Chris Dixon had an important post over the weekend title The Idea Maze. He starts off with a very strong juxtaposition of thoughts around the importance of “the idea” to a startup.
Ideas_Matter: The pop culture view of startups is that they’re all about coming up with a great product idea.
~Ideas_Matter: In response to this pop culture misconception, it has become popular in the startup community to say things like “execution is everything” and “ideas don’t matter”.
Ideas_Matter’: But the reality is that ideas do matter, just not in the narrow sense in which startup ideas are popularly defined.
The argument around whether or not the idea matters in a startup is getting tedious and I think Chris does a nice job of dropping a bomb in the middle of it. But I don’t think the puzzle pieces get put together quite right.
I don’t agree with Chris’ assertion in Ideas_Matter’. My view is that a startup is a continuum of ideas. The initial idea may bear some resemblance to the idea at any future time, but the actual instantiation of the idea can vary dramatically over time based on the learning that happens along the way. The notion of the Idea Maze captures this construct, as does the work of Steve Blank and Eric Ries.
But that doesn’t mean that “the idea matters.” I believe that it means a different construct is needed other than “idea.” I accept that the answer isn’t just the “execution of the idea” since that misses the point also. As a result, I think we need to blow up the construct of “ideas vs. execution” since it’s both and neither.
Chris does a nice job of laying out how to navigate the Idea Maze using history, analogies, theory, and direct experience. That’s how I approach investing, and how Foundry Group uses our themes to guide what we invest in. If you think hard about what Chris is suggesting, it’s the path through the idea maze for most entrepreneurs that is the important thing.
Here’s a specific example from my own experience. I’ve always loved books. About ten years ago I started thinking harder about being a writer as part of what I do. I’ve used history, analogies, theory, and direct experience to help me figure out how I think about the publishing and content industry. I self published some content (my blog) and contributed to traditional print and online media. But rather than self publishing a book to start, I decided I needed to understand how the publishing industry has worked for the last 100 years by participating in it. I had a theory that over the next decade there would be a radical change in how the publishing industry worked, but in the absence of being a content provider (known as an “author”), I wouldn’t really understand the process. So I wrote several (now four) books with a publisher (Wiley). Hence – direct experience. I’ve also studied the history of the publishing industry and talked to many other authors about their experiences. And I’ve got many analogies about how other information based industries have been massively disrupted by technology. And now I have a very clear set of ideas about how the publishing – and content – industry is going to change and how I’m going to participate in that change as a writer.
My important idea wasn’t “disrupt the publishing industry.” Nor does that particular idea matter. But the continuum of ideas I’ve had over the last decade that emerged from this thought is incredibly powerful. And the emergence of that continuum in a startup has the potential to be very powerful. Or fail. Which is, of course, the nature of a startup.
There is this magical moment that happens when a startup finally puts the key components together to build a successful business. After months or years of iterating and pivoting, they finally have the right product for the right market at the right price. At this point, the company has to shift gears and change their mindset a little. They need to stop looking for gold and start mining as fast as possible. My friend Chris Moody, President/COO at Gnip, refers to this as the execution phase of a business and there is no better example of execution in our current portfolio than the team at Gnip.
After 2.5 years of product development and varying business approaches, Gnip found their magic moment about a year and half ago. Since that time they have been heads down executing and the results have been incredible.
Today Gnip announced an exclusive partnership with Tumblr. This monumental partnership will give Gnip’s customers full coverage of an amazing source of social data that has never been available. With 50 million new posts per day and 15 billion page views per month, Tumblr offers a huge new data stream for companies to analyze and use to drive business decisions. The fact that businesses will be able to receive this data via the same reliable and scalable Gnip infrastructure that currently delivers Twitter and other important data sources is a major win for the ever growing social data economy.
The Tumblr partnership is the kind of announcement that companies plan their entire year around. However, in Gnip’s case, it is just the latest activity in an impressive series of events that shows the Gnip team knows how to get shit done. It is only April and Gnip has already done the following in 2012:
Okay, so the Gnip team is getting stuff done, but at what price? They must be cracking the whip pretty hard and creating a real sweat shop, right? Wrong. In spite of growing their number of employees by 300% in 2011, Gnip was just named The Best Place To Work in Boulder. Not the best startup, the best company. And, the best news of all? They are hiring!
I heard a fascinating one-liner the other day that I had knee jerk negative reaction to but when I thought about it more thought was deeply insightful, especially in the context of big established companies vs. new entrepreneurial companies.
A CEO of a very large, successful company said “execution is an order of magnitude easier than opportunity.” In the context of young startups, I often feel exactly the opposite. Opportunity is everywhere, but execution in a bitch.
But then I thought about this a little. For a big company that dominates a market, it’s totally focused on execution. The company is built for execution and, assuming it is built well, just cranks things out. What it cranks out might be inspiring, or it might not be, but it’ll keep cranking things out.
For these companies, finding the new opportunity is really difficult. The company is tuned to defend its turf, not go find new turf. Execution is all about defending market position, maximizing profit, expanding market share in existing markets, and allocating resources. In a few extraordinary cases, this activity is massively inspired, usually around companies that love their products (Apple) or their customers (Virgin). So – for most of these companies, “execution” is easy relative to finding the new opportunities. And many of these large companies don’t focus on finding the next opportunity, or expanding their existing opportunity, until their business hits major headwinds, is in decline, or is massively disrupted. I give you Borders, B&N, and Blockbuster as examples here – awesome at execution until what they did became irrelevant and then it was too late for them to do anything about it (other than maybe B&N, who might pull off their transition.)
In contrast, startups are totally focused on the new opportunity. Assuming they find it, and it’s a big one, execution becomes the main challenge in front of them. Their activity is all about scaling up the organization, hiring people like crazy, building a culture of shipping great product consistently, reacting effectively to early customer feedback, and continuing to evolve their products to meet the new massive opportunity they are going after.
From the eyes of a big company CEO, finding the opportunity is hard. From the eyes of a startup CEO, the opportunity is everything – execution is hard.
My insight is simple: “context matters immensely.” As young companies grow rapidly, they have to focus on becoming execution machines and recognize that at some point they’ll start struggling with identifying the next evolution of their opportunity space. Assuming the opportunity they are going after is massive, this won’t matter for a while. But the execution dynamics will. And when you find yourself executing well, dominating your market segment, and growing quickly, you’ve got to make sure you keep focusing on expanding the opportunity, especially since that’s going to get harder as you get bigger.