What do chefs and entrepreneurs have in common? Both try to use great ingredients, and apply their energy and experience to create masterpieces.
I love to cook, and I love to watch cooking shows. Maybe it’s because I worked in my Dad’s restaurants as a young kid. Anyway, I have found that there are 3 basic types of chefs: 1. Scientist, 2. Magician, and 3. Artist.
To make a meal, the Scientist is the left-brained chef who meticulously measures and weighs ingredients, and follows religiously a 50-step recipe. The Magician has no recipe and, in fact, has no preconceived idea what kind of meal she’s going to cook. Instead, she goes to the market and sees what’s fresh and in season, then she goes back into the kitchen and conjures up a creation on the spot. The Artist is a combination of the first two. He has a general sense of what he wants to make, and how he wants to make it, and works within these guidelines to create his meal. He dosen’t work off an exact recipe, but instead relies on instinct and creativity to work within his themes.
Having observed, invested in, and worked with dozens of startups over the years, I theorize that Startup Founders also fall into 3 categories, each one similar to those in the cooking metaphor above.
For example, the Startup Scientist may have a super detailed business plan and 30 pages of financial projections including a dozen pages of assumptions (ok maybe I’m exaggerating, but you get the drift). Some years back, a good friend of mine sold his company for a tidy sum and used the 12 month noncompete period to develop a detailed business plan for a consumer-oriented startup. He raised $10 million in venture capital. His business plan was amazing, and every possible contingency and possibility was covered, this even before his company earned Dollar One. What happened? Within 2 years, he burned through all of his cash and folded the venture. Why? I think the Scientist and his team were enamored by his plan, they hired too many executives too soon, and failed to be flexible and responsive to clients needs. I really think his “awesome” business plan worked against him, and he stuck with it even though he should have pivoted and iterated. The bottom line is that startups are not a “science,” and this approach works better for large companies than startups.
The Startup Magician has NO PLAN. He has a business idea, and gets to work, whether it’s developing a killer app, or acquiring customers and adopters. He is open to change and creativity, and pivots and pivots until he finds something that works. This kind of startup has no real business model per se. Can this kind of company succeed? Remember Google? They had no business model until a year or so before they went public. What was Facebook’s business model 2 years ago? Does Twitter have a business model today? Most would say it is undefined, but it has to be considered a very successful startup. These are exceptions. My personal feeling is that it’s very difficult to build a hypergrowth enterprise in this manner. Some Startup Magicians create successful businesses, some create nice lifestyle businesses, but most either stagnate, or fail, usually because of a lack of direction.
What about the Startup Artist? This entrepreneur has rough guidelines for what she wants to achieve in her business. She knows her product or service, her company culture, the kinds of people she wants to hire, and the markets in which she will compete. She has a general mission and vision for the startup, and a set of core values which serve as guiding principles. Maybe she doesn’t have an awesome business plan, or a 10-scenario DCF analysis, but those things are not only NOT NEEDED in a startup, they will in fact inhibit growth and innovation. Ideally, she and her team work off a one-page plan with a couple of key areas of focus, and then they concentrate on EXECUTION. I believe this type of startup has the best chance of winning because it allows for flexibility and adaptation to changing market and business conditions. The company also has a general sense of its direction, culture, and style, which will keep it from meandering aimlessly.
The lesson here, I think, is that it’s best for a startup NOT to be to be too exact, nor too free form. Planning is great, but the plan itself should not be Gospel. The benefit of preparing a business plan is in the planning process itself, where you and your team think carefully about your capabilities and differentiators, your customers, your competitors, financial assumptions, and markets. But, it’s imperative to keep in mind that the one true thing about any startup’s business plan is that things will NEVER turn out as planned.
To build a hypergrowth company, you must be ready to pivot, to develop new solutions, to move into markets you didn’t originally foresee, and to take on other opportunities without being beholden to some preset plan which was made in theory to begin with.
Thanks for reading, and please leave a Comment below. What style of Startup Founder do you think has the best chance of succeeding? Am I being too critical of the Scientist?
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Note: This Post is dedicated to my good friend Derek Coburn (@cadredc), Founder of CADRE, the UN-networking organization of remarkable advocates. Thanks D, for suggesting I write a Post about this topic!