What is the purpose of a startup?

Wednesday, 7.20pm

Sheffield, U.K.

Man is an artifact designed for space travel. He is not designed to remain in his present biologic state any more than a tadpole is designed to remain a tadpole. — William S. Burroughs

A startup is like a tadpole. It’s a stage in the life cycle of an organisation. One approach is to see a startup as a period when an entrepreneur searches for a scalable business model. The dictionary definition is related to starting something up – from a small business to a drama group. Legally it might be a recently started company with little or no capital. Paul Graham of YCombinator fame defines it more narrowly – “A startup is a company designed to grow fast” – growth is what distinguishes a REAL startup, specifically its growth rate.

A popular tool for startup founders is the Lean Startup by Eric Ries. I first came across this concept in 2013 when I attended a Startup Weekend event. The Lean Startup built on Steve Blank’s Customer Development Process. It was an eye-opening idea, and the most valuable insight in there was “Get out of the building”. Go and talk to customers. It completely changed the way I looked at developing products and services for my customers. Rather than building something and presenting them with it I simply talked to them and started to build things that solved the problems they described.

That’s not all there is to the Lean Startup, however. Eric Ries suggested that what was needed was examining the components of a business plan and coming up with hypotheses about customer behaviour that could be carefully tested through experiments. It’s an approach that tries to be scientific. As a founder you come up with hypotheses. You design experiments to test your hypotheses. And if your hypotheses are valid, you go ahead and build your product.

I really liked the idea of the Lean Startup, but the principles didn’t really work that well for me. I created a number of business models, dutifully filled in the templates. But the hypothesis building just seemed like hard work. I don’t think I’d go as far as to say it doesn’t work, because the response would be that I just wasn’t applying it correctly. Instead, I put the theory on the back burner and moved onto other things, like Soft Systems Methodology.

For a long time, the only model I was aware of out there for a founder was that of the Lean Startup.

Until now…

Recently, I came across a special issue of the Journal of Management focused on the Lean Startup.

In their contextualising article, Zahra et al., (2024) introduce three alternative startup approaches : effectuation, creation theory and the theory-based view.

As described above, the Lean startup is about making a prediction and then testing if it’s right.

Effectuation is about: working with anyone willing to work with you; on what you can control; ensuring a low risk of loss; coping with surprises; and overcoming obstacles. These five principles were derived from conversations with 27 entrepreneurs and are described below:

  1. Bird-in-hand: Build immediately using resources you control. These include identify (who you are), knowledge (what you know), and network (who you know).
  2. Affordable loss: Invest very little and keep the downside risk low and affordable.
  3. Crazy quilt: Work with anyone willing to make real commitments, which means willing to pay or get involved and do the work.
  4. Lemonade: Turn failures into new opportunities.
  5. Pilot in the plane: Cocreate with partners who have made real commitments.

No 4 seems like an aspiration. The other four seem like very useful ideas.

Creation theory says that hypotheses are nonsense. We don’t know what’s going to work so we have “conversational experiments”. We talk to others about our ideas, most ideas die, some ideas survive and those are the ones where there is more certainty, eventually enough to build a business.

A theory-based view sounds similar to the lean startup, it starts with a theory of the business and is followed by using scientific methods in practice to collect and analyse data to validate the theory. But the creators argue it’s better.

Another idea that I hadn’t realised but which is obvious in retrospect is that startup theories mostly come from Western settings. Non-Western settings have fewer resources and more constraints. They may use strategies such as: seeing and copying what works; growing incrementally; leveraging family networks; having a number of options (bricolage); focus on making money with sales rather than gathering information; and changing what their families work on.

All the startup theories are predicated on the idea that business plans don’t work. Trying to predict and plan for the future is difficult. In practice, people shape and build their futures.

I think my approach in practice is a combination of effectuation and creation theory. I might dig into that more in future posts.

References

Zahra, S. A., Gruber, M., & Combs, J. G. (2024). Contextualizing Lean Startup and Alternative Approaches for New Venture Creation: Introducing the Special Issue. Journal of Management, 50(8), 2997-3007. https://doi-org.hull.idm.oclc.org/10.1177/01492063241264228

Are You Working On The Thing?

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Friday, 8.08pm

Sheffield, U.K.

The main thing is to keep the main thing the main thing. – Stephen Covey

I have four books on my desk, twelve on the floor, and a worrying number of others waiting for my attention.

Which is distracted by Disney+.

It turns out the vast majority of academic papers are not read, much less cited.

That has to be the case for the majority of content put into the world – on social media, in books, and of course, in this blog.

So, when you’re working on something should you be trying to read as widely as possible?

Should you try and expand your field of vision and look at the range of arguments out there?

I’m starting to think you shouldn’t.

Your attention is valuable and you should protect it – in quite a selfish way.

The attitude to almost everything that crosses your path which is not directly relevant to your business should be to ignore it.

I’m not very good at taking this advice.

It is important to go deep when you’re working on something. You can’t understand it unless you spend time on it.

You won’t understand a subject unless you read the relevant literature.

You won’t understand a business unless you spend time working on it and dealing with clients.

And more often than not your competitive advantage comes not from doing something new but combining old things in surprising new ways.

What I really think I mean is that it’s ok to ignore something if it’s not the thing.

If you start reading a paper and it’s clear from the first few sentences that it’s not well written, it’s ok to stop reading it.

This goes for ideas and pitches and beliefs too.

If it’s not for you, that’s ok too. Just say it’s not your thing and walk on.

I’m also starting to realise that’s simply what most academic journals do.

A journal is a place to have a conversation about a particular subject – one that’s set out in the guidelines for authors.

An editor will be quite clear that some papers belong in their journals and others don’t.

Bad papers don’t belong.

Papers that don’t talk about the topics that the journal covers don’t belong.

The rest have a chance, a small one.

Because there’s lots of competition. The way academics are judged is by the number of papers they publish – so like any metric publishing is being gamed.

And that explains why although more and more papers are being published, few are read and it’s hard to tell whether the rest say anything important.

This makes it all the more important to have a good filter – the equivalent of a firewall that drops all requests that don’t meet predetermined criteria.

And now I’m off to read something that isn’t quite my thing, but could be interesting anyway.

Cheers,

Karthik Suresh

What If The Way You Think Is Wrong?

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Thursday, 9.06pm

Sheffield, U.K.

On two occasions I have been asked, ‘Pray, Mr. Babbage, if you put into the machine wrong figures, will the right answers come out?’ I am not able rightly to apprehend the kind of confusion of ideas that could provoke such a question. – Charles Babbage

I am working on a talk on the history and foundations of Soft Systems Methodology (SSM).

If you don’t already know, SSM is a way to tackle real-world problem-situations involving human groups.

There’s a little bit to unpack there.

First, one kind of problem is, “What is 2.998 divided by 16.456?”

There is one answer to that problem.

A different kind of problem is “Why doesn’t X like me?”

The answer to that is more complicated and it might turn out to be one that you don’t want to know.

Then there are problems faced by managers in businesses, or entrepreneurs running businesses.

Now, what these come down to, as Wikipedia tells us, is that there are two types of problems: well defined; and ill-defined.

Well defined problems can be solved with a range of techniques, often mathematical.

Ill-defined problems need some more work – and one way to do that is problem structuring.

That means spending some time to figure out what the problem(s) are and then moving towards a solution.

So, why am I telling you all this?

Well, for a start let’s take what’s happening in the world right now.

Some people believe that what’s wrong with the U.S is a well-defined problem.

Government is too big, common sense has been overidden by overinflated worries over climate change and equality, and it’s time to look after number one rather than police the world.

Others believe that it’s more complicated.

Inequality is entrenched through generational disadvantage, money has taken over politics, and the people in power are blaming the weakest in society and around the world rather than taking responsibility for creating the mess that the world is in.

So here’s the problem.

If someone comes along promising to tear everything down and you give them a chance, will things get better?

How will you know?

The news is still going to be full of bad things happening tomorrow.

Except in the stock markets. Those with money in there are going to do well regardless of what’s going on in your street.

It’s like a Zen koan.

When the powerful play at soldiers, does anything change?

I probably picked something insanely complex to talk about a method to work on real-world problems.

I think the point I’m trying to make is that we aren’t taught to tell the difference between well-structured and ill-structured problems.

We think that all problems require problem solving – that there is a solution.

Like it’s an exam at school.

But the real world doesn’t work like that – at least not when you bring human beings into the problem-situation.

Okay – so that’s a term to highlight. Not a problem but a problem-situation, a situation that some people consider problematical.

The majority of people, especially ones trained in a scientific mindset, will try and apply science to the problem-situation – let’s come up with a hypothesis for why things aren’t working, let’s try some experiments, let’s pivot if we fail, and eventually we’ll get a problem-solution fit.

It’s an extremely persuasive argument. One that’s easy to sell. Why wouldn’t you want to follow a scientific approach?

If you subscribe to this view then you’re taking a “positivist” approach – you believe that all knowledge is true only if it comes from sensory experience, supported by reason and logic – it’s an objective view.

And that’s great, if you’re managing footballs or metal bars.

But people see and think and talk about their world differently – they have a subjective view of what’s going on.

Phenomenology is the term given when we’re trying to understand “subjective, conscious experience”.

Objectively, of course.

I was talking to someone the other day who believes a number of things that are wrong.

Wrong, objectively, as in the facts are wrong.

And wrong, morally, because humans can do better.

The difficulty is getting them to see that.

And unfortunately, not enough people know how to use tools like SSM to help.

Cheers,

Karthik Suresh

The 4P Discovery Model (or the $P Model)

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Sunday, 9.43pm

Sheffield, U.K.

Study the past, if you would divine the future. – Confucius

For the last eight years I have been working on one deceptively simple problem.

How to find out what people want?

The world is full of people that experience problem-situations.

That is, they are in a situation they consider problematic.

For example, they want to know what impact regulation is going to have on their business, what their next career step should be, which technology they should invest in, and many other such questions.

I get involved in such situations as a consultant, either because it’s a field I know about, or because I’m working with someone else who can help.

I use a particular technique to listen to people called Rich Notes.

I’ve been refining this technique as part of my research programme, but I still wasn’t quite sure why it worked or what I actually did.

Until now.

I’ve come up with a 4P Discovery Model.

If you mistype the 4 you get a $, and that unintentional and arguably crass mistake makes another point, if you get Discovery right you’ll probably make some money.

Let me explain.

If you run a business, a service business or a product business, it helps to know what your market is willing to pay for.

Finding out starts with Discovery – an interaction with a prospect that tells you what you need to know.

Think about the last sales meeting you were in.

What happened?

Did the salesperson come in with a presentation and tell you all about what their firm did?

How much time did they spend listening to you and what you needed?

I’m willing to bet that 80-90% of the meeting was about them, with the rest left for you to ask questions about them.

There probably wasn’t much time in there that was about you.

My approach reverses that, the Discovery meeting is about listening to you.

And I’m interested in learning about four things – using what I call the 4P Discovery Model.

This is a model that I’ve followed largely unconsciously for a while, but have had to unpack and label so I can write about it.

First, the present.

Where are you right now, what’s the current situation?

Where are the pieces on your chessboard?

Second, let’s talk about the past.

How did you get here, what decisions led to this point, and what have you tried along the way?

It’s important to know what was tried and whether it worked or failed, and why, before we try and do something else.

Third, we need to find the pain, what needs fixing right now?

People rarely do things unless they really have to – it’s got to really hurt before they’re willing to buy some medicine.

And then finally, what are your preferences?

People are ready to buy certain types of products and services and not others for a range of reasons.

You need to find you what those reasons are – what kind of approaches are preferred.

This is especially important when it’s a group in the situation – they’ve all got different wants and have to negotiate a preferred one.

If you’ve followed the yellow brick road (or the purple arrows) then you know what to offer your prospect, and there’s a good chance they’ll sign up to your proposal.

And unlock a flow of $s.

Cheers,

Karthik Suresh

A Reminder Of The Nature Of Scholarship

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Friday, 8.41pm

Sheffield, U.K.

Concentrate all your thoughts upon the work at hand. The sun’s rays do not burn until brought to a focus. – Alexander Graham Bell

The world is a complicated place. So how do we make sense of what we see happening around us? How do we operate businesses, institutions, and systems in a world of flux and change? In a world of hypercomplexity?

I don’t know about you but I find the pace of change seems to be exceeding recommended speed limits.

Whether it’s the dismantling of political systems or the daily advance of AI tooling things are happening too quickly to comprehend.

Systems thinking is one of the few fields that can make sense of situations and intervene with an understanding of the technology, culture and politics that affects what is going on

The Systemist is the journal of the UK systems society and, in its Summer 2024 issue, observes that new and better methodologies are not much use if there aren’t people who can understand, select and use them in the real world.

The reason for this is because the field is new and the scholarship is still primitive (Checkland, 1992).

It’s new, Checkland argues, in the sense that the origins of systems thinking go back to 1948, a mere 77 years, which is nothing compared to the 2000 years or more that the Western intellectual tradition has developed over.

But what exactly is lacking in scholarship – what does it mean to be scholarly?

A scholarly approach is one that tries to eliminate intellectual confusion.

I read somewhere that good writing does not seek to be understood, it seeks to not be misunderstood.

The confusion in the systems field includes: how systems ideas are presented; the difference between reality (ontology) and how we study it (epistemology); and what people want systems thinking to be and what it is.

Checkland’s paper makes one vitally important point.

There was a time that people believed that there was a way to communicate between different scientific fields – that there was a “Unity of Science”.

It was a hope that speakers of different languages could talk in a single general language and then translate their findings back into their own languages.

That doesn’t work.

General solutions do not work. As Checkland writes, “You pay for generality with lack of content”, and quotes Ken Boulding who said, “All we can say about practically everything is almost nothing.”

The real power of Systems thinking is when you have a real-world problem – something you care about and want to do something about.

And thinking and writing clearly about that problem and how you approached it is the way we become more scholarly.

Cheers,

Karthik Suresh

Checkland, P., 1992. Systems and Scholarship: The Need to Do Better. The Journal of the Operational Research Society 43, 1023–1030. https://doi.org/10.2307/2584098

Analysing The Tricks Politicians Use To Get Power

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Sunday, 9.16pm

Sheffield, U.K.

One great object of the Constitution was to restrain majorities from oppressing minorities or encroaching upon their just rights. – James K. Polk

I watched a WW2 government film warning people about fascists and how they gain power.

It’s a simple technique – create an enemy for your followers to hate.

If you haven’t seen the Disney film “Wicked” yet, spoiler alert.

It’s about creating an enemy to bring your followers together.

It’s one of the oldest plays in the political handbook and it’s used in country after country because it’s so easy to deploy.

It’s quite difficult to run a government that works for everyone.

In Rambles and Recollections of an Indian Official, the author writes about the different character of kingdoms. Those with a more military disposition were “mere standing camps”, without the buildings and civil works in kingdoms with a priesthood.

The challenge, however, is that as a kingdom focuses its resources on buildings its civil institutions and less on its soldiers it also becomes weaker and less able to repel invasion.

Times have changed since then and wars are fought between economies and between supply chains.

Although that may only be in theory. The Ukraine war is being fought in a “modern, yet archaically brutal battlefield“.

The WW2 film is worth watching because it shows you so clearly what happens when a country starts sliding in the wrong direction.

First, it starts with blaming a set of minorities for everything that’s wrong with what’s going on.

The majority, listening, take a step back from the minorities, distancing themselves.

Until the it turns out that some of them are also minorities that are being targeted.

Politicians win when they can divide and conquer.

When they have the power to introduce regressive policies.

There are only two responses.

One is conflict – the minorities have to organise and take action.

The other is progressive. Where the majority act to protect the minority.

It is possible that we now live, unfortunately, in interesting times.

Cheers,

Karthik Suresh