The dilemma of choice for startup founders

The world is a big, complex place.  As barriers of entry to markets diminish and people become more connected, the number of opportunities for tech entrepreneurs is increasing.  Surely, this is a good thing, right?

It is, if you can focus.

And herein lies a dilemma – the secret to focus is to limit options.  Underpinning this assertion is the paradox of choice, more specifically: the more options people have, the less committed they are to any one option.

At muru-D, we love focus.  We work with our founders to anchor down on a few selected dimensions of their business, encouraging them to limit their scope of action and commit to actionable goals in a highly compressed time.

Options: Too much of a good thing

In his seminal book called The Paradox of Choice, Barry Schwartz puts forward a compelling argument which at first glance appears counter-intuitive. It is alluring to assume that having more options enables for better decision-making. In reality, the reverse is true. His central argument is that the human response to lots of options is inertia, due to the detrimental impact of options on our psychological state. This is the dilemma of choice.

For startup founders this has far reaching implications.  With the increase in scope of any business idea, there is an exponential growth in the number of possible business configurations required to support it.  Every increase in the scope of an idea presents a “Y point” which begets further “Y” points, as these options have implications for many parts of their business.

This complexity overwhelms many founders and their teams; fragmenting their time and giving them an overwhelming number of issues to resolve, leading to decision fatigue.   The inevitable consequence of this lack of focus is that teams often run out of money before they gain sufficient traction to build a case to for further funding.

The 4 dimensions of startup strategy

To deal with the risk of this, we coach teams to set practical short-term goals along four dimensions which are fundamental to their success.  It is the successful interplay between these dimensions which transforms them from a “startup” to a “business”.

These dimensions are as follows:

1. Customer: describe customers in granular terms.  For B2B businesses, the customer isn’t “marketing departments”, it is “the Marketing Officer of medium-sized logistics/shipping company with headquarters in ASEAN”.  By definition, the customer is an identifiable individual who will be paying you for your service.  However, in B2C businesses it is critically important to adopt a customer mindset for non-paying customers (referred to by some as “users”) which are intrinsic to the proposition to paying customers.
2. Product: having a clear and simple core product which considers the way in which customers will interact with it.  For B2B businesses, this means having a high level of intimacy with their primary users.  This may be a different person than the customer.   I have often recommended founders conduct ethnographic studies of their users in the process of product design.  In plain English, this translates to conducting day-in-the-life-of studies.  Spend time with the natives; know how they will use the product within their actual environment.  Be mindful of feature-creep. It will cost time and money and potentially confuse users – less is often more.
3. Team: what are the resource requirements, both in number and type, over the next six months? When are they required and how are you ensuring the funnel of appropriate candidates for the roadmap ahead? Ensure that the team shares similar motivations and work ethics.  One small test I ask myself is “Would I enjoy having a beer with them?”
4. Financials: Get on top of unit economics. How does the cost per user or product change with volume, i.e. how much does your 100th user cost and how does that change for the 10,000th or the 10,000,000th? Put the assumptions on a page. Translate every customer interaction into further insight about (i) How much it costs to acquire a customer?; (ii) How much do they buy?; (iii) How much will they pay?  (iii)  How long do they stay? (iv) how much does it cost you to get them to buy more (often). It is incredibly important to be financially literate and every week, get clearer on your startups simple profit equation.

Making it real

The secret to success is to break down these dimensions into a series of tangible next steps that were written down.  We call these weekly no-fail goals.

Stated goals are important as they crystallize thought into action which can later be reviewed.

Create momentum by holding public weekly stand-ups where team members talks about their issues and select one no-fail goal they commit to achieve before the week is over. For example, a health tech founder can commit to interviewing 5 doctors in a week as a way to refine their product if usage is lower than anticipated.