a big factor here too. So you have to ask yourself “Have
I done this exact task before successfully?” If the answer is no,
then at a minimum, you need a model to even do the job, and a guide,
or coach to do a good job.
Typically, any new company will need at least four to five different
skill sets at the executive level to be successful. Then you need
those same skills sets at the actual execution level, and possibly
even the management level too. Rarely does it make sense to hire
all those people full-time on day one while you are still in a
business model design and validation process. Yet without these
people, you really cannot possibly “know what you do not know.” Most
often it does not make sense to have all these needed people on
full-time staff during the first one or two years of running the
business. Yet you can really not expect to compete effectively with
others in the marketplace without all these skill sets on your
team. Although it seems like a catch-22 of sorts, there are ways
around this dilemma. This is why designing a new business model must
be an iterative process, as team members who are added later add
more input.
Typically you should be using virtual team members and consultants
in small doses to fill in these holes and identify areas that can be
improved dramatically. People often look at this as a cost, which
it is short term, but over even three to six months these things
ought to be a net savings if you are using the right startup
oriented people. You do have to watch out for consultants who want
to “do it right,” when right is how a multi-million or even
multi-billion dollar company would do it. I would guess only one in
ten consultants and professional services people out there really
understand how to work with a startup. Working in startup mode means
being in the risk business and developing 80% solutions at 20% of
the cost because things change too fast to do it “right.”
So how do you figure out what you don’t know without all these
experts on your team? In reality, there are only a few ways to
ferret out what you don’t know and they are all either the result of
leveraging someone else’s experience or based on your own systematic
research. Since research involves lots of trial and error, it is way
too expensive for a startup to research what it can just learn from
someone else. Researching too much can even kill a company with very
little time and cash. You need some trial and error for sure, but
this should only be around your core value added and “new” business
model ideas. If someone has done it before, it is always cheaper to
learn from him or her, than it is to figure it out on your own.
Models built on someone else’s mistakes are by far a superior
alternative and come in several forms.
One of the best ways to leverage other people’s experience is
through the use of models, or roadmaps, that have been proven to
work before by others. This is because they connect the dots in an
orderly fashion to insure that the proper order and priorities are
mapped out. For example if you are starting a company and you don’t
know which corporate structure to use, would you guess, spend weeks
studying all the options, or have a discussion with an expert in
that area for an hour? Obviously a meeting with your attorney is in
order.
In business, the most valuable models are complete step-by-step
roadmaps that combine a visual diagram with a checklist or a more
elaborate description to define the visual diagram in more detail.
This is because human beings think about and communicate complex
abstract concepts best visually. I often think a good model can
sometimes even provide more useful information than an entire book
because it is a more pragmatic. Visual diagrams also help people
communicate because they can describe things at the highest level
(the whole diagram) and also be used to point to various levels
within the model to focus and remove ambiguity in communications.
It is now possible to go up or down “levels,” or naming each level
without people disconnecting. I have seen very smart people talking
for long periods of time about different things without even knowing
it because they did not have a reference like this and were actually
talking about different levels. Only when a diagram was placed on
the white board did they really connect and understand how bad their
previous communications were. They went on and on without knowing
because the English language is just not that exact when discussing
complex concepts on many “levels” without specific definitions for
the exact situation.
DIAGRAM OF THE OSI MODEL WHICH ENABLES
COMPLEX TELECOMMUNICATIONS
|
Application |
|
Application |
|
Presentation |
|
Presentation |
Session |
|
Session |
Transport |
|
Transport |
Network |
|
Network |
Data Link |
|
Data Link |
Physical |
|
Physical |
Describing
this concept in pure text would be much more difficult than this
simple diagram and would be very difficult to communicate
effectively. That text would also not be a very useful tool for
discussing the concepts with other people.
I would venture to say that without the simple OSI model of
communications above, we could literally be decades behind where we
are today with telecommunications technology. Would the Internet be
what it is today if the industry did not align and standardize its
thinking and resources around this simple seven layer model? Not a
chance. We would have massive number of competing proprietary
systems and few computers would communicate without great difficulty
and applications specific software. This simple model not only
allowed communications between the design engineers, but it set a
standard that allowed different companies to attack different levels
of the problem. Breaking this huge problem down into layers actually
was a huge step in accelerating an industry to a new level.
Languages need visual aids to remove ambiguity whenever you are
talking about multi-dimensional things. Good models are simple
enough to understand and yet complete enough to be sure you are not
leaving things out. Generally, due to the human mind’s limitation
on short-term memory, models should be divided into no more than
seven to nine layers. If you need more than that, you probably need
to break the problem down or process up into multiple models or
diagrams.
A Model For Marketing
For example, the “Marketing and Communications Pyramid” below is
really a very simple model, but it provides anyone with all the key
high-level steps to figure out where they may need outside help and
advice. If they understand this model very well, and have done all
these steps successfully before, then they are in good shape. If
they have not, they should be looking for ways to minimize the risk
and learning curve with help from people who have experience with
all these things. This will not only produce a better result but
will also get it done faster and cheaper in the longer run.
Of course there will always be unknowns in anything worth doing and
no model will have all the answers. However, a good model is a
roadmap that can allow someone without enough experience to figure
out what they don’t know and get help where needed. As Einstein
once said: “If the idea at first is not absurd, then there is no
hope for it.” This is largely true on several levels and very
profound in the context of any new idea or company. First, if it was
that obvious then people would have done it before you ever got
there. Second, for it to really be a new and revolutionary idea it
must be radically different in some way, so as to shift the paradigm
and look at the problem from a whole different perspective. So any
great idea will surely be ridiculed by most before it can succeed,
just like Galileo was ridiculed by his fellow scientists and the
church even though he had already proven the sun could not possibly
revolve around the earth.
After 16 years as a CEO, I would never
begin to think I could launch a real company without significant
help and input from several other people. It amazes me that some
people believe they know everything they need to know to launch a
business and be successful. I have never met, and don’t think I ever
will meet, anyone who really does know everything needed to start a
sophisticated business all alone. They might know enough at a single
level, or in a single vertical discipline, but certainly not across
all disciplines and levels. Most entrepreneurs know there is real
value in the problem they can solve for customers. If they don’t,
they won’t be around very long. However, nobody ever knows
everything they needed to know when setting out to start a new
business. After all, even the Lone Ranger had help from Tonto. I
read about fifty books per year and also try to attend at least four
seminars a year for personal improvement to stretch my own knowledge
into new areas. This need to improve and constantly update, add and
replace obsolete information will never end and I KNOW I will always
need help to accomplish any significant challenge in business.
So the bottom line is to look for models that have been developed by
people who have already done exactly what you want to accomplish. So
find a model from someone who has “done it before” and get a little
help from the person who built the model or has ten or fifteen years
experience in that discipline. Even if their model is flawed, it
will be a great improvement over doing your own trial and error
along the way. You will still most likely make 80% fewer errors
which otherwise could cost you enormous extra time and money.