Skip to main content

The New Roadmap For Entrepreneurial Success

 

Rather than writing yet another how-to guide for people wanting to launch a startup, Tom Eisenmann conducted original research on startup failure to better understand startup success.

 

During his multiyear research project he conducted 470 interviews with failed entrepreneurs and investors, and provided a series of case studies—from a home-furnishings retailer (Fab.com) to a concierge dog-walking service (Baroo) to a sophisticated social robot (Jibo)—and he identified six distinct patterns that account for most startup failures: 

  1. Bad Bedfellows. Startup success is thought to rest largely on the founder’s talents and instincts. But the wrong team, investors, or partners can sink a venture just as quickly.
  2. False Starts. In following the oft-cited advice to “fail fast” and to “launch before you’re ready,” founders risk wasting time and capital on the wrong solutions.
  3. False Promises. Success with early adopters can be misleading and give founders unwarranted confidence to expand.
  4. Speed Traps. Despite the pressure to “get big fast,” hypergrowth can spell disaster for even the most promising ventures.
  5. Help Wanted. Rapidly scaling startups need lots of capital and talent, but they can make mistakes that leave them suddenly in short supply of both.
  6. Cascading Miracles. Silicon Valley exhorts entrepreneurs to dream big. But the bigger the vision, the more things that can go wrong. 

Eisenmann features all his research findings and expert advice in his new book, Why Startups Fail. It’s a must-read for founders at any stage of their entrepreneurial journey, and a roadmap charting the path to startups success.

 

In short, “If you want your startup to succeed, you need to understand why startups fail,” explains Eisenmann.



Tom Eisenmann

 

Today, Eisenmann, a Harvard Business School professor for the past 24 years, and who has guided over 1,000 Harvard Business students and alumni as they launched new ventures answered these questions for me:

 

Question: Do you believe reading your book about why startups fail versus a book about how to become an entrepreneur will be more useful for someone considering entrepreneurship? If so, why?

 

Eisenmann: There are lots of excellent books about how to succeed as an entrepreneur, and aspiring founders should read them. There are far fewer books about why startups fail – and how founders can anticipate and avoid common failure patterns.

 

Some of the advice on how to succeed as an entrepreneur can backfire. For example, growth is a priority for many founders. But growing too fast can strain a startup in ways that boost failure odds. Understanding why startups fail can help avoid such traps.

 

Question: Do you believe someone is more likely to be a successful entrepreneur if they previously worked in a non-entrepreneur business?

 

Eisenmann: Consider three types of prior experience that can be valuable for an entrepreneur. All three types can be gained by working for a big company before launching a venture. 

  1. Prior industry experience is very important for entrepreneurs targeting some markets, but less important for other markets. If you launch a beverage brand or a fashion apparel company, industry experience is super valuable. But founders can launch a startup like Instagram without prior experience in photo sharing.
  2. Prior functional experience can be very valuable for an entrepreneur. If they’ve been a product manager or a salesperson in the past, they’ll be better able to recruit individuals to lead that function for their startup.
  3. Prior experiences at each stage of a company’s life cycle, from seed-stage startup to mature public corporation, is valuable because entrepreneurs will know what management challenges to expect when their venture reaches that stage. 

Question: What can a budding entrepreneur learn from watching television shows, such as Shark Tank?

 

Eisenmann: The show is terrific! The sharks do an excellent job of probing an entrepreneur’s motivations and probing for problems with a venture’s product design and marketing plans. In this way, the show mirrors the case study approach we use to train students at Harvard Business School.

 

Question: What is the largest change in entrepreneurship you've seen during your 24 years teaching?

 

Eisenmann: The Lean Startup movement swept out of Silicon Valley starting in 2008 or so and has since been embraced by entrepreneurs around the world. Founders following Lean Startup principles state assumptions about the problems and solutions they’ve identified and devise efficient experiments to rigorously validate these assumptions. Essentially, they apply the scientific method to their startup by testing hypotheses. And, they do so with a minimum of wasted effort – hence the term, Minimum Viable Product. Done right, the Lean Startup approach helps entrepreneurs avoid wasting time and effort building and trying to sell a product that no-one wants.

 

Before Lean Startup logic took hold, some smart entrepreneurs would test demand before launching their business. But now everyone has a playbook for how to do this.

  

Question: What is your advice for entrepreneurs for a post-pandemic time?

 

Eisenmann: Post-pandemic, entrepreneurs will enjoy demand-side and supply-side boosters. With respect to demand, Covid-19 has fundamentally changed the way we live and work, and that will open up countless opportunities for new ventures.

 

On the supply side, we’ve learned a lot about working from home. Entrepreneurs will find it easier to recruit talented employees who can work from anywhere in the world. It’ll be less crucial to be in a startup hub like the Bay Area.

 

Question: Why did you end your book with a "Letter to a First-Time Founder?"

 

Eisenmann: There’s lots of conventional wisdom about what makes for a great entrepreneur. For example: Be passionate! Trust your gut! Be persistent! Be frugal! Stay focused! Most of this is good advice – most of the time. But followed blindly, the advice can actually boost a founder’s odds of failing. Consider the exhortation to be persistent. If persistence turns to stubbornness, an entrepreneur may be unwilling to pivot when their product fails to meet customer needs. If they don’t pivot, they’ll burn through cash and imperil their venture. My letter encourages first-time founders to think deeply about whether and when conventional wisdom makes sense.

Thank you to the book's publisher for sending me an advance copy of the book.

Comments

Popular posts from this blog

Three Essential Parts Of A Mission Statement

A lot of companies struggle when creating their mission statement. Author  Peter F. Drucker  provides the following good advice in one of my favorite book's of his,  The Five Most Important Questions You Will Ever Ask About Your Organization : Every mission statement has to reflect three things : Opportunities Competence Commitment In other words, he explains: What is our purpose? Why do we do what we do? What, in the end, do we want to be remembered for? How well does your mission statement meet Drucker's recommended three requirements?

Effective Listening: Do's And Don'ts

Here are some great tips from Michelle Tillis Lederman's book, The 11 Laws of Likability .  They are all about: what to do and what not to do to be a leader who's an effective listener : Do : Maintain eye contact Limit your talking Focus on the speaker Ask questions Manage your emotions Listen with your eyes and ears Listen for ideas and opportunities Remain open to the conversation Confirm understanding, paraphrase Give nonverbal messages that you are listening (nod, smile) Ignore distractions Don't : Interrupt Show signs of impatience Judge or argue mentally Multitask during a conversation Project your ideas Think about what to say next Have expectations or preconceived ideas Become defensive or assume you are being attacked Use condescending, aggressive, or closed body language Listen with biases or closed to new ideas Jump to conclusions or finish someone's sentences

6 Ways To Seek Feedback To Improve Your Performance In The Workplace

Getting feedback is an important way to improve performance at work. But sometimes, it can be hard to seek out, and even harder to hear.  “Feedback is all around you. Your job is to find it, both through asking directly and observing it,” says David L. Van Rooy, author of the new book,  Trajectory: 7 Career Strategies to Take You From Where You Are to Where You Want to Be . As today's guest post, Van Rooy offers these  six tips for how to get the feedback you need to improve performance at work . Guest Post By David L. Van Rooy 1.       Don’t forget to as k :  One of the biggest mistakes people make is assuming things are going perfectly (until they make a catastrophic mistake). By not asking, you’re missing out on opportunities for deep feedback: the difficult, critical feedback that gives you constructive ways to improve. 2.       Make sure you listen :  Remember, getting feedback is about improving your performance, not turning it into a “you versus the

10 Quotes From The 5 Levels Of Leadership -- John C. Maxwell

Soon I'll post my full review of John C. Maxwell's latest book, The 5 Levels of Leadership .  In the meantime, here are some of my favorites quotes from the book that I believe should become a must-read book by any workplace/organizational leader: Good leadership isn't about advancing yourself.  It's about advancing your team. Leaders become great, not because of their power, but because of their ability to empower others. Leadership is action, not position. When people feel liked, cared for, included, valued, and trusted, they begin to work together with their leader and each other. If you have integrity with people, you develop trust.  The more trust you develop, the stronger the relationship becomes.  In times of difficulty, relationships are a shelter.  In times of opportunity, they are a launching pad. Good leaders must embrace both care and candor. People buy into the leader, then the vision. Bringing out the best in a person is often a catalyst for

5 Tips For Generating Ideas From Employees

Your employees have lots of ideas.  So, be sure you provide the forums and mechanisms for your employees to share their ideas with you.  Hold at least a few brainstorming sessions each year, as well. And, when you are brainstorming with your employees, try these five tips: Encourage ALL ideas.  Don't evaluate or criticize ideas when they are first suggested. Ask for wild ideas.  Often, the craziest ideas end up being the most useful. Shoot for quantity not quality during brainstorming. Encourage everyone to offer new combinations and improvements of old ideas.

3 Things Your Mission Statement Must Have

A lot of companies struggle when creating their mission statement. Author Peter F. Drucker provides the following good advice in one of my favorite book's of his, The Five Most Important Questions You Will Ever Ask About Your Organization :" Every mission statement has to reflect three things : Opportunities Competence Commitment In other words, he explains: What is our purpose? Why do we do what we do? What, in the end, do we want to be remembered for? How well does your mission statement meet Drucker's recommended three requirements?

How To Survive And Then Reset To Ultimately Thrive

“Uncertainty is here to stay. Rather than seeing it as an obstacle to overcome, integrate it into your strategic approach to invigorate your high-growth potential and outperform competition under any market condition,” explains Rebecca Homkes , author of the new book, Survive, Reset, Thrive .   “Most books aren’t honest enough about how hard it is to reset ,” adds Homkes. Yet, resetting and leaning into change is essential. “If you are ready to embrace change as a central element of your growth strategy, this book is for you.” Homkes’ book is a timely, comprehensive, and essential read for business leaders looking to take the next step toward ensuring high growth for their companies. The book brings together more than 15 years of Homkes working directly with high-growth companies of all sizes and across a wide variety of industries.   Survive, Reset, Thrive (SRT) is a practical and innovative interconnected three-mode approach :   Survive : Stabilizing your business when

3 Coaching And Mentoring Tips

Here are three great tips from the book, The Everything Coaching and Mentoring Book : Coaches do not motivate their employees; they inspire them to motivate themselves.  This is best accomplished by allowing employees to see clearly where they stand in the organization versus where they want to be in their careers.  That is, what are their self-interests versus what the company can offer them. A mentor always exercises the power of suggestion. That is, wise mentors offer up plenty of suggestions to their mentees. They pose alternatives.  But they refrain, as much as possible, from telling their mentees what to do. Mentoring is all about sharing experiences.  It is about mentors imparting the multiple lessons that they've learned to their mentees and helping them better navigate through their own careers.  By absorbing these lessons--of mentors' mistakes and successes--mentees are better prepared to move forward with knowledge and confidence.

Use A Board Of Advisors

David Burkus often provides valuable comments to my various Blog postings, and he's a person who effectively uses a board of advisors, instead of mentors, to help him achieve success. "I've found that in my life, it was easier and more effective to set up a board of advisors," said Burkus, the editor of LeaderLab . "This is a group of people, three to five, that have rotated into my life at various times and that speak into it and help me grow. I benefit from the variety of experience these people have." LeaderLab is an online community of resources dedicated to promoting the practice of leadership theory. Its contributors include consultants and professors who present leadership theory in a practitioner-friendly format that provides easy-to-follow explanations on how to apply the best of leadership theory. Community users can download a variety of research reports and presentations about leadership and leadership versus management. For example, a pr

How To Avoid 8 Common Performance Evaluation Pitfalls

As the year comes to a close it's likely time for many business leaders to tackle the annual performance appraisal process. So, here is a good reminder from author Sharon Armstrong about how to avoid eight performance evaluation pitfalls .  These are in what I consider is the best chapter of the book The Essential HR Handbook , that she co-authored with Barbara Mitchell. 1.  Clustering everyone in the middle performance-rating categories 2.  Overlooking flaws or exaggerating the achievements of favored employees 3.  Excusing substandard performance or behavior because it is widespread 4.  Letting one characteristic - positive or negative - affect your overall assessment 5.  Rating someone based on the company he or she keeps 6.  Rating someone based on a grudge you are holding 7.  Rating someone based on a short time period instead of the entire evaluation period 8.  Rating everyone high, to make you look good There's other great information in this 250-page book th