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Thinking about High Growth sat in a Temperance Bar in Rawtenstall

May 22, 2017

A Temperance Bar is a type of bar, found particularly during the C19th and early C20th, that did not serve alcoholic beverages. A number of such bars were established in conjunction with the Temperance Society, advocating a moderate approach to life, especially concerning the abstinence from alcohol.

Temperance Bars with full temperance licences (allowing them to serve on Sundays, despite English trading laws at the time) were once common in many high streets in the North of England. The movement had a massive following, fuelled mainly by Methodists. These bars were the first outlet for Vimto, also serving brews such as black beer and raisin tonic, blood tonic, dandelion and burdock, herb bitters and sarsaparilla.

The temperance movement (one foot in front of the other please) began in 1835 in Preston, amid concerns about the Industrial Revolution’s equally industrial levels of alcoholism. Although prohibition was never formalised in the UK in the same way it was by our supposedly sober cousins in America, a wave of non-alcoholic bars began popping up in most towns to guard against the dangers of heavy drinking.

In their heyday, temperance drinks were not only seen as delicious non-boozy tipple, but were thought to have health benefits: ginger for soothing nausea or colds, sarsaparilla and dandelion for detoxifying. I’m a little sceptical: according to family folklore, my gran’s deafness was caused when my great grandfather decided to shun the doctor and treat her ear infection with his herbal linctures.

Some of the most famous Temperance Bars carried the Fitzpatrick family name. The Fitzpatricks, a family from Ireland, came over to Lancashire in the 1880s. A family of herbalists, they turned to building a family-run chain of shops throughout Lancashire. These shops dealt in their non-alcoholic drinks, sold herbal remedies, and cordial bottles.

At their peak, the Fitzpatrick family owned twenty-four shops, all brewing drinks to the original recipes brought over from Ireland. However, as new drinks came over from America, the Temperance Bars slowly waned away. Today, Fitzpatrick’s Herbal Health in Rawtenstall is the last Temperance Bar in the country.

The Rawtenstall bar has been thought of with affection by generations of the town’s residents. It is notable for its old copper hot water dispenser, which was originally a fixture at the Astoria Ballroom in Rawtenstall. It has also won awards as the country’s ‘Best Sarsaparilla Brewer’, and for its dandelion & burdock.

The bar has recently reopened after four weeks refurbishment, with a fresher, brighter look and product innovations on the menu However, it has maintained its traditional offerings, past traditions and family-run ethos. The bar retains many of its original fixtures and fittings, including the ceramic tap barrels and shelves lined with jars of medicinal herbs. Mr. Fitzpatrick would be proud.

When I was growing up, dandelion and burdock was the social tipple of choice. Darkly mellow with just enough fizz and a pleasing aniseedy aftertaste, I used to drink it at my grandma’s house in Manchester – which we would gulp down with Jacobs orange Club biscuits. She would prop the bottle on the doorstep outside, ready for the man who collected the empties.

Apparently, dandelion and burdock dates back to the days of St Thomas Aquinas and it’s back, along with other old-style temperance drinks gracing much fancier menus than the chippies of my youth. For example, at the St Pancras Booking Office Bar at the London station, you can sip sarsaparilla or blood tonic whilst snacking on crispy calamari and parmesan chips.

The drinks may appear simple, but are unbelievably complicated. Sarsaparilla, for example, involves an intricate blend of sarsaparilla root, anise, liquorice, nutmeg, molasses, cinnamon, cloves, brown sugar, lemon juice and other botanical extracts.

But back to Fitzpatrick’s. This quirky Pennines apothecary, with its ceramic tap barrels and jars of botanical herbs and roots holds a special lure, with its ghostly inhabitants, unknown pasts and general eccentricity. Come rain, shine or old-fashioned drizzle, it will restore you, warm your cockles, quench your thirst and satisfy your need for quirkiness.

However, the fact that it is the last temperance hostelry shows you have to keep moving and innovate, otherwise your market evaporates as your customer preferences change or alternative products take your marker. The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew, and act anew.

Rousing words from President Abraham Lincoln, taken from his 1862 annual address to Congress. It’s a call to action, which has resonance with the turbulence in most markets today. You simply can’t stand still, the need is to stay agile with a relevant value proposition and viable business model.

But most businesses hesitate to adopt new thinking, instead they focus on hunkering down and a low-key ‘back to basics’ approach, defaulting to a risk-reduction focus rather than a growth mindset. Whilst this often secures bottom-line improvement, it is unsustainable and rarely offers anything more than short-term expediency.

It impedes curiosity and experimentation, and stifles thinking beyond the immediate time horizon. However, whilst organisations may regard seeking breakthroughs as too steep a challenge and are content with simply maintaining their business, research shows that focusing on short-term aspirations typically yields only short-term results, whilst those seeking significant breakthroughs will both identify the big ideas and also generate closer, incremental ideas along the way.

It’s about holding an ‘innovation mindset’. Over time, I’ve developed a pretty keen sense of whether or not my efforts with clients will be successful, and one of the biggest red flags that tells me I’m in trouble is hearing this phrase: That’s the way we’ve always done things.

I can’t think of a single sentence that’s more antithetical to growth and innovation than the blind acceptance that some things can’t be changed within an organisation. It’s a sentiment few companies can afford to indulge, but transforming an organisation from innovation-averse to forward-thinking isn’t always an easy road to navigate.

And that’s where you need an entrepreneurial leader, so lets say if someone was to build a passenger-carrying rocket for joy rides into space and offer you a ticket, would you go? Of course you would, especially if Richard Branson was involved.

He’s a live wire, someone with a can do, will do attitude who doesn’t let short-term difficulties become traumatic, although I’ve had some mixed experience with Virgin Atlantic – the last time I flew the rate of progress through the lounge to board the plane was so slow that technically I was classified as a missing person. However, his innovation in mass-market long haul flights has had an impact, and of course, very customer focussed.

But let’s consider Branson himself. In the last twenty years, barely a week passed when we weren’t treated to the spectacle of Branson’s mouse like whiskery chops being winched to safety from some vast expanse of ocean. His speedboats kept running into logs of wood or his balloons too heavy for sustained flight.

However, I like the way he’s made it in business without a pinstripe suit or an obvious predilection for golf, and despite the often-disastrous attempts to go across the Pacific on a tea tray or up Everest on a washing machine, I do like the way he keeps on trying, his boldness and give it-a-go attitude. He’s also dyslexic, so overcome that significant personal challenge too.

He may be a publicity-seeker, but he’ll get us in space with Virgin Galactic. My concern wouldn’t be the perilous spins, loud bangs and crashes of Branson’s previous failures as I sat in my seat, but rather the expectation that every passenger will have to conform to Branson’s relaxed style and only allowed to fly in jumpers and corduroys, and his beardy face beaming out doing the safety procedure promo. He’s got nice teeth though.

But recall Fatal Attraction, you thought Glenn Close was dead, you relaxed and then, whoa, she reared up out of the bath with that big spiky knife. That’s one thing Branson doesn’t do. No, not lie in a bath of cold water pretending to be dead, love him or loathe him, he doesn’t sit back and think That’s it, I’ve had enough.

Obviously he doesn’t need the money, but he just keeps on with his self-belief and crashes into the next idea. He’s a disruptive force that never gives up and while his opponents are kept fully employed wondering what he is going to do, he is busy doing it, and its often something they hadn’t thought he’d do.

Based on this inspiration, research, my own intuition and experience, I’ve developed a blueprint for creating an innovation mindset, which I’ve called High Growth Anatomy, an assessment of you innovation dna. It’s a series of reflective questions, structured as to ‘Go’ and ‘No Go’. Evaluate yourself, what’s your ‘Go’ score?

Foresight or Hallucination?

  • We have clear and articulated goals based on our purpose, of where we want to be in the next 6, 12, 18 and 24 months;
  • We have some thoughts on where we are aiming to be, but it’s more of a wish list than a ‘lets make it happen’ plan.

Front-foot or Back-foot?

  • As a team we are moving forward all of the time;
  • As a team we are fire-fighting most of the time.

Clued-up or Clueless?

  • We are clear about how we make a difference in our market;
  • We are unclear about how to stand out in our market.

Dexterous or Clumsy?

  • We are agile in our business, we ‘seize’ the moment with alacrity;
  • We are blunderers, unable to move quickly or with grace.

Leaning-forward or Leaning-back?

  • We are restless thinkers, learning, imaging the future, eager to grow;
  • We are thinking about our future, but out time is spent living today.

Web-enabled or Webbed-feet?

  • We have a clearly articulated digital strategy in our business model;
  • We use the Internet and social media, but have no digital vision.

Harmonious or Mutinous?

  • We are all wearing the same jersey, pushing together in the same direction, one heart and one voice;
  • We’re a collection of tribes and opinions, connected but not united.

Curious or Cautious?

  • We develop lots of new things, some of them work, some don’t, but we’re always ready to experiment;
  • We generally keep trying things until they don’t work, then think of something new to have a go at.

Heads-up or Head-down?

  • When faced with a threat we respond rapidly and decisively;
  • When faced with a threat, we often step back and wheel-spin.

Fresh thinkers or Copy cats?

  • We are creative and restless, innovation is a core behaviour;
  • We don’t have a point of difference in our business model.

Stickability or Bendability?

  • When something is not going to plan, we reflect, adjust and kick on with renewed enthusiasm;
  • When initiatives do not work, we tend to give up and go back to what we know.

Kinship or Coldfish?

  • We actively pay attention to building our culture, values and spirit;
  • We do not pay attention to our internal culture – it just happens.

Connectivity or Disconnected?

  • We are hot wired, we’re all linked-in and linked-up;
  • Our organisation is not well co-ordinated – we’re disconnected and decoupled.

Insights or Blindspots?

  • We have a very good knowledge of our customers, their customers and our competitors;
  • We have an ad-hoc knowledge of our customers, their customers and our competitors.

These are uncertain times with Brexit, Trumponomics and a General Election. Companies are struggling to find the right balance between caution and optimism. No one knows what will happen next, and it is crazy to operate your business as though you do. But the more volatile the times, the more essential it is to keep your options open. Thus, taking less risk (closing down innovation options) is actually more dangerous than investing to preserve a number of future-focused options.

There are lessons for us all in the history of Fitzpatrick’s, decline and renewal, and the entrepreneurial attitude of Branson, where everything-is-possible and optimism rules. A strong sense of the possible is essential to driving innovation that in turn leads to success. Whilst the image of the swashbuckling adventure-hungry risk-taking buccaneering entrepreneur is somewhat of a caricature, positive energy and exuberance makes a refreshing change, as the news is a constant stream of maudlin and misery.

Things don’t just happen. You’re sure to get somewhere if you walk long enough isn’t the answer. Hope isn’t a strategy. It’s about strategic readiness, agility, clarity, direction and velocity and then execution. Sit down, have a glass of dandelion and burdock, and ask yourself the High Growth Anatomy questions and reflect on how to create your own future, before someone does that for you.

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Entrepreneurial learning journey: building your startup team

May 16, 2017

Lean startup thinking is based around the concept of a MVP as a means of sharing your product vision with your target customers, containing sufficient value to attract early adopters. Asking the right questions of your MVP is key, it’s as much a process as a pilot version of your product, and guides you broadly around your business model assumptions, many based on your hunches.

Testing all aspects of the business model, not just the product features, is vital, and this applies to developing your ‘Minimum Viable Team’ (‘MVT’)?  As Steve Blank states, a startup is a temporary organisation used to search for a repeatable and scalable business model. Having a talented team is an essential ingredient to startup success and scaling, as any aspect of the business model.

Most startup founders work on the basis that they will find the folks they need to scale their business either by word of mouth within the startup community, or within their own network, when they need them.  Alas experience tell us those serendipitous moments don’t always occur. The route of chance isn’t always successful, or even best financially in the longer term.

So what are the key considerations in your startup team building strategy, when seeking to create a key part of your business growth engine? Here are some thoughts.

1. Hiring Philosophy

What is the vision for your MVT in terms of its purpose, values and principles held as underlying attributes that will make a difference?

Rockstars gives leverage You’re looking for rockstar starters who can create 10x more leverage – ‘moonshot thinking’ –  than an average employee. The effectiveness gap between employees can be multiple orders of magnitude. In startup hiring there are few shades of grey, go for those that can add rocket fuel to your momentum.

Culture-contributors are better than culture-fitters A startup culture is part of the business model and customer experience. Just like we want people to contribute new skills and ideas, we want people to contribute new culture. Hiring culture-fitters does not make your culture better. The founding team will soon be outnumbered by new hires. They will decide your future culture, not you.

Hire for potential & learning not experience & experts Potential and experience are not mutually exclusive, but potential is far more valuable. Everyone usually hires for experience, but for a startup my view is to hire those whose potential will explode when they join you, pulling you along with them. Interviewing for experience is easy because you are discovering what someone has done. Interviewing for potential is hard because you are predicting what they will do. How do you do this? They get excited talking about what they could do rather than what they have done.

Static expertise quickly becomes obsolete. To survive and grow we must be a learning organisation. The clearest signal of a learner is curiosity. Curious people, by definition, love to learn, while experts talk about what they know.

Experimentation is a crucial mechanism for driving breakthroughs in any startup. If you want to create a successful, hyper-growth company, you’ve got to focus on empowering your teams to rapidly experiment.

Hire for difference not similarity There is a natural bias to hire people ‘like us’. Fight this bias. Hiring similar means we value repeatability and efficiency over creativity and leverage. Hiring different brings new skills, paradigms, and ideas, which are the sparks and catalyst of leverage. You will naturally want to hire people you connect with. Fight your instincts.. Don’t default to ‘she’s like one of us’.

2. Focus on Personality

Simply, what sort of people did we want in our team alongside us on our startup journey? I’ve developed this simple framework, a combination of attitudes, character and behaviours, to check for ‘togetherness’. They are:

·     Openness: We look for free spirits, open-minded folk who will enjoy the startup adventure and new experiences – the highs and the lows.

·     Conscientiousness: A startup can be a bit chaotic and disruptive, so we look for people who are organised and dependable.

·     Extraversion: We look for energisers, live-wires who tend to be more sociable and keep noise and energy levels up – not office jesters, but people who can keep the lights burning

·     Agreeableness: High scorers for this trait are often trusting, helpful and compassionate. Empathy is an invaluable trait to have when building your startup to balance the searing ambition.

·     Emotional stability: People with high scores for this trait are usually confident and don’t tend to worry often.

We are social creatures, and a deeper understanding of who we (and others) are can provide a valuable tool for working with others. You can build a more effective MVT using personality traits as part of your hiring decision.

In terms of the attitudes and behaviours we sought, these maybe summarised as follows:

They would much rather act than deliberate Generally, startup business plans are less useful than the planning process, as things change so quickly. Before the plan shoots out of the printer, things have already changed and ‘the plan’ is already outdated. Stuff happens.

Very few startups resemble their original plan, and that’s a good thing, because it means they’re pivoted and reshaping their businesses to meet the needs of their customers. Great startup employees are the same way.

They have an appetite to get out of the building Great start up people obsess over the customer, they understand calories are best spent making a real difference for customers. Every business has finite resources. The key is to spend as much of those resources as possible on things that matter to the customers. Fretting over trivial things doesn’t help anyone. It’s just a waste of energy.

They don’t see money as the solution to every problem One of the key lessons founders learn in a startup is resourcefulness. How do you take limited resources and turn them into something remarkable? That’s also true of the best startup employees. They’re remarkably resourceful. They’re constantly looking for creative ways to make the most of the resources they have.

3. The concept of ‘Tour of Duty’

Start-ups succeed in large part because their MVT is highly adaptable, motivated to go the extra mile and create something different. However, entrepreneurial employees can be restless, searching for new, high-learning opportunities, and other startups are always looking to poach them.

However, if you think all your MVT will give you lifetime loyalty, think again. Sooner or later, most employees will pivot into a new opportunity. When Reid Hoffman founded LinkedIn, he set the initial employee engagement as a four-year ‘tour of duty’, with a discussion at two years. If an employee moved the needle on the business, the company would help advance her career. Ideally this would entail another tour of duty at the company, but it could also mean a position elsewhere.

A tour of duty has a defined end, but that doesn’t have to be the end of an employee’s tenure. One successful tour is likely to lead to another. Each strengthens the bonds of trust and mutual benefit. If an employee wants change, an appealing new tour of duty can provide it within your company. This is a more effective retention strategy than appealing to vague notions of loyalty and establishes a real zone of trust.

The tour-of-duty approach for a startup works like this. The business hires an employee who strives to produce tangible achievements and who is an important advocate and resource in the MVT. A tour-of-duty is established, either two or four years. Why two to four years? That time period seems to have universal appeal. In the software business, it syncs with a typical product development cycle, allowing an employee to see a major project through. At the end of this ‘tour’, the business could pivot to a new direction, and thus the MVT needs to pivot too.

Properly implemented, the tour-of-duty approach can boost both recruiting and retention for a startup. The key is that it gives both sides a clear basis for working together. Both sides agree in advance on the purpose of the relationship, the expected benefits for each, and potentially a planned end.

The problem with most employee retention conversations is that they have a fuzzy goal (retain ‘good’ employees) and a fuzzy time frame (indefinitely). The company is asking an employee to commit to it but makes no commitment in return. In contrast, a tour of duty serves as a personalised retention plan that gives a valued employee concrete, compelling reasons to finish her tour and that establishes a clear time frame for discussing the future of the relationship. Personalised tours produce even positive feelings.

Thus when working with MVT employees, establish explicit terms of their tours of duty, developing firm but time-limited mutual commitments with focused goals and clear expectations. Ask, ‘in this relationship, how will both parties benefit and progress in the lifetime of the MVT?’

4. Lessons from Google

A company’s culture and core values are the bedrock of innovation and effective teams, and Google has established a suite of practices for you to use when building your own effective startup team.

Back in 2013, Google conducted a rigorous analysis deemed Project Aristotle to identify what underlying factors led to the most effective Google teams. Over 200 interviews were conducted across +180 active teams over the course of the two-year study. More than 250 attributes were identified that contributed to both success and failure.

Their hypothesis was that they would find the perfect mix of individual traits and skills necessary for a stellar team. Turns out they were dead wrong.

The researchers found that what really mattered was less about who is on the team, and more about how the team worked together. Here are the top five keys to an effective Google team, in order of importance:

Psychological safety Psychological safety refers to an individual’s perception of the consequences of taking a risk or a belief that a team is safe for risk-taking. In a team with high psychological safety, teammates feel safe to take risks around their team members. They feel confident that no one on the team will embarrass or punish anyone else for admitting a mistake, asking a question or offering a new idea.

Dependability On dependable teams, members reliably complete quality work on time (vs. the opposite – shirking responsibilities). Perfection is not optional. The enemy of great is good. Always strive for the best possible product, service or experience.

In a decentralised team working remotely, this core value is extremely important. Always trust your teammates are doing their best work with good intentions. Don’t jump to conclusions or judgments.

Structure and clarity An individual’s understanding of job expectations, the process for fulfilling these expectations, and the consequences of one’s performance are important for team effectiveness. Goals can be set at the individual or group level, and must be specific, challenging and attainable. Google often uses Objectives and Key Results (OKRs) to help set and communicate short- and long-term goals.

Meaning Finding a sense of purpose in either the work itself or the output is important for team effectiveness. The meaning of work is personal and can vary – financial security, supporting family, helping the team succeed, or self-expression for each individual, for example. The self-directed employee takes responsibility for her own decisions and actions. Having a team that can constantly say “We can figure it out” creates a competitive edge.

Impact The results of one’s work, the subjective judgment that your work is making a difference, is important. Seeing that one’s work is contributing to the organisation’s goals can help reveal impact. The world’s most precious resource is the passionate and persistent human mind. Get your team to embrace long-term thinking.

Every member of the team needs to embody a growth mindset: the belief that they can learn more or become smarter if they work hard and persevere.

That media fervour for the unicorn startups and their celebrity founders can suggest that it only takes the one or two entrepreneurs to build exceptional companies on their own, or with a co-founder. I think that’s rarely the case.

Henry Ford once said, Why is it that every time I ask for a pair of hands, they come with a mind attached? In a startup, minds dramatically amplify the value of hands and they become even more powerful when they’re able to engage with like-minded, stimulated other folk in the team.

The first four minutes: the growth mindset of entrepreneurs

May 2, 2017

It’s 63 years ago – 6 May 1954 – that Roger Bannister ran the first sub-four-minute mile at Iffley Road Track in Oxford. Inspired by Sydney Wooderson, who set the British record set at 4 minutes 4.2 seconds on 9 September 1945, Bannister started his running career in the autumn of 1946.

He had never previously worn running spikes or run on a track, but he showed promise in running a mile in 1947 in 4 minutes 24.6 seconds on only three weekly half-hour training sessions. He was selected as an Olympic possible in 1948 but declined as he felt he was not ready to compete.

Over the next few years, improving but chastened by this lack of success, Bannister started to train more seriously. In 1951, Bannister ran 4 minutes 8.3 seconds, then won a mile race on 14 July in 4 minutes 7.8 seconds at the AAA Championships before 47,000 people.

After failure at the 1952 Olympics, Bannister set himself a new goal: to be the first man to run a mile in under four minutes.  On 2 May 1953, he ran 4 minutes 3.6 seconds, shattering Wooderson’s 1945 standard. This race made me realise that the four-minute mile was not out of reach, said Bannister.

Other runners were making attempts at the four-minute barrier and coming close, notably American Wes Santee and Australian John Landy, who ran 4 minutes 2.0 seconds. Bannister had been following Landy’s attempts and was certain his Australian rival would succeed. Bannister knew he had to make his bid.

6 May 1954. Aged 25, Bannister had begun his day at a hospital in London as a junior doctor, where he sharpened his racing spikes and rubbed graphite on them so they would not pick up too much cinder ash. He took a mid-morning train from Paddington to Oxford, nervous about the rainy, windy conditions that afternoon

With winds up to 25mph, Bannister said that he favoured not running, and would try again at another meet. Just before the start, he looked across at a church in the distance and noticed the flag of St George was moving but starting to slow. The wind died. The conditions were far from perfect, but Bannister knew at least one obstacle had been eased. As the run began, the conditions did worsen, with a crosswind growing, but by then Bannister was in his stride.

The race went off as scheduled at 6pm with Chris Chataway and Chris Brasher providing the pacing. Brasher led for the first two laps, Bannister stayed close and then as the race reached lap three, Chataway came through to maintain the pace. The time at three-quarters was 3 minutes 0.5 seconds but Bannister knew he had to bide his time.

Bannister began his last lap, needing to run it in 59 seconds. Chataway continued to lead around the front turn until Bannister began his finishing kick with about 275 yards to go (just over a half-lap). He flew past Chataway onto the last straight and threw everything at the challenge ahead, his tall, powerful style driving him on. Could he do it? He knew this was it. The world stood still. It was just him and the track. He was being carried by history.

The announcement came. The announcer excited the crowd by delaying the proclamation of the time Bannister ran as long as possible:

Ladies and gentlemen, here is the result of event nine, the one mile: first, number forty one, R. G. Bannister, Amateur Athletic Association and formerly of Exeter and Merton Colleges, Oxford, with a time which is a new meeting and track record, and which – subject to ratification – will be a new English Native, British National, All-Comers, European, British Empire and World Record. The time was three…

The roar of the crowd drowned out the rest of the announcement.

Bannister’s time was 3 minutes 59.4 seconds. He’d done it. He’d broken the world record. He’d done what so many believed was impossible. But Bannister’s record only lasted 46 days, Landy beat his time on 21 June in Turku, Finland, with a time of 3 minutes 57.9 seconds. Bannister went on to win the 1,500m at the 1954 European Championships with a record in a time of 3 minutes 43.8 seconds. He then retired from athletics to concentrate on his work as a junior doctor and to pursue a career in neurology.

It was doubted that a man could break the four-minute barrier for the mile. Experts said for years that the human body was simply not capable of a 4-minute mile. It wasn’t just dangerous; it was impossible. Perhaps the human body had reached its limit.

As part of his training, Bannister relentlessly visualised the achievement in order to create a sense of certainty in his mind and body. It took a sense of extreme certainty for Bannister to do what was considered un-doable. He alone was able to create that certainty in himself without seeing any proof that it could be done.

Once he crashed through that barrier, the rest of the world saw that it was possible, and the previous record that had stood for nine years was broken routinely – 24 people broke the 4-minute mark within a year of Bannister.

Once Bannister proved that once you stop believing something is impossible, it becomes possible. He decided to change things. He refused to settle. When no one believed his goals were possible. When his competitors were hot on his heels, he picked up his pace. He took things into his own hands, and decided to tell a better story. And in doing so – he did the impossible.

Bannister undoubtedly had a growth mindset, now an established learning theory from the work of Carol Dweck whose research-based model showed the impact of mindsets. She unpacked how a person’s mindset sets the stage for either performance goals or learning goals.

A person with a performance goal might be worried about looking smart all the time, and avoid challenging work. On the other hand, a person with a learning goal will pursue interesting and challenging tasks in order to learn more.

Dweck became interested in people’s attitudes about failure. Dweck noticed that some people rebounded while others seemed devastated by even the smallest setbacks. After studying the behaviour of thousands, Dweck coined the terms ‘fixed mindset’ and ‘growth mindset’ to describe the underlying beliefs people have about learning and ability. When people believe they can get improve, they understand that effort makes them stronger. Therefore they put in extra time and effort, and that leads to higher achievement.

Bannister’s achievements support Dweck’s model of the fixed versus growth mindset shows how one’s beliefs about your own underlying potential impacts actual achievement. At the same time, neuroscience discoveries were gaining traction, researchers began to understand the link between mindsets and achievement. It turns out, if you believe your brain can grow, you behave differently.

Individuals who believe their talents can be developed (through hard work, good strategies, and input from others) have a growth mindset. They tend to achieve more than those with a more fixed mindset (those who believe their talents are innate gifts). This is because they worry less about looking smart and they put more energy into learning.

What’s the best way to get started with your growth mindset development? One way is to identify where you may have fixed mindset tendencies so that you can work to become more growth minded. We all live upon a continuum, and consistent self-assessment helps us become the person we want to be.

For some people, failure is the end of the world, but for others, it’s this exciting new opportunity. Instead of focusing on output, which can be seen as emblematic of a fixed mindset, think about the effort needed to improve. Thus the takeaway is it’s not the most talented, but those willing to keep going and overcome barriers that enjoy more success. Hard work brings results.

The boom and bust nature of startups often results in entrepreneurs being viewed simplistically as successes or failures based on the outcome of their startups. However, the real key to success is mindset, which allows entrepreneurship to be viewed as a journey rather than a distinct outcome.

Fixed mindsets attribute failure to a lack of innate ability, get beaten down by it and become much more risk averse and self-conscious. On the other hand, entrepreneurs with growth mindsets are better suited for the startup rollercoaster ride, as they learn from their experiences and don’t attribute failure to a fixed trait.

This leads them to be able to analyse problems more deeply and bounce back more effectively. In a growth mindset, there is a lot of truth in the saying, what doesn’t kill you makes you stronger. It also happens to make you smarter.

Perennially innovative companies like Tesla, Apple and Amazon are distinguished by a learning culture that fosters curiosity, innovation and encourages risk taking. They realise that learning generates its own unpredictable rewards, rewards you will miss if you aim only at specific, measurable goals and disregard the roles of effort.

As a growth-mindset entrepreneur, your success is an incremental aggregate of many little ideas. Every new positive or negative data point should raise more questions. Why did customers like this product so much? Was this luck? The growth mindset engenders continuous innovation and improvement even in the face of success.

So, how do you cultivate a growth mindset?

1. Don’t be defined by what you already know rather identify with your current learning, have a learning path defined, have an appetite to learn and enjoy the learning process itself. Embrace the iterations of steps backward as much as the steps forward.

2. Enjoy lessons learned for what they are don’t focus just on the outcomes, no matter how significant they maybe. Instead, recognise milestones by learning from the effort it took to achieve them. Success and failure are both by-products of the learning journey and offer valuable lessons.

3. Don’t be self-defining fixed-mindset entrepreneurs are self-defined by their results. Growth-mindset entrepreneurs are never self-defining, rather they embrace the journey and trust results will follow. Growth mindset entrepreneurs show long-term resilience, repeated innovation and the necessary drive for future enduring success.

4. Hear the voice of a growth mindset entrepreneur in your head – challenges are exciting rather than threatening, here’s a chance to grow, think the growth potential in following this opportunity, even if it’s out of your comfort zone – just like the example of Bannister.

5. Focus on the process you can learn from the processes and improve for the next time. Don’t let yourself sink into fixed mindset thinking, worrying about a challenge, a setback, or a bad outcome, focus on how to improve the process so next time out the outcome may be different.

Many successful people, including Einstein and Edison, said they learned more from their failures than from their successes, many of their breakthroughs came after a number of failures that provided learning experiences.

The more we are organised around stretching and growing, and being comfortable with confusion and setbacks, the more we are going to create growth mindsets.

Your future only exists in your own mind. To own your future, you must always be taking steps to grow and make the future bigger than your past, always looking ahead at what’s possible. Having a bigger future is not about how much time you have left, it’s about what you do with that time.

Always maximise the value of your past as you move forward, and know that your past won’t become useful until you’re committed to having a future that’s even bigger. Like Bannister, I always expect the life ahead of me to be much bigger, more exciting, more motivating, more engaging, and more fascinating than anything I’ve achieved before.

Each of us needs to believe that within us is a sub-four-minute mile performance, where we cast aside all self-doubt  of the little voices in our head and refute the naysayers.

The first sub-four minute mile could have belonged to someone else, but Bannister wanted it more, he had a growth mindset. Three minutes and 59.4 seconds that changed history. Few other sporting moments have been crystallised in a nation’s memory in the same way as the first sub-four-minute mile. It’s still special too – more people have climbed Everest than run a sub-four-minute mile.

Startups: tips on investor conversations

April 24, 2017

Every startup founder understands the importance of meeting with potential investors, and the need to make themselves memorable, drive home their startup’s product’s value and stand-out in the queue of other entrepreneurs seeking investment to kick-start their dream.

However, working out how to build a platform for the meeting, and trying to create and control a compelling conversation where you feel you’ve done yourself justice, is another matter altogether

With the medals and scars from my personal experience from over twenty years of fund raising, I’ve learned that having a step-by-step approach, scripting and structuring the content, enables you to deliver your key points in a coherent manner – and have a wash-rinse-repeat formula for other conversations too.

Without developing your script and style, each meeting can be ad-hoc and become messy and unstructured. Whilst you need to be spontaneous and fresh so not to become robotic, having a disciplined approach is essential.

Here’s my thoughts to speed dating investors on a first meeting, where every minute and moment counts.

1. Know your audience Like all good marketing and sales conversations, the startup pitch begins before you say a word. It starts with research of the firm and person you’re meeting, and crafting a personalised strategy.

Firstly, you have to understand their interests. Do they have knowledge of, or hold investments in the sector? Adjust your content according to their background knowledge.

What type of startups do they invest in – pre-revenue, early revenue, or at a revenue threshold? Have they had successes? If so, figure out their priorities and focus on addressing them.

2. Don’t jump in with both feet – break the ice When you start the conversation, your first instinct is to jump straight into your pitch, with a combination of enthusiasm and nerves. However, instead of launching into your opening statements, start by asking them one question: What is the most important thing you want to make sure I cover with you today?

This answer is really helpful in focusing your conversation. For example, if they ask about market size, you’ll know to spend time covering it. If they ask about your team, you’ll know where to take a deeper dive.

Find out what caught their eye. Investors see thousands of new ideas and sit through hundreds of pitches, they’ve heard and seen it all. The fact that you’re here in a face-to-face in-person meeting means that you are doing something new that has caught their interest.

I’d open the meeting with, something like before we get started, can I ask what specifically caught your eye? – because that becomes your hook for the rest of this meeting, and a point of reference for other future investor meetings.

Opening with this question also gets them engaged early in the process, before you’ve begun to really pitch. It helps to set a tone for a dialogue and a more intimate conversation, not simply an interview.

3. Be open, transparent and engaging – but get to the point Start by building rapport, let them get to know who you are and what you’re about outside of your business personna. Investors want to know your character. They’re looking to reduce risk and ultimately invest in you first, then your idea.

The first meeting shouldn’t just be about money, it’s important to make sure you get along on a personal level to begin to create mutual trust, the basis for an ongoing relationship and ultimately lead to an investment.

Beginning with a causal conversation engages them person-to-person, it’s not a speaker-listener mode. That connection can be persuasive by making both parties feel at ease with each other. My personal rule of thumb when meeting someone is to ask myself: Is this someone I could work for?”

However, don’t let the conversation prattle on. Keep the personal introduction to a few minutes tops, and then get into the meat of why you’re here.

4. Start with a simple and succinct tagline Get to your core with a strapline and short explanation about your product. Right out of the starting block you need investors to know what they’re looking at – and do the work for them, make it easy for them to understand. They want to understand why a customer would buy your product, so make it simple and clear.

Working with startups, I often use the metaphor of The North Star, used for navigation since man began sailing, and applying it to startups to get clarity about our purpose, and what we do for a living to provide customer value.

A good tagline should be ten words maximum and capture your company’s purpose in a memorable way. You need to explain what your company does in less than ten seconds, in simple, clear language anyone can understand.

For example, We make personal international money transfers easy, secure and cost effective is a clear, straightforward explanation of your service. As opposed to We enable mobile bitcoin monetisation transaction through international arbitrage using a distributed AWS hosted cloud-based solution with an asynchronous transaction engine written in Scala, which is a mess.

5. Take a step back – tell them the problem you are solving The temptation is now to unpack your product in detail, but my view is don’t talk about your solution, talk about the problem you are seeking to solve.

When you take this approach, you are showing investors that you understand the problem that customers face, and that why your product is the best solution to it.

You need to be able to describe the specific problem, and your product’s specific and differentiated value in a way that anyone on the street could understand. Think and talk from a customer’s perspective.

6. Tell your product’s story – show the customer value You’ll be tempted to show off all the features you’ve spent time developing but investors only care about the problem your product solves, and why it’s the best at solving it.

The most powerful way to explain your product’s value is with a story, how you, or a ideally a third party, experienced this real life pain point, and how you spotted this opportunity to build your product to fix it.

You want your story to be authentic and approachable. It should make your product’s value obvious, and it should engage investors on a personal level such that it gets them thinking ‘I get it’.

Its now appropriate to explain your product benefits for customers – not its features. The difference is this:

Benefits: what your product helps customers accomplish. e.g. The iPod puts 1000 songs in your pocket.

Features: What your product does. e.g. The iPod is a digital music player with 1 GB of storage.

These benefits are why customers will buy your product, generate revenue and grow your company, which is an investor’s primary concern.

7. Unpack your learning journey Stories without contrast are not interesting, and investors want to hear about your ups and downs. They want to hear how you struggled early on, what roadblocks you hit and how you overcame them, what customer conversations, pivot, iterations and learnings you’ve had along the way.

These contrasting points make your story memorable, identifying staging points in your entrepreneurial journey, which should be a primary focus in your pitch.

Being memorable alone is not enough, once you’ve engaged investors with your story, you need to convince them that your solution is gaining traction in the market – and again it’s not just about money.

8. Discuss your dashboard of metrics This has the potential to be a defining moment, a fork in the road. Do your metrics point the way to product-market fit and creating a revenue stream, or do they highlight some gaps or stumbles between your story and an underlying reality?

Start-ups are unique because of their ability to scale fast, and typically go through three stages – traction, transition and growth. Each of these stages requires different metrics.

Equally, when you talk about your metrics, you have to ensure they’re integrated into your company’s story. You can’t just say “We have 1000 downloads.” Without context, your metrics don’t make sense.

In general, the further down the customer traction journey a metric comes from, the more valuable it is. For example, having 20,000 downloads doesn’t mean you have 20,000 customers right now. Your active users, on the other hand, show how many top customers you have right now.

9. Highlight your potential growth and levers to become cash positive Being knowledgeable about the size of your addressable market is vital here, and then how you will gain market share to grow, scale and become cash positive. Explaining your product’s value is one thing, showing how that value becomes revenue is another.

Your startup needs one amazing thing that makes it a real winner, and this is your competitive advantage. More than that, you need a clear path to converting that advantage into profitable customers, and evidence that you have a plan to achieve this.

Investors aren’t just evaluating your product, they’re evaluating you. They need to have faith in your commercial skills to make this happen. Can you take a good idea and turn it into a scalable, sustainable business?

10. Focus on your team Investors will look beyond you to see that your story is more than a great person with potentially a great product, they want to know that you have a team with the skills and experience to make this happen. And it’s not all about the glory of growth and success, they want to see that when things looked like failing, your team has the grit, resilience and backbone to keep the thing going.

Investors are also particularly interested in teams because startups pivot all the time in search of opportunity, but the core team usually remains consistent.

11. Making a sharp exit – wrap up and walk out of the room Now that you’ve concluded the conversation, you need to make a clean exit. You’ll want to deliver a brief, succinct summary of the conversation in a few sentences. As a closing technique, use a memorable phrase, possibly reworking your opening line to include metrics. This can turn into a Ricky Gervais moment, so be sincere but clear. People remember the last thing you said.

There maybe some random questions as soon as you finish and walk out of the room. Stay confident, keep your body language and voice calm, and bring the conversation back to your company’s core customer value proposition. That value is what investors care about, not just the flair of your presentation.

12. Will we see each other again? Finally, you’ll want to have a strong call-to-action – what are the next steps to follow up from today, and make sure not to leave the room without understanding specifically what is going to happen next and on what timeline.

I had one investor say to a startup I was working with say I look forward to talking with you again in three months after you’ve secured those five more customers, because I know you’re going to make mistakes and learn from them. So call me again when you’ve experienced those mistakes.

This was invaluable, it gave us clarity as to our focus and priorities, set the rules for us to get that second meeting, and if we gained the five additional customers, we had a clear line of sight to securing the investment we sought. Sometimes the most useful parts of conversations with investors are not about the money.

Good luck in your next meeting.

Startups 1-2-3-4 Go!

April 19, 2017

The Clash, the eponymous self-titled debut album by The Clash, was released 40 years ago last week, on 8 April 1977. How time passes by. It is widely celebrated as one of the greatest punk albums of all time, and one of the best debut albums. It was a record that made you sit up and take notice. It set the template for punk with its sharp shock songs full of passion and angry lyrics that were snapshots of the UK’s decay at the time.

The songs are short and intense, the speed-freaked brain of punk set to the tinniest, most frantic guitars trapped on vinyl. Rich in social commentary, attacking the fraught political and economic climate at the time, the collection of fifteen songs was unusually musically varied for a punk band, with reggae and early rock and roll influences plainly evident.

Despite all the hoopla over the Queen’s Silver Jubilee, a generation of disenfranchised, angry youth faced a grim reality of a dystopian future. In the latter 1970s, punk was the soundtrack for this alienated rage, an anti-establishment outreach of raucous, haywire impulses. Yet it remains timelessly inspiring. If you’ve never listened to this album, put it on your 100 albums to listen to before I go to heaven list.

Like a business startup, the Clash had raw energy, raw ideas and an attitude to take everything and everyone on. The classic line up which emerged from the creative tension of forming a band – Strummer-Jones-Simonon-Headon – made their mark. Each member brought a different influence, whether it was Joe’s folk lyricism, Mick’s rock adulation, Paul’s Brixton-born reggae, or Topper’s driving percussion, what you got was a unique blend.

Most of the first album was conceived on the 18th floor of a council high rise on London’s Harrow Road, in a flat rented by co-founder Mick Jones’ grandmother, who frequently went to see their live concerts. The songs were written over a twelve-day period, three four-day sessions Thursday-to-Sunday, beginning 10 February 1977, and recorded over three consecutive weekends at a cost of £3k.

The cover artwork was designed by Polish artist Rosław Szaybo, the album’s front cover photo, shot by Kate Simon, taken in the alleyway opposite the front door of the band’s ‘Rehearsal Rehearsals’ building in Camden Market. The picture of the charging police on the rear cover, shot by Rocco Macauly, was taken during the August 1976 riot at the Notting Hill Carnival – the inspiration for the track White Riot, their debut single.

The Clash wanted a riot of their own, and so they created one, not in the streets with bricks and bottles but on stage and in the studio with guitars and words. It may be an old fashioned thought now that a record can change the world, but it did and still stands up to this day as a brilliant document of the turbulent times, a luminous and revolutionary record.

I bought the record (one of those shiny vinyl things) and still have it close to hand to this day. It’s battered and scratched, the sleeve torn and frayed, but it’s a key part of my personal social history, but history relevant to now some 40 years on.

It was a platform to challenge prejudice, both without and within, that we could dance to, or jump about to. The first thing I ever liked about The Clash before I had even heard a tune was their name. In those heady days of mid-teens at parties of school mates, The Clash’s debut album was played over and over again. I recall one in particular as we all pogoed in the front room, every word to every song was sung as if our lives depended on it. The neighbours called the police because of the noise. This was a band capturing the moment. So were we.

Today, The Clash, their story and output, remains one of the most important signposts of my formative years. For five years, their lyrics, politicised and bristling with social conscience, had a far-reaching and ultimately enduring influence. They caught my ear and imagination, their mixture of politics and music shaped my beliefs and tastes.

Their musical experimentation and rebellious attitude was utterly inspirational and positive. For me, there remains a sense of urgency and anarchic inventiveness in their songs that roots them in the great musical moments of the late C20th. The songs more than stand the test of time, reminding you that music should speak to the politics, opinions and issues of society of the day.

So, I must admit, I still harbour a bit of attitude when it comes to Joe Strummer and company. A debut album like a stick of dynamite, it had heart and soul. I immediately got their vibe and saw their potential to speak to people. If you were lucky enough to see them, I don’t think you ever forgot it.

As I get older, it’s hard to separate songs from the memories we associate with them. People and places we used to know suddenly come rushing back with tremendous clarity after just a flurry of notes and words sung by a familiar voice you hear on the radio.

You don’t hear The Clash on the radio these days, but I can’t really tell you how much it meant to me back in 1977. I had a tear in my eye then, and I do now thinking about it. Everybody would sing along, loud. Those guys were a huge influence. It’s about appropriating anger. It’s what we should be doing. And suddenly (except for perhaps a bit of knew-joint pain and a few locks of grey hair) it’s as if no time has passed at all.

Fast forward, this first album remains an echo of the exhortation created more than 40 years ago. It speaks to entrepreneurs that you can write your own music, your own story, you can do it for yourself. On their record sleeves they printed: ‘Made by the Clash’. That says it all. Frustrated entrepreneurs, doing it for themselves.

Today, there is almost unlimited digitally fuelled competition for ears and pennies. For musicians, buskers or professionals, it has never been easy to turn tunes into cash and make a living. Social media enables direct-to-fan relationships, but the double-edged sword of technology is the mass-market digital noise reverberating from iTunes to Spotify to Soundcloud, where new bands can’t compete due to the social marketing voice and reach of the established artists.

You have to shout loud and spend lots to be heard. There are only so many iTunes/Starbucks ‘free track of the week’ cards to go around, so what are the strategy lessons from The Clash for startups today, to get yourself noticed as a new business in a crowded, market place as a newcomer?

Stand for something, be true to your purpose The Clash did whatever they wanted, great bands have that sense of purpose. They have a set of values and they remain true to them, quickly finding out that there are millions of people who share those same values. Like a band, put some voice in your content marketing and stamp it with your personality. When your earlier advocates realise that they could miss out on something unique and special, they won’t want to miss it, and will in fact share it.

Being different matters more than being better The Clash became successful because they were different. We had never seen anything like them before, they grabbed our attention. Rock stars have proven for years that being different – and getting noticed because of it – is more important than quality of music at the outset. It’s like building an MVP – be different, stand out from the crowd, offer something different. When opportunities don’t present themselves in a timely manner take calculated risks – pivot.

Be an experience A Clash concert wasn’t just about the music, it was the experience. Likewise great startups like Uber and Airbnb don’t simply sell products, they sell experiences which add value, and we buy into. Give your customers a really great, memorable experience instead of pitching them another me2 product. Social media is a force because it enables connectivity and community, conversations about experiences happen, creating word of mouth and referral marketing. Create opportunities for your customers to connect and share their experience.

Turn up the volume Can you hear us at the back? The Clash were loud. I mean loud, really loud. Their records were meant to be played so everyone down the street could hear it. Well, I thought so. Music sells the album, t-shirts and the concert tickets. Like music, your product content does not always have to ask for the order, just consistently keep everyone in a ready-to-act state. Be bold, and tell your followers and customers what you’re doing by delivering relevant content delivered in relevant ways.

Established customer know your history, new audiences want your hits Communicate your business legacy and future value through targeted channels and voices. New music keeps fans coming back for more. Always generate new and fresh products to keep people engaged with your brand, but treat existing and new customers differently. Don’t just deliver repeated content, engage your audience with innovation and create new reasons for people to come back to you.

Ensure your band has an inspired front man When your business leadership requires you to replace founding members with energetic new blood, put your business’s values in front for all to see. For The Clash, the focus was on Joe Strummer, a frontman with tremendous charisma but also, paradoxically, with a tremendous amount of humility. What do you stand for as a leader? Make it part of your brand.

Don’t just copy songs Even if it’s just a chord sequence or a riff, take it and make something else. Just copying something is no good, unless you want to just be in a tribute band. It’s vital to keep playing around and pushing yourself in business, create your own product. Don’t be afraid to build a business or revenue model that plays to your strengths, even if it’s non-conventional. Be an original, not a replica.

Be a brand, with an image. If you plan on getting noticed, establishing a brand promise, and creating an image is vital. John Pasche designed the ‘tongue and lips’ logo for The Rolling Stones in 1971, originally reproduced on the Sticky Fingers album. It is one of the first and most successful cases of rock brand marketing. Is your business logo iconic and noticeable?

Harness nostalgia with innovation Great music enshrines an artist with the amber glow of posterity. Today, vibrant retrospectives of digitally remastered content show the artist has transcended their time and that they can now be appreciated outside of the context of their era. Recordings from the past sit comfortably with tunes from the present. In business terms, it’s where your moments from the past meet today’s innovation, you have to leverage the past whilst also pushing the future to stay current.

So that was The Clash in 1977. A new generation raised its voice. Loud, clear, fast, innovative and straight in the face of the establishment. And forty years later this knockout record still sounds furious and roars mighty and still inspires. The restless heart and honest soul of one of the few bands that mattered will never vanish.

Make your startup like The Clash, with positive attitudes and energy, belief that you can achieve something new and spectacular. This mindset and behaviour enthuses and influences others around you as to the possibilities that you have envisaged.

Ensure your startup has the vitality, focus and aims to make a difference. Life’s too short to go unnoticed, be audacious. Life is all about progression from good to great. Push yourself to be there. Make some noise – 1-2-3-4 Go!

Apply Pareto’s Principle to move the needle on your startup

April 10, 2017

Vilfredo Pareto was a philosopher, economist and academic, fascinated by social and political statistics and trends. Legend has it that one day he noticed that 20% of the pea plants in his garden generated 80% of the healthy peapods.

He took this observation into a study about wealth and income, and discovered that 80% of the land in Italy was owned by 20% of the population. He investigated different industries and found that 80% of production typically came from just 20% of the companies, publishing a paper, Cours d’économie politique.

Sadly Pareto didn’t live to see the general appreciation and wide adoption of his principle, and it was left to Joseph Juran to suggest The Pareto Principle or the 80/20 rule, the law of the vital few, that states that for many events, roughly 80% of the effects come from 20% of the causes – a small minority will have a disproportionate impact, generating a disproportionate share of results.

Whilst there is nothing special about the number 80% mathematically, many natural phenomena have been shown empirically to exhibit such a distribution. I have 20 rooms in my house, but I spend about 80% of my time in just my bedroom, family room, kitchen and office (exactly 20%). On my iPhone, I have 30 different mobile apps pinned to the tiles, but 80% of the time I’m only using the six (20%) on my home screen.

When I go food shopping, I definitely spend the most time in the aisles that are around the edges of the store: fruit and veg, the fish stall, dairy, breads — and generally skip the aisles in the middle of the store (except for health and beauty, obviously). When I socialise, 80% of my time is spent with the same 20% of my friends. In perfect accordance with the Pareto Law, 80% of the people reading this blog will gloss over it and be on their way, but 20% will stop, reflect and take action.

Application of this universal rule also applies to the odds of success: your odds of winning go up to 80% when you achieve the 20% that give you the most results. That is great odds. Intuitively, we know this to be true, but very few people truly understand how far this principle extends into business, and it’s especially useful when launching a startup.

In research into the productivity habits of high achieving entrepreneurs, handling every task that gets thrown their way – or even every task that they would like to handle – is impossible. They use Pareto to help determine what is of vital importance, delegate the rest, or simply let go.

So how can you apply Pareto’s principle to gain more time in your startup life?

You’re faced with the constant challenge of limited resources. It’s not just your time you need to maximise, but your entire team’s capacity. Instead of trying to do the impossible, a Pareto approach is to truly understand which projects and activities are most important, and which specific tasks you need to focus on.

The temptation is always to try the new and exciting. There’s nothing inherently wrong with that, but a Pareto analysis and an 80/20 mindset helps you to stay focused on your strategic plan and execution, and spend less time chasing endless new opportunities, which can be distracting and are often the cause of entrepreneurs losing their way.

No matter what your situation, it’s important to remember that there are only so many minutes in an hour, hours in a day, and days in a week. Pareto can help you to see this is a good thing, otherwise, you’d be a slave to a never-ending list of things to do. It helps your efficiency knowing that 80% of the outputs are the result of 20% of the inputs.

The 80/20 rule is also divisible, meaning that it is also true that 20% of 20% of the inputs (4%) generate 80% of 80% of the outputs (64%), and so on. While the 80/20 dynamic is powerful enough, it only gets more lopsided as it progresses. Consider, for instance, that with only three steps you arrive at 0.16% of inputs being responsible for an astonishing 41% of output.

The simple takeaway is this: Stop beating your head against the wall on working harder and putting in longer hours. Most of what you’re spending time doing doesn’t matter. 

Startup ventures are a bit harder to accept this thinking, and the 80/20 can appear paradoxical. We are predicting the future not measuring the past, so our thinking is to do everything because we can’t really decide what is important. Often I see exhausted entrepreneurs walking around wearing burnout as a badge of startup life.

This needn’t be the reality. The opportunity cost of doing the 80% is often not doing the 20% of what really matters. Once you internalise this you’ll focus on predicting the 20% instead of trying to get everything done, and always feeling you’re living on a hamster wheel and constantly behind.

So, what 20% of your work drives 80% of your outcomes? For example,

  • 20% of my leads result in 80% of my sales
  • 20% of my social connections do 80% of the sharing
  • 20% of my referral sources refer 80% of my leads
  • 20% of customers account for 80% of total sales
  • 20% of the reported software bugs cause 80% of software crashes
  • 20% of my clients soak up 80% of my time – 80% of the people who are ‘interested’ never buy

It is time to set some priorities, a focused intensity on work that matters. Ignore the numbers for a moment and understand the concept: a minority of efforts lead to a majority of good results. The 80/20 rule supplants the long established ‘work more’ mindset mantra of a startup. We should stop the wasted effort and focus on investing in the paths yielding the most sizable returns.

Startups adopting the 80/20 principle work in a precise and predetermined manner, analysing their results at fixed intervals in a data driven approach to startup strategy execution. Focus intently on the work plan by limiting distractions. If the effort does not yield significant results, change the work plan.

Results should be viewed both in a short-term and long-term perspective. In this way, startups should work to first applying the 80/20 rule by initially focusing the majority of work towards accomplishing short-term immediate goals. Correspondingly, minimal work output should initially be allocated to long-term goals.

Often, startups are an all-or-nothing proposition. It either works out or it doesn’t. In my view, the Pareto Principle for startups is actually that 20% of the initial work input is responsible for 80% of the first steps of success, and in this way no single decision matters, it’s good decision-making overall over many decisions matter.

In a startup the rate of decision-making is high, and staying on plan may not be the right thing to do. Some structure helps, but it is easy for it to become stifling, so 20% work becomes about doing the right things, as opposed to doing a lot of things. Working more hours does not necessarily increase the likelihood that your startup will succeed.

In fact, it may decrease it if it makes your thinking narrow and cloud your judgment. You may be too focused on breadth of work and not depth of work. For example, consider a startup which persists in directing its activities equally across its entire product range when perhaps 80% of customer traction derives from just 20% of the products. By discovering these statistics, the decision-making would clearly signpost where to direct your efforts, and probably that some products that could be discontinued.

So, here’s my Pareto Platform to you get started on a 20% focus:

* Develop a basic model of your key activities, the things you know that when combined and lined up, with focus, create success.

* Identify the pivots/conversion points within that model, the things you must get right at all costs

* Put in place metrics that give you a sense of what is happening right now

* Identify the levers within those conversion points you can influence to get to significantly better results

* Make small tweaks – pull the levers – and see what happens, and track results over time

These are the principles I adopt whenever facing overwhelming workload or a set of apparent priorities from different projects. It’s a return-to-basics call that gives clarity.

Taking a longer-term perspective, the Pareto Principle offers equally good insights to guide startup thinking and doing:

Focus on 20% of your market It is possible to have a successful business that either focuses on a niche market and mass sells into it, or just a segment of an overall market. Your target isn’t the market, but identify a demographic and define your addressable market with precision to ensure you have discipline, clarity and focus on your customer development.

Scale your pricing Is your pricing scalable? Many startups sell direct to end customers – by necessity – in their early stages, only to subsequently realise that margins can’t accommodate resellers and distributors when considering new channels. Test your assumptions and do your homework before setting pricing, look at 20% customer price bands and test elasticity of demand.

Less is more
Is a national market automatically better? No. Uncontrolled demand driven scaling leads to all manner of headaches and cost-bleeding, Price erosion to support volume customers is almost always irreversible. Avoid this scenario and consider partnering using exclusivity to negotiate better terms and focus on the 20% of customers available.

Hyperactivity vs. Productivity Being busy is not the same as being productive. Forget about the start-up overwork ethic that people wear as a badge of honour, you don’t scale! Get analytical and stay analytical, use 80/20 principles to stop putting out fires, duplicate your few strong areas instead of fixing all of your weaknesses

Work with ideal customers Not all customers are created equal. Apply the 80/20 principle to time consumption: what 20% of people are consuming 80% of your time? Put high-maintenance, low-profit customers on autopilot, process orders but don’t pursue them or check up on them, and exit high-maintenance, high-profit customers – the money isn’t worth the effort.

Get intimate Likelihood is that 80% of your new customers result from 20% of your offerings. Therefore identify which offerings produces most new customers, and then use the identified offerings more often (and use the less-effective offerings less often, or not at all). Get intimate with your offerings, and focus on the 20% that your customers want.

Everyone wears several hats in a startup, with overloaded schedules and too much to do. We think ‘I’m busy and therefore being productive’, but getting stuff done does not have a linear relationship to doing the stuff that makes a difference.

You already have all the time you’re going to get, and the law of diminishing returns applies – time is a bandit, and we often use extraordinary effort to keep things moving forward, but this is simply not sustainable. Management by crisis and fire fighting can become the norm, but are hugely unproductive and energy sapping. Urgency itself is not the problem.

The Pareto Principle enables a startup founder to work ‘on’ the business, not just ‘in’ the business, providing visibility for thinking time and space to focus on priorities, working with the team to do the stuff that makes a difference. The reality is most of what we do doesn’t matter, so we need to change this and focus on the 20% that moves the needle.

Startup metrics for customer traction

April 3, 2017

Start-ups are unique because of their ability to scale fast, and typically go through three stages – traction, transition and growth. Each of these stages requires different priorities that are reflected in different objectives, strategies, team etc.

In the early stages of your startup, you’ll have to manage so many tasks that you’ll often be overwhelmed with what needs to get done. But instead of being paralysed by what appears like an endless amount of work, know that you really only have one goal: traction.

The North Star has been used for navigation since man began sailing, and applying it as a metaphor to startups is useful to get clarity in the maelstrom of things to do. For me, your North Star is determined by answering the question:

How many people are getting authentic value from our product?

It’s a simple goal and easy to measure. I use ‘authentic value’ to avoid the ‘vanity metrics’ I’ll refer to later. The moment when a user gets authentic value means you are getting traction, and we can anticipate revenue, and when you have paying customers, you have a chance to turn your startup from an experiment into a business.

Simply, traction refers to the initial progress of a startup, seeking product-market fit, gaining market share and mind-share from its target audience.

You don’t necessarily need to be profitable to show traction, maintaining consistent growth in other metrics besides profit such as daily active users, monthly active users, monthly signups, or a decrease in churn rate are all indicators that your startup is gaining traction. Just as traction is important to you, it is important to potential investors too.

One of the first steps in generating traction is finding what the real drivers of your business growth are, which may take some time to discover, and developing processes to maximise each driver. When you have clearly defined processes, potential investors will also have a better picture of how your startup will progress in relation to the general landscape of the marketplace.

If you achieve success in the traction stage, you’ll have forward movement in the important metrics that drive your business. While being nimble allowed you to experiment during the early days of your startup – finding what moves the needle of your initial growth, testing different offerings, and nailing down your product-market fit – your aim is to maximise what makes you unique and what makes you valuable to customers.

Getting traction is hard. You’ll be working more ‘in’ your business than ‘on’ your business, and there is a dilemma: fundamentally, your focus has to be on customers, but the inclination is on product development.

What failed startups don’t have are enough customers, and it’s customers that investors are most focused on. When you’re talking to investors about your startup, it’s pretty much all about your traction, growth and velocity, and small numbers can have a big impact on their thinking. Is ‘20%’ enough for the big questions?

It’s important you’re on top of your numbers, and you can speak their language, so immerse yourself in your financial model and get as comfortable about churn, attraction, burn, runway, CAC and LTV, as you are your customer pitch. There are a lot of metrics and KPIs that startup founders are expected to have at the tips of their fingers, the vital signs that you live with day to day. These numbers show you have clear view of your key growth drivers.

In reality, the numbers should just confirm your instinct on performance and progress, but often they produce a reality check of where you are on the runway, offering a balance to the emotional ‘feel’ of what represents real progress on growth aspirations.

In my experience, startup founders can fall into the habit of innocently deceiving themselves with their own view on data, by only focusing on the KPIs and data that sounds positive and offers a positive outlook. We all have cognitive bias, tending to hone in on the metrics we know are improving over time, and ones that sound impressive without much context.

For example, I’ve seen startups ignore the hard stats of monthly active user numbers, but talk about the number of web site visits or downloads of white papers. Beware of ‘vanity metrics’ such as these, they don’t provide any meaningful indication regarding customer traction, pricing and cashflow – the metrics by which you should be making decisions. Focus on metrics and numbers that you can improve, and that inform you on your direction of travel in a meaningful, clear way.

To me, the indicators that matter most in the life of an embryonic startup are about customer development and attraction: customer acquisition, retention and conversion. If you don’t have a handle on these numbers, then you’re simply fiddling round the edges, and your actions will make far less of an impact on growth direction, velocity and scaling ambitions.

These measures, when combined, inform you about customer traction, offering data points to give a clear picture of the underlying growth: how many customers have found your product (acquisition), how long do your customers stay with your product (retention), and how many of these customers are willing to pay for the product (conversion)?

These data points define the sales funnel, starting with acquisition, a signpost indicator that there is customer value proposition in your offering. Acquisition doesn’t have to be expensive, it can be organic and relatively clunky and have some friction in the process, because at this stage it’s still about validated learning and building on your MVP.

Once you have initial users, your focus is on retention. What is the monthly churn rate – how many leave your product after the first month? If they stay a month, how much longer are they likely to stay? Your retention rate has a major impact on building your user base, and the scaling, and ultimately the width and depth of customer revenue.

If retention is low, then the work of acquiring new users will continually get more expensive in order to grow revenues as you’ll have to continually spend more and more to acquire new users. Investors want to see the opposite trend: as your customer base grows, unit cost of customer acquisition, on average, should decline.

Retaining more users obviously provides an ongoing growing population to convert to recurring annuity revenues or other monetisation strategies, and with opportunities to grow the business by broadcasting to, and engaging with, a wider audience, enabling more visibility on social media, and a range of use cases.

Once you have optimised user retention, you can start working on both ends of your sales funnel, bring more users in, and converting more of them to paying customers. But focusing on converting users, when your retention numbers are low, will yield few results, and over time, those results will diminish without strong retention numbers.

So recognising that whilst there are lots of moving parts in your startup, which you need to stay on top of, a focus on customers forms the core of a dashboard of basic metrics. Over time, new financially based metrics can be plugged-in as it’s important to put an emphasis on the numbers you need to actively improve profitability.

But that’s the key: don’t use numbers to measure a startup financially at the outset, use them to guide and drive growth ambitions and the direction of travel and development of your business model.

Equally there is a ‘lead’ and ‘lag’ orientation to metrics, some track was has happened, others can be used to look forward. Don’t start tracking things having made a change, start tracking before the change occurs. Progressions are far more important than numbers without any context: what was that number last month, compared to this month? How has it changed? What is the growth curve? Is it static? Is it dynamic?

Use your numbers to ask questions, the things you need to know to be sure that what you’re doing is having any effect at all. It is difficult to prioritise product and customer growth: Should we write a new feature? Remove a feature? Fix a bug? Redesign a user interface? Remove a step in the sign-up process? Write a blog post? Offer an e-book for a lead nurturing campaign? Change pricing? Hire a customer support person?

So having set your North Star and its associated metric, what are the key drivers to focus upon, the moving parts which will get you to where you want to be: How many people are getting authentic value from our product?

I’ve always liked the ‘startup metrics for pirates’ – AARRR metrics – developed by Dave McClure, which represent all of the behaviours of your customers which drive to your North Star:

  • Acquisition: the customer finds you
  • Activation: the user interacts with you
  • Retention: the user likes you
  • Referral: the user recommends you
  • Revenue: the user pays you

You need to break down these five metrics on your product and analyse them separately, so that you can optimise each of them. It’s important to understand AARRR, because only when you understand all the metrics, you will understand each of the moving parts in your startup, so you don’t guess and make the wrong assumptions.

The truth is that many startups make the same mistake of thinking if something doesn’t work, it must be everything, or they just guess the wrong reason why their business is not working. The truth is, any part of a customer’s experience can influence them. Here are some other metrics to consider, my own 5C Scorecard:

Customer Numbers A simple, binary index, set and measured for each period, provides visibility, clarity and simplicity of your North Star.

Conversion Rate to be a very telling KPI in that it reveals a combination of the company’s ability to sell its products to its customers and the customers’ desire for the product. It is particularly instructive to track and review Conversion Rate over time and regularly run experiments to improve.

Customer Acquisition Cost (‘CAC’) CAC is the unit cost of spend on sales and marketing, on average, to acquire a new customer. This tells us about the efficiency and effectiveness of our marketing efforts, although it’s more meaningful when combined with other metrics detailed below, and when measured over time.

Customer Retention Rate indicates the percentage of paying customers who remain paying customers during a given time period. The converse to retention rate is Churn (or Attrition), the percentage of customers you lose in a given period. When you see high retention rates over an indicative time period, you know you have a sticky product that is keeping customers happy. This is also an indicator of capital efficiency.

Customer Lifetime Value (‘CLTV’) is the measurement of the net value of an average customer over the estimated life of the relationship. Improving the ratio of CLTV/CAC is critical to building a sustainable company.

There is also one financial metric you need to keep a track on at this stage:

Cash Burn This is simply the net cashflow per month and is critical to the survival of any startup. Runway is the measure of the amount of time until have in terms of cash, expressed in terms of months.

Short Runways cause entrepreneurs to be myopic and removes the liberty to tweak and iterate when necessary. It also forces them to focus on the next fundraising round instead of on growing the business. It’s a separate discussion from this blog, but fund raising should be focused on milestones, not the runway.

I’ve ignored the usual financial metrics – revenue growth, gross and net margin, as you must not be limited to the KPIs themselves, for they are merely measurements of outcomes. You must have an understanding of what levers can be pulled towards achievement of your North Star, which is then reflected in KPIs. The focus should not be on the KPIs themselves, but the meaning behind them and knowing what impacts each one.

Once we set our direction by the North Star and check-in on the underpinning metrics on a daily and weekly basis, you give yourself a mechanism for deciding where to focus your time to move your business forward, and for me, that’s all about how many customers see authentic value in your offering.