Why This Blog?

A startup is 1% idea and 99% execution.

- Widely used one-liner of unknown origin

 

The quest for mitigating execution risk

Early stage ventures carry tremendous execution risk. Everyone can have an idea but few master the intricacies of execution. There are several reasons early stage ventures fail but most reasons can be narrowed down to one of the following:

  1. An early stage venture/startup needs hypothese-driven validated learning and customer development to create a product that meets customer needs.
  2. An early stage venture should not be run the way a large company is run. Innovation and optimization require different management styles.
  3. Creating a business on a network (the internet) is fundamentally different from creating a business in the offline world and requires creation of an entire ecosystem of players
A lot has been talked about the first bit by Steve Blank and Eric Ries and pertains to entrepreneurship in general. Clayton Christensen and the Innosight authors have written extensively about the second point, specifically in the context of early stage ventures in large companies.
Very little has, however, been written about the third. Building a business on a network presents unique challenges but entrepreneurs do not have an exhaustive understanding of these challenges:
  1. In a traditional business, value is created by the business. On the internet, value is created by the users and other partners.
  2. A traditional business markets its products/services on a channel. An internet business does so on a network. A network is fundamentally different from a marketing perspective because every node is a potential consumer as well as distributor.
  3. Value in traditional companies is created through optimized processes. Value in internet businesses is created through optimizing interactions on the network.
  4. Monetization of a (potentially) infinite scale business with low unit costs (most internet businesses) is very different from monetizaiton of an industrial business.
  5. Finally, internet businesses are multi-sided and need the creation of an ecosystem. Non-network businesses work in a linear fashion moving from suppliers to firm to buyers.
These differences (and many more) show that startups need to have a better understanding of the characteristics and success factors on a networked business to minimize their execution risk.
Over the course of my analysis of networked businesses, several patterns emerge that underlie all successes and an equal chunk of patterns emerge that explain failed startups. An overwhelming majority of startups fail. Many of those reasons for failure are actually common across startups.
This blog is aimed at identifying such patterns of success and failure and mitigating execution risk.