Launching a new business is usually a rollercoaster of an experience. You may start out thinking you have much of it figured out, yet reality will often leave you humbled instead.
And in the process, you might also discover that a number of conventional business wisdoms that you've known all this time, are actually flawed. Some crumble under careful scrutiny, while others have simply become outdated. Let us go over the five major ones in detail. They should help you navigate your nascent entrepreneurial journey better.
Don't be the first mover in a new industry or concept: For years, we have been taught the importance of being the first mover in a market. As the logic goes, if you are the earliest in pursuing a unique idea, your foresight helps establish supremacy long before your competitors can catch up.
As it turns out, this line of reasoning does not always hold up in reality.
An analysis of 50 different industries in the USA from 2000-2020 revealed that in 35 of them, the first movers are either out of business, or possess a tiny market share.
This concept is slowly dying, to be made way for a far better one -- the last mover advantage. The premise is simple: you don't necessarily need to be the first one to enter the market. That isn't a credit. But you want to be the last. That is, after your entry, you build such scale and dominance that new rivals are never able to even meaningfully compete.
Take for example, the evolution of bike-sharing in Bangladesh. Many people assume Pathao to be the pioneers, but that's not true. The honour goes to the company SAM, or "Share-A-Motorcycle".
Yet being the earliest did not benefit SAM in any way, because it was Pathao which managed to scale in such a comprehensive manner that it would be foolhardy to launch a competing ride-sharing startup at present. Many have tried in recent years, only to fail.
We have seen similar dynamics play out in the food-delivery space. Hungrynaki were the first movers, yet Foodpanda was the first to scale rapidly and establish dominance. Today, they serve more than half of the market. So the thought of starting a new food delivery startup to compete against this behemoth should sound extremely unnerving to a disciplined founder.
Thus, there's some truth to the saying: pioneers get slaughtered, but settlers prosper.
Hire for strengths, not absence of weakness: It is tempting to hire an individual who appears "safe" overall, with whom you have zero objections. You are not particularly excited about him, but there is nothing wrong with him either.
Such personalities are fine if you are building an ordinary company. But to create an exceptional business -- one that grows fast and takes over a market -- you might do better with a few eccentric characters instead.
Think of the most successful founders. While they are brilliant, they all have major flaws. Jeff Bezos is difficult to work with. Zuckerberg has poor social skills. Steve Jobs lacked empathy.
Unfortunately, that is the price of having exceptional strengths. It also comes loaded with glaring weaknesses. You can't have one without the other.
But a great team needs individuals with superhuman strengths -- like a savant coder, a charismatic salesman, an analyst who's a magician at financial modelling.
Coined by Ben Horowitz, co-founder of Opsware and legendary VC firm Andreessen Horowitz, the strategy of hiring for strengths ensures you do not discard an extremely valuable hire just because they come with some baggage.
Now, this does not mean you stack your company with employees who are vicious characters. A lack of cultural fit can be a fine line to draw. However, when it comes to other flaws, you should consider which ones are unacceptable and which you can live with.
Let some fires burn: The early years of a fast-growing business are often chaotic. As the founder, you essentially have to play the role of a firefighter -- dousing mini flames popping up in different parts of your company round the clock.
Unfortunately, you will have neither the time nor the resources to address every crisis. Therefore, prioritisation becomes critical, which means letting some fires burn.
Popularised by LinkedIn co-founder Reid Hoffman, this approach has enabled a lot of startups over the years to scale rapidly without getting bogged down by temporary frictions. For example, when PayPal began experiencing exponential growth, consumer complaints also ramped up proportionally. With only three customer service agents, they were not able to even attend many of those irate users.
Instead of devoting additional resources to this department, the founders focused on fixing the actual product. It paid off in the long run, as the number of complaints soon fell considerably.
Thus, part of being an effective manager is knowing which problems are so acute that they will fatally wound your business if you do not fix them. And which, although painful in the short-term, can be left alone with limited collateral damage. A broken product is a fatal problem, some unhappy customers may not be, especially if you can eventually placate them.
Domain knowledge can sometimes be a crutch: Investors highly value domain experience. For example, raising funds will be easier as a fintech founder if you have a few years of experience in the banking industry under your belt. It does make sense, because with domain expertise, you know intimately how an industry works, hold some connections already, and can better visualise how a disruption may look like.
This might not be the case for a complete outsider. Case in point, a fintech founder with no banking experience may naively underestimate the regulatory challenges of working in such an industry. They may also lack the credibility necessary for financial institutions to work with them.
However, while in most cases domain knowledge is an asset, it can also sometimes act as a barrier to innovation.
Experience tends to make people not just realists, but in some cases, pessimists. Someone who has worked extensively in the banking world knows the restrictions around it so deeply that they may feel cynical about the potential of a disruption.
They might believe it just isn't possible given the hurdles involved whereas a naïve outsider lacking that visibility may instead feel a radical innovation conceivable. For example, half of the top ten most valuable fintech startups in Europe right now have been launched by founders with no finance backgrounds.
This writer had a similar experience in his own line of work as the co-founder of a catering business. During the pandemic, a client came to them with the proposal of hosting a "remote wedding", essentially delivering wedding food to 400+ homes across Dhaka city within a single afternoon.
With food, there were many considerations: if you cook too early, it may spoil, if it's inside the packets for too long, it might spoil, if you deliver late, the reputation of the bride and groom is in tatters.
Knowing just how much of a logistical nightmare this could be, he immediately declined. But his business partner insisted they give it a shot.
He reluctantly agreed, thinking, given how much he knows about how food delivery works, this might end badly. To his surprise, though, the entire project went off without any hitch. In fact, the final delivery was completed five minutes ahead of the deadline. The guests loved the concept, and their client was ecstatic.
Since then, they have gone to execute dozens more of such remote weddings. And they have learned to not let expertise get in the way of radical new ideas.
Fire your worst customers: Customer obsession is no doubt the blueprint for a highly successful business. It is the motto for some of the most revolutionary ventures in history.
Therefore, young founders would do well to make customer satisfaction the core of all their business strategies. However, not all customers are cut from the same cloth.
In line with the famous Pareto principle, 80 per cent of your revenues will usually come from 20 per cent of your customers. In a similar way, 80 per cent of your headaches will also come from managing the most troublesome 20 per cent of your user base.
These customers have all sorts of demands. And typically, no matter what you do, they won't be satisfied. In fact, their whims may overwhelm your entire customer service department while their negative word of mouth drastically affects the growth of your company.
Sometimes, it is wise to just cut them off from your business altogether.
It may be a painful process initially, but every time they will free up your resources to be channelled towards your most loyal customers instead -- people who value your service, and are proud to be your clients.
You have to exercise similar caution when taking customer feedback to improve your product. If you listen to everyone, your product will become a hotchpotch of complicated features that are too cumbersome to use. Instead, listen to the most committed users and ignore those on the fringe with an unending list of demands. You will end up with a product that is simple, polished, and easy to use.
muhammed.asifkhan92@gmail.com