10 Common Small Company Mistakes - #1 Drinking the Kool-Aid

This is the first installment in a series of “mini-articles” that examine the top major mistakes startups and small companies make.  This post looks at how blindly following a company vision cause a young/small company to do the wrong things. It also offers some suggestions about how to avoid this mistake.

 

By nature, entrepreneurs are a confident, risk-taking, brash, defiant lot. These qualities are important because they help company founders overcome the inevitable difficulties and nay-saying that comes with every new venture. Some common “nay-sayings” are the following:

 

  • “If your idea was so good, somebody would have done it already.” (This is the “there is nothing new under the sun” response.)
  • “There is no market for your offering”
  • “It is too easy to copy your idea – once you do it, (insert big company name here) will copy it and you will be out of business.”
  • “Somebody is already doing it, you won’t succeed.”

 

[Side note: Nalebuff and Ayres, in their excellent book “Why Not: How To Use Everyday Ingenuity to Solve Problems Big and Small” present some amusing anecdotes that illustrate that the notion "there is no room for new ideas" is not new. One example provided, was the complete and utter rejection of Christopher Columbus’ “business plan” by the Spanish Royal Commission assigned to vet the westward journey. “The Commission rejected Columbus’ proposal to sail west with the view that ‘so many centuries after the Creation, it is unlikely that anyone could find hitherto unknown lands of any value.’” Another example given is Lord Kelvin’s infamous quote in 1900 that “there is nothing new to be discovered in Physics.” This, just several years before Einstein’s landmark papers that stood the world of science on its head.]

 

In order to succeed in building a viable business, good entrepreneurs must develop a thick skin and must not become discouraged by negativity. This is natural and healthy.  In a sense, rejecting some negative responses becomes a healthy reflex.

 

However, this almost always creates a problem with inexperienced entrepreneurs when legitimate customers, partners, and indeed early employees reject the founders’ vision. The reflex to reject criticism means that legitimate feedback is often filtered out. Which entrepreneur has not uttered one of the following statements in response to negative feedback?

 

  • “Those guys just don’t ‘get it’”
  • “That guy is a bozo – he wouldn’t know a great idea if it hit him over the head”
  • “It will be fun proving her wrong”
  • “Dinosaurs!”

 

As a result, leaders of young companies often gravitate to sources of positive feedback and ignore one of the best opportunities to correct themselves (before it is too late).

 

You should be worried when you aren’t getting push-back. Push-back makes you think; push-back makes you analyze whether you are on the right track. Particularly, statements like the following are extremely valuable, when they are specific and detailed:

 

  • “Your product won’t work here because….”
  • “We can do the same thing with (insert other product here)...”
  • “Nobody will trust their passwords/file security/personal details, etc. to a small company like yours”

 

My favorite “get lost” statement, which should send off a “five alarm” warning if you hear it, is the following:

 

  • “I really like your product, but I wouldn’t be the one to use it. You might want to talk to….” (where … represents the perpetual “someone else”)

 

These types of objections should help you enhance your product, focus your market position, or at the minimum, sharpen your marketing messages before you launch. In all cases, this type of information should provide valuable assistance to see if you are on the right track.

 

Few companies have the foresight early on to spend the time and effort analyzing feedback.  The more common case is the “damn the torpedoes, full speed ahead” scenario. The startup plows ahead with their product/service plans, investing lots of time and money, only to discover that the offering falls flat on its face.  Then what?  Is it the product? Is it the messaging?  Maybe the wrong target market?  The pricing model? Maybe it is just early and you ARE on the right track?  How can you know?

 

Admitting a mistake at this point is not easy, particularly for venture-funded companies. At this stage, with so much already invested, it is difficult to do the right thing. The tendency is to keep plugging away with the same offering, and just try harder. Often, the right thing to do is to step back and analyze your feedback (or lack thereof.)

 

Several danger signs of “drinking your own Kool-Aid” are the following phenomena:

 

  • Early on, company leaders do not participate in day-to-day planning meetings (or planning meetings don’t exist in any structured manner). Developers work according to general visionary statements….and fill in the gaps themselves.
  • Product direction changes on a  (too) frequent basis, often without any sort of due process
  • There are few, if any interactions with customers/partners to gauge interest about the product/service during the development cycle.
  • There are customer/partner meetings, but it is filtered by company leaders. Feedback to the developer and marketing teams is not provided in any detailed or consistent manner – i.e. there is a disconnect between customer feedback and the internal operations
  • Negative reports/articles about the market are ignored or rejected without serious consideration and without an effort to discuss the issues with the authors.

 

It is wrong to think that all forms of structured process necessarily lead to bureaucracy and slow response times. Processes do not need to be more complicated than a written summary and a short discussion, which can be carried out during a weekly team meeting.

 

Falling prey to “drinking your own Kool-Aid” often leads directly to other cardinal mistakes, including not validating the market, not working with customers early on, and overestimating the offering’s uniqueness in the market. These will be covered in the next post.

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