September 29, 2012, 7:48 PM — Today’s startups are turning the traditional model of “how to” on its head. Startup entrepreneurs, particularly in the tech sector, start out by seeking advice—and that’s never a bad thing. The difference between success and failure however, is knowing what to do with that advice once you’ve received it, and more often than not, the correct answer is to completely ignore it.
Lanny Goodman, CEO, Management Technologies, Inc.
There are an army of experts out there, ready to help out startup businesses. For the most part, they all follow the same canonical advice found in business books, academia, and all of those wildly popular books that detail how somebody else has already done it. Lanny Goodman, CEO of Management Technologies, Inc., advises people to go a step beyond. What do the advisors and writers of those books do? “They follow what is successful,” says Goodman. “And try to distill from them the underlying principles that made them successful, and then write their books, and say, ‘you can do this too.’ The reality is, they’re always behind the curve. How could they be anything else? Unless they were out there inventing new companies themselves, where else are they going to get information from, other than following people who have been successful?”
Countless Internet companies have read books about Zappos.com, and decided that since they were successful with a particular business model, then all it takes to be successful is to copy what they’ve already done. That’s nonsense, says Goodman. Another popular success story, often written about, is Southwest Airlines. “There is a notion that Southwest Airlines started with this vision of dominating the universe. That’s nonsense. It was three guys sitting around a room saying, if we could figure out a way for people to fly between San Antonio, Dallas and Houston for about the same as it would cost to drive, we might have a business here. And they did wind up taking over the universe, but the notion that somehow all of this can be planned for and anticipated, and you too can do this, I’m sorry but this is nonsense.”
The concept of copying success is obsolete—and may have never really had much success anyway. It is borne in a risk-averse model, and risk aversion has no business in an entrepreneurial high-tech setting. Because people—especially investors putting in large amounts of money—are inherently risk-averse, the idea that all startups have to go through a very detailed period of strategic planning has taken a bit of the wind out of the sails of the spirit of entrepreneurship and innovation. Goodman has a different take on what strategic planning really is—or should be. “People think strategic planning is about creating a plan, and it is not. It is not a business process, it is a human process. It is a process by which human beings create something where nothing existed before, and that is what we do. It’s this God-like ability that we have. The human consciousness is so powerful that with just a creative impulse, a wisp of an idea, we can wake up at two in the morning, ‘oh my god,’ write it down on a pad of paper, and six months later there’s a company and products going out the back door, and the very atoms and molecules of creation have been reordered based on that wisp of an idea. It’s completely amazing, but we’re not very efficient at it. And we all know from experience that it takes a completely stupid amount of effort to get the simplest things designed and off.”
The question then becomes, how do we get efficient at it? The canonical set of tools that you are given by conventional business advisors have you copying others, and not using anywhere nearly enough of your creative imagination. Yes, you’re launching an Internet company, and you’re worried about all the intense hours of planning and strategy—that you have to get every piece right before you start. I’m here to let you off the hook.
Goodman tells me of a story when a startup entrepreneur called him, saying that he wanted to do strategic planning. “My response to him was that actually no, you do not. In fact, strategic planning is the absolute last thing you want to be doing.” To Goodman, the strategic planning of a startup takes a back seat to experimentation. Creating a tech startup today is less about having a complete roadmap written in stone—and more about creating an iterative process that creates itself along the way. The end product is often far from what the founder had originally envisioned, and that’s the way it should be.
What a tech entrepreneur has to be able to do, says Goodman, is “quit making decisions.” That’s a bold statement, but it works. “Because decisions, if you look at the nature of decision making, the frame of reference is that decision making is binary. There is a right decision and a wrong decision. The fact of the matter is, there is an unquestionably good decision and an unquestionably bad decision, and there is a broad spectrum of marginal decisions. The problem is that anything that isn’t unambiguously a good decision gets lumped into the framework of a bad decision, so the odds are stacked against you that any decision you make is going to be viewed as not a good decision.” Moving away from this strict binary process of creation, Goodman instead says, “Let’s quit making decisions. What we do instead, is we run experiments.”
In the end, that’s what a tech startup is, after all—an experiment. When you think about it, the most wildly successful tech and Internet companies were started accidentally, weren’t they? Did people like Mark Zuckerberg and Bill Gates start out thinking they would be on top of the tech universe? Probably not in their wildest dreams. And they didn’t gain that unimaginable level of success by creating detailed plan and sticking to it; both of those visionaries and the companies they created have morphed into something they never could have imagined when they were young men with crazy ideas.
Today’s business model—or perhaps we could call it an “anti business model”—starts with experimentation, with a completely different paradigm that is far more ambiguous than any venture capitalist would be comfortable with. “An experiment is intrinsically ambiguous,” says Goodman. “We have a hypothesis, we have a theory, and we want to test that theory to see if we can validate it or not. And what we know is, either way, we are going to learn something.” His advice to entrepreneurs is, “for the first couple of years, your sole agenda is being opportunistic and reactive. That’s what is needed. Test and experiment. Don’t throw serious resources behind anything you haven’t validated in practice.” And the beauty of today’s technology is that the available tools, like 3D printing, rapid prototyping, and cloud computing, means that this sort of experimentation is a lot more possible than it has ever been.