For those of you entrepreneurs who are in the early stages
of your venture this post is for you.
With the assistance of Donald N. Sull’s article, Discipline
Entrepreneurship, I discuss how integral discipline is to your venture’s
success, especially in its early stages.
As an entrepreneur myself, I have experienced first hand the
challenges one can face when met with uncertainty. While uncertainty can be an
entrepreneur’s worst enemy, often time it is the flexibility of uncertainty
that draws people into starting their own ventures. Although the flexibility is
great, it can be overwhelming and sometimes a bit difficult to manage. Sull,
explains that the critical task of entrepreneurship lies in effectively
managing the uncertainty inherent in trying something new.[i]
But how do you effectively do this, you ask?
Well for starters no one solution manages all uncertainty.
All entrepreneurs are different, the same way all ventures are different. But don’t
get me wrong we may have some similarities but that ‘s all they are,
similarities. What I will do in the rest
of this discussion is highlight three key areas that beginning stage entrepreneurs
should think about as they work to manage their uncertainties.
1.
Formulate a Working Hypothesis: This is one of the best first steps an
entrepreneur can take. By formulating a hypothesis you are able to clearly
define what the opportunity is for your venture, your venture’s resource needs,
the value that your venture can generate, and most importantly device a plan to
test your hypothesis.
A working hypothesis helps to determine
what variables are in and out of scope for your venture therefore, narrowing
your focus. A working hypothesis helps to make the unknown known, because you
are focusing on both the implicit and explicit assumptions associated with the
uncertain variables that are in scope for your venture.
Utilizing a working hypothesis allows for
calculated flexibility; when an opportunity comes along entrepreneurs should
ask themself is this opportunity in scope or out of scope. More plainly put does
this opportunity add value to your hypothesis or does it deviate and add no
value? This question has the ability to keep you and venture out of serious
danger, as it helps to make variables a lot more certain.
2.
Assemble Resources: To assemble resources does not simply mean go
accumulate assets such as “cash, equipment, and real estate it involves
intangible resources such as intellectual property, a network of potential
employees, and access to partner’s customers and distribution capability.”[ii] Some of this may be obvious, but too often
“entrepreneurs raise to little money (or too much money), hire the wrong people
at the wrong time or enter into fatal partnerships.[iii]
When assembling resources, as an
early stage entrepreneur it is important to think about the different stages
that you will go through. For example, if you don’t have a product to
manufacture then there is no need for a factory, therefore an office space to
work closely with your team to brainstorm and refined your hypothesis further may
be most appropriate. Resources should be regarded as stepping-stones to the
next level for your venture. Resources should not be a heavy weight that
cripples your venture; going back to the factory example, if all your capital
is tied up in property plant and equipment (PPE) that means you may have less
capital available for important things like pivoting or emergencies related to
staffing, product designing, or intellectual property.
3.
Design and Run Experiments: As an entrepreneur
you know better than anyone the power in getting your hands dirty. So after all
the hypothesizing and assembling of resources jump in and test your assumptions
through a series of iterative real world experiments. Two experiments I view as
most valuable in the early stages are partial experiments, and holistic experiments.
Partial experiments are good at
revealing information about “a single critical source of uncertainty”[iv]
these experiments are most optimal in use when the unknown is known and is
associated with a quantifiable value and cost. Holistic experiments, in
contrast, can “simultaneously test multiple variables (ex. Technology, Customer
Demand) and interactions among them on a small scale.”[v]You
can best utilize holistic experiments before you roll out your product or
service to the general public, by using a test market. Testing markets allow
you to test multiple variables and see the interactions between them. Thus
better informing your management of uncertainties.
Discipline takes time, you will have to unlearn all the
entrepreneurial myths and then learn how to apply science to your art. In order to manage uncertainty effectively,
you need a hypothesis that is laced with testable assumptions and a plan that
includes a resource and experimentation strategy. The road to efficient
uncertainty management can be challenging but if you keep it simple and focused
you will know where your uncertainties are.
Leave me a comment discussing how you have dealt with your
uncertainties as an entrepreneur; all stories are welcome.
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