I’m fascinated with the 80/20 theory which originated from the economist Pareto. I particularly like idea that 20% of what you do today results in 80% of the future. Visa-vi 80% of what you do today only counts for 20% of the future. The challenge is finding that elusive 20% in the here and now. Its especially difficult in the fast moving tech sector compounded by having too much short-term stuff to do in a startup. However startups need to be both short-term reactive and maintain a long-term strategy to survive. The problem is our brains find it hard to handle both thought processes simultaneously. The answer for startup founders is to learn to regularly split and switch their mind-sets or where possible divide the roles between founders.
The character Norman Bates (Psycho) going too far with split thinking
I didn’t agree with Eric Ries Gigaom’s post on ‘Myth: Entrepreneurship Will Make You Rich’. However Eric did highlight the dichotomy of startup founders dealing with short-term v’s long-term decisions simultaneously. The lifetime of startups is very short compared with larger companies. Startups don’t have the luxury of time. The startup needs to continually change to survive. This results in continually switching between short and long-term planning or reacting.
I recently attended a panel discussion at The British Libary which included Doug Richards (of Dragon’s Den fame) & Nick Wheeler founder of Charles Tyrwhitt, a specialist shirt manufacturer. Doug’s early tech startup days in LA he was extremely reactive to selling Sun Microsystem whatever the business opportunity presented at his feet. This is a good strategy. It gets immediate prospect/customer feedback on what they do or don’t like and brings in much-needed immediate revenues to put food on the table. However short-term selling means your only react – jumping from one customer need to the next. This can lead to excessive diversification and no focus within startup.
Nick Wheeler was determined to ‘stick to his knitting‘. Nick only wanted to sell shirts. He knew, obviously, that there would always be a need for men’s shirts. He knew in his own mind that he would be the ‘best’ shirt maker. This is a long-term strategy and vision. Again this is a good strategy. Its has the potential to bring growth, clear direction and commitment. However too much long-term strategising does not pay the bills and if the strategy is wrong i.e. the customers aren’t interested in the product the founders won’t know until it’s all too late. Nick did say ‘they nearly went bust‘ based on his long-term goal. But then I’m sure Doug Richard’s must have sailed close to bankruptcy with his short-term selling.
It’s a difficult balancing act managing short-term long-term goals like so many other peculiarities of running a startup. It can hurt the brain to keep switching between the two thought processes required for short-term and long-term thinking. You have to learn to cope with the constant flipping between short and long-term thinking. It is vital skill but make sure it does not drive you mad 😉