Startups: Are You Making Enough Mistakes?

July 19, 2006

I think too many would-be startup entrepreneurs assume that successful startup founders make very few mistakes.  The thinking goes something like this:  “It is a well known fact that the mortality rate for startups is very high.  A large percentage of all startups fail.  This likely means that for the few that do succeed, the founders must have gotten all or most things right and made very few mistakes.”  This would seem like a rational argument.  And it is.  It just happens to be wrong.

I’m going to argue that more startups fail because of not making enough mistakes (instead of making too many).  This may sound a little backwards, and it is.  So, let me say it a different way:

“Most successful startups get a lot of things wrong, but a few things really, really right.”
If you are not getting a lot of things wrong either you are a) exceptionally brilliant and lucky or b) not doing very much.  Show me a startup that is making very few “mistakes” and I will show you a startup that is likely suffering some level of “strategic paralysis”.  Quite simply, they are starved of execution.  There is very little actual activity that is happening and hence the company is not moving forward.  

Regular readers of my blog will know by now that I have an uncanny knack for the mediocre metaphor.  So, here’s another one: 

I will posit that it is more important for a startup to be moving in the wrong direction than not moving at all.  Why?  Two reasons.  First, even as you are moving in the wrong direction, you are learning things.  You are developing the important “muscles” that you will need when you ultimately do figure out what the right direction is.  If you’re simply sitting in your chair and thinking about what the right direction is, when the time comes, your foot will have fallen asleep and you won’t be able to make much progress.  (See, I told you it was going to be a mediocre metaphor).  Second, it is quite often impossible to figure out what the right direction is until after you’re explored around for a while.  You simply can’t determine the right direction to head-in until you simply start walking and looking around.  

But, you might argue, aren’t startups dealing with really constrained resources?  Can they really afford to expend energy and money heading in a direction that is wrong?  This is a valid concern.  Startups are indeed resource-constrained.  But, there are often paths in the wrong direction that are strewn with cash.  For example:  You may end up taking on a custom consulting project that moves your company into a direction that seems misguided and totally misaligned with what you thought you wanted to do.  The direction probably is misguided.  But, let’s assume that it pays the bills.  It may even (gasp!) be profitable.  If this is the case, that means what you’re really losing is time.  But, you’re not really losing the time completely because if you do it right, you’re going to be learning a lot along the way – most important of which is how to make money, how to deliver to customers and why service companies are so hard.  The trick is to not get used to it, learn what you need to learn and then productize.  But, that’s just one example (and it happens to be the most common one, which is why I used it).  Put simply, kicking off a software company by focusing in the early stages on services revenue is an exceptionally good way to get started and an exceptionally easy way to live a life of quiet desperation if you’re not careful.  

I’ll plan to write more about this whole “service company to product company” concept in a future article as I think it is a topic of high importance and interest to a lot of you (or at least I think it is).

Meanwhile, I have some closing advice for the entrepreneurs reading this:  Even if it’s in the wrong direction (for now), get moving!


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