Chapter 6

The Big Picture in an Hour

Ideas, People, and Execution

IDEAS, PEOPLE, AND EXECUTION are the three words at the heart of every successful enterprise. They won’t tell you exactly what tactics you’re going to focus on each day; that comes next. But they’ll frame up the big picture of what your mission is about. The big picture aligns the little picture—the individual decisions and actions that move you forward, one step at a time. Any Navy SEAL will tell you that you need a constant, seamless scan between big picture and little picture. Big picture/little picture. The Israeli Defense Force experts consider their constant habit of calibrating big picture/little picture to be one of their key success factors. They require every member of a true team to internalize it, too, in order for them to reach their highest battlefield potential. So we’re going to spend a moment here on the big picture.

When I boil it down from everything I’ve read and studied, I think most experts would agree that every aspect of business can be extrapolated from these three general categories:

• Idea is the what and why. That means it covers mission, vision, value proposition, nature of product and service, innovation, differentiation, problem and solution, and so forth.
• People is the who and the human. It covers the founders, managers, teams, culture, talent, integrity, energy, and commitment on the inside, as well as relationships with customers, vendors, and partners on the outside.
• Execution is the how, where, and when. It means bringing the idea to life via performance, features, production, marketing, sales, supply chain, strategic planning, and customer service.

The questions that are debated endlessly are, “In what order should we tackle these three key elements? And which is most important?” The answers are, “All at once” and “All of the above.” They are completely interdependent, each worthless without the others.

Yet their qualities are separate and the weight you give each one varies at different stages of the business. Most people rank them in this order for entrepreneurs starting a business: Idea, then People, then Execution. I disagree. So listen up, because we’re going to have a reality check on all three.

EVERYTHING YOU NEED TO KNOW ABOUT IDEAS

The Perfect One

To start a business, you need one of those can’t-miss, million-dollar ideas like the hula hoop—an idea that you can prototype in your basement, then show to a Fortune 500 company that will snap it up, guaranteed. Just don’t forget to make the 43 people you’ve told about it swear on their lives to keep it secret, and make investors sign a 12-page nondisclosure agreement so the idea stealers don’t cop it and get that guaranteed $100 million for themselves because your idea is that good.

You know it’s true because you learned it in school: “There is nothing more powerful than an idea whose time has come.” “Build a better mousetrap and the world will beat a path to your door.”

In your dreams.

Here’s the reality, in the words of author and entrepreneur Tim Ferriss, as quoted in Do More Faster: TechStars Lessons to Accelerate Your Startup (a really good book by the founders of start-up incubator TechStars, David Cohen and Brad Feld—folks who get pitched hundreds of fail-safe ideas a month): “Trust me, your idea is worthless.”

And speaking of mousetraps, you know what people really think when you show them a better one, one that will require them to trash all their old mousetraps that work fine, train their overworked employees how to use your new-fangled gadget, and put them at risk of getting fired when your supposedly brilliant innovation doesn’t work (and the premises are suddenly aswarm with hungry, squealing rodents)?

People think you are a pain in the ass.

The key to launching a great business is not a brilliant idea, nor is it a brand-new, solar-powered, digitally-controlled mousetrap. You do not need to start with a perfect, fully-formed, fail-safe, once-in-a-lifetime idea to eventually succeed and become a millionaire in business. Likewise, you don’t need to go around being paranoid, protecting the idea you have from grave robbers and thieves who lurk in every investor’s doorway. Here’s why.

People Don’t Pay Money for Ideas

The reason your idea is worthless, according to Do More Faster, is that except in the movies, there is no market for ideas about new products and services that currently exist solely in your head. No one pays for ideas because they are a dime a dozen. Everyone has them in proportion to the number of beers they’ve consumed after work. Also, you can be sure that, whatever your new idea may be, someone, somewhere is already working on their own version of it.

People pay for ideas that have been executed: ideas that have been turned into real, working prototypes and start-up enterprises through the skills, determination, soul, and grit of an entrepreneur. The ones that have been executed are those that someone believed in enough to put everything on the line for, making mistakes and fixing them until a problem was solved, because they wanted to hold their dream in their hands. They wanted to prove the naysayers wrong.

Investors—at least not professional investors—don’t invest in ideas either. They invest in the human vessel that harbors those ideas and will execute on them. This is not a cliché; venture capitalists, private equity masters, and others with money to invest really do bet primarily on what they believe is the fire, the enthusiasm, the resilience, and the resourcefulness of you and your people, because they know this next timeless truth about ideas . . .

All Ideas Change, Even Great Ones

The reason your idea is worthless—at least in its current form, before you’ve built it—is because it will change anyway, often radically, between what’s in your business plan and what you eventually learn will work with customers.

This is a law unto itself. Your idea will change. Your business will be different six months or a year from now than when you started. An informal poll of people who run start-up incubator firms and see dozens and dozens of founders starting companies every year shows that 40 to 50 percent of those who come to them make a major pivot in the first few months. They often eject their original genius idea completely in favor of a more opportune one, because once they get into motion and test assumptions in real markets, they bump into the true opportunity, lying behind a doorway they hadn’t seen.

This is a crucial big picture/little picture principle. If you’re willing to adapt to reality when you see it—not give up or quit, but adjust your priorities and change your idea to meet the real demand that the market and customers show you—you will find your success. When you keep your sense of the big picture—your true mission—you’ll be able to adjust the little picture as needed. Don’t confuse that with giving up, because it’s something very different; it’s finding the clearer path. And that usually means changing, or at least tweaking, your big idea.

Rackspace became a wildly successful managed hosting company, renting out computing space on servers it sets up and maintains. But it didn’t start out that way. In fact, the term managed hosting hadn’t even been coined yet when Rackspace was started in the late nineties. The business was IT services—more accurately, three San Antonio college friends who hired themselves out to wire computer networks for local businesses to make some extra money. While performing those gigs, they got a chance to talk and listen to a variety of customers. And the team happened upon a simple, unfilled need: businesses needed more computing capacity, but didn’t always have the resources or the volume to hire IT staff and build a data center. Customers started asking whether they could help them solve this problem. They realized that if they set up and maintained a rack of servers and just rented customers the amount of computing they needed, they’d pay for the service.

The rest is Rackspace history.

Great News

Do not get discouraged by this plain truth about ideas—that there’s no magic bullet. It is actually the best news you could hear because it means that an idea’s entrepreneurial value is shaped in your hands. It’s under your command and control. And that means it can’t be stolen. No one can heist your drive, inspiration, vision, judgment, values, or personal emotional mechanics—the ingredients that (as Do More Faster reminds us) make product and service ideas come to life and make a business succeed.

Damn the Torpedoes—Competition Is Good

So what if others decide to execute on your idea as well? If you believe in your team and your mission, this is not a stopper. In any good business category there will always be competitors, but they will produce a different result than you do. It’ll look differently, perform differently, and be formulated differently for all the “great news” reasons we just mentioned (because their drive, inspiration, vision, judgment, and so on are all totally different from yours). If one start-up car maker in Japan and another in Arizona both come up with the idea of making a hybrid sports coupe and they execute with the same degree of commitment and technical skills, their prototypes are sure to come out looking like two kids from different mothers. There’s room in the market for one or both to succeed.

In fact, having competitors is always better instead of worse for your own chances. Competitors help build bigger, more-aware markets than you can do all by yourself, and attract customers you can tap when you prove you are the number one choice.

The idea of renting server space to computing-hungry companies wasn’t a one-of-a-kind, original idea when Rackspace got started in 1998. There were already competitors who were far more established and had millions in revenue (versus Rackspace’s zero). But the company founders believed they could find customers willing to rent server space from them in San Antonio. They figured they could carve off a piece of a growing market by finding a way to do it faster, better, or cheaper. They eventually overtook the other players in the category, not because they were the only ones with the unique idea, but because of the unique way they executed on the idea, adding value in services and support that set them apart for their customers.

Fool’s Gold

So from now on, stop worrying about having the perfect, fail-proof idea and quit obsessing about someone stealing the one you’ve got. Never let your quest to perfect your idea before you start keep you from getting started. That pipe dream is for amateurs, because no guaranteed idea exists without you adding the magic ingredient: your entrepreneurial skill and your power to dare and do. And as we’ll see, no idea can get perfected until it’s exposed to the reality of customers in a real market.

The Best Ideas

So what kind of idea should you be looking for if not the perfect one? The answer is simply the one that sparks you enough to get you into the game. A catalyzer that flips your switch and gets you and your partners going. You do need a business idea—one that promises to fill a need or creates a new opportunity for which others will pay you money—just not the perfect one before you start.

Here’s some distilled-over-time wisdom to help you identify a good business idea.

1. The Best Ideas Are the Small Ones

Love the good, small ideas, the ones with the fewest moving parts. These are the kind you can set up and demonstrate to customers at an early stage, adjust until you have a Minimum Viable Product (MVP), determine if people want to buy it from you for more than it costs to make, and see if they’ll come back for more or tell someone else to buy it. Then you can grow the business.

(By the way, in the pages that follow, we’ll be referring frequently to the “product” you plan to offer. Of course, your business might just as well be built around the intangible, personal kind of product usually referred to as a “service.” However, it’s wordy and clunky to keep repeating the phrase “product or service.” So whenever we say “product,” please remember that we are really saying “product or service.”)

If you think about it, Netflix was a simple idea: “We’re going to send you movies through the mail and never charge late fee.” Enterprise was a simple idea: “Rent cars to people where they need them, not at the airport.” Kayak.com took all the travel sites and put them on one screen. Rackspace said we’re going to have IT guys set up and maintain a bunch of servers, then rent space on them.

Mrs. Fields simply started with a chocolate chip cookie recipe she liked. She baked some and found out people would pay for them and ask her for more. That’s a small business. Then it made sense to open one store. If she found out she could get enough people to buy cookies to cover the cost of her business—that is, rent, ingredients, and her own salary, for starters—her store could sustain her. Then she could start opening more stores just like it.

Small ideas are so great because they let you discover whether they work or not in the shortest amount of time for the least money. Nobody knows whether any idea will work—least of all your biased self—until a customer who isn’t your mother or your best friend volunteers to hand over a hard-earned dollar, giving up the opportunity to spend that dollar on something else.

In fact, here’s a bonus pearl of wisdom gained from people in what used to be called the mail-order business (they invented modern advertising) and in the movie business, who have been trying out new ideas for a hundred years—and this is sage—

“Nobody knows anything.”

In other words, nobody knows whether any idea will work until the market votes for it by buying it and recommending it to their friends. Never trust anyone, no matter how senior they appear, who tells you they do know. If they did, they would be billionaires. And if the billionaires who own movie studios know what would work, then the dozens of big-budget movies made by the most experienced professionals in Hollywood with A-list actors and directors that flop every year wouldn’t.

Remember this when you’re tempted to believe a “nega-holic” who tells you your idea will never work before you’ve created a real prototype and sold it. The only sure thing is the idea that worked. Small ideas let you find out faster, one way or the other.

On the flip side, large ideas are the ones that require you to account for 15 independent variables that need to fall into place for your business to work. Those are the kind we avoid and you should, too. These are the ones that require you to build a network that doesn’t exist yet, or create a whole new infrastructure before customers can use it. A legendary example of this was Webvan.com, widely recognized as the number one business disaster of the original dot-com era. Webvan was an online service that would deliver basic goods like groceries to your door within 30 minutes of your call. The idea in those days was that all you needed to succeed on the Web was “first mover advantage,” meaning the head start on market share enjoyed by the first company to jump into a new industry; pesky things like sales, revenues, and profits were not required.

Webvan raised hundreds of millions from the most sophisticated investors in the world: Benchmark Capital, Sequoia Capital, Goldman Sachs, and more. They hired a CEO from a renowned consulting firm. They spent $1 billion to build a central distribution center that required them to invent one-of-a-kind automated systems for their model to work. They bought a huge fleet of trucks and built a presence in 11 major cities. Among 10 other things, their model required them to disrupt the behavior of the American consumer, who had been happily buying groceries at the friendly local supermarket for over 50 years and didn’t feel he or she had a problem that Webvan could solve. And they did all this before they knew whether their idea would work with customers.

What a surprise it must’ve been when they found out it didn’t. At all.

For a dozen unanticipated reasons.

As usual, the SEALs have the right idea. “Crawl, walk, run” they say. Take a good small idea and get it to work really, really well. Then make it bigger.

Here’s another way to look at it, to help you keep your ideas small . . .

2. The Best Ideas Do One Thing Really Well

Good ideas fix one problem or provide one new benefit the customer didn’t have before. They do not solve every customer problem and revolutionize every part of an experience. In fact, the opposite is true. Nobody, except the gadget geeks who design TV remotes, wants a device that does 157 things. They want a product or solution that does one important thing very, very well. They want it to solve a single nagging problem or provide one cool new opportunity for a price they feel comfortable paying.

(By the way, about pricing: Most people are fair and reasonable and have no problem paying a tad more if they perceive new or enhanced value. Come in a little lower? Fine, that’s gravy. But not too low—then it starts looking a little suspicious.)

Vast fortunes are made by letting customers do one thing better or with less pain. Generations of parents stabbed themselves when fastening diapers using safety pins. The market was transformed and a giant business was created when someone put two Velcro strips on each side of the nappy, capturing millions of customers overnight.

Do you own a couple of gas stations? Try this change: clean the restrooms. Really clean them, every day. (Include a vase of plastic flowers and a $9.95 fake painting on the wall, too.) That’d be enough to draw traffic to your station instead of all the others at the intersection. We have to give big companies credit where it’s due: ExxonMobil did this and motorists did beat a path to their door. We know people who will drive out of their way every time to go to their stations, even if they don’t need to use the restroom.

Want to know what Rackspace did that no one else in the industry had tried?

When customers called, they picked up the phone after one ring.

It was proof of a promise of customer service you could hear and see. Their one thing was Fanatical Support.

Throwing a barrage of features at savvy customers and investors is more of a problem than a solution. It impresses no one. It means you can’t focus, can’t commit, can’t specialize, and can’t get the big thing right. The added bells and whistles become a blur of irrelevance if not annoyance. Suppress this urge.

3. The Best Ideas Are 1 Percent Better

Shoot for a real, obvious, and dependable 1 percent difference. You can always go up from there. You don’t need to create a giant breakthrough like Apple’s iPod to succeed; in the real world, success occurs by tiny fractions. The difference that wins an Olympic gold medal is .001 seconds. And you can be crowned the best golfer in the world when you win the right tournament by the length of a single putt.

No one ever reached for the second-best product on the shelf. When people have a choice, and aren’t already locked into one technology or one supplier because they’ve made a large prior investment, they just pick the one they think is better—by any margin. Best by 1 percent is the tipping point, and it can change the world. When it comes to better, an inch is as good as a mile.

The key is that it needs to be a difference that is obvious to buyers—one that they can measure, feel, or easily see demonstrated. It needs to be something the customer can appreciate—something important enough to care about and trusted enough to believe.

It just has to relieve 1 percent more of my pain or deliver 1 percent more opportunity or delight in my life. It only has to be 1 percent lighter, more compact, simpler, more dependable, friendlier, harder, warmer, or colder. Whole companies have been created because someone reduced two keystrokes to one, or built a dustpan and brush that snap together, or mixed the ice cream in front of you at the counter, or made real handmade espressos rather than plopping a capsule into a machine.

But your 1 percent has to be a real, meaningful difference, and that’s a term of art—not just a claim, a variety, a slogan, or a choice for its own sake. It has to add a specific value. What makes a meaningful difference in the world or advertising and marketing is a critical notion that will get its own discussion in Chapter 10.

4. The Best Ideas Inspire You

They guys at Rackspace succeeded because they found a difference customers wanted that others weren’t willing to provide. Fanatical Support sometimes cost the company a little more money and work to deliver, but Rackspace provided it every time, rain or shine, until customers started to believe it was the difference that the company stood for.

But—and it’s a crucial but—Rackspace was able to give its customers what they wanted only because it gave its people—the Rackers—what they wanted. Here’s how Graham Weston explains it: “We decided at the beginning that what everyone wants from work is to be a valued member of a winning team on an inspiring mission. And we decided we would do everything in our power to build our company that way. When given this kind of opportunity through work, people will give their hearts and minds to the team and the mission day and night, not just their backs and their hands from nine to five. People will tap their entrepreneurial power for the cause at every level of the company. It’s a competitive advantage money can’t buy.”

But this is easier said than done. To give your people an inspiring mission to fulfill, you have to start with an idea that quite simply inspires you, because it’s the easiest kind—actually, the only kind—you can use to genuinely inspire others.

The idea doesn’t need to be fancy. And that doesn’t mean to pick your favorite pastime outside work. You’re in search of a business, not a way to relax on Saturdays. It has to fill someone else’s need. But the prospect of owning and building out this idea needs to excite you and incite your enthusiasm. Then it will motivate you and the other members of your team because your ability to bring it to life will advance your values—social, technical, artistic, or financial. Depending on those values, you might be as excited to open a new bicycle shop or invent a new way of providing small business accounting services as someone else might be to build the first civilian space station or cure global hunger. It’s 100 percent up to you. Either way, as long as your excitement is genuine, it will be contagious.

So, of the dozens of business ideas you might pick, don’t settle for one that doesn’t inspire you in some way. Not just because it’s more fun, but because in the tougher, scarier moments that all missions periodically create, you’ll renew your strength and commitment by tapping into this energy source. And most important, you’ll pay it forward to all your teammates. Don’t leave an asset this precious on the table.

5. The Best Ideas Make It Easier or Faster—Not Cheaper

One final word: you can never lose or waste your money by making a product easier or faster. You’ll never meet a customer or a consumer who doesn’t want these two features. All other performance and properties being equal, customers will reach for your product if it has them. Of course, the overall value still has be there. Drivers would rather own a BMW that can do 80 mph than a Kia that claims it can do 120. But in general, when your idea makes some activity measurably faster and easier without trading off some other key element, like safety, or maybe luxury, or indoor plumbing—your idea is a good one.

Notice, however, that we didn’t include “cheaper” in this rule. Cheaper is the oldest motivator for consumers, but if you’re not careful, it’s the oldest, deadliest trap for your idea and your business, too.

Cheap is not an idea; it’s a condition. As a main difference in any category, cheapest is a club with one member. You’re volunteering for a never-ending fight to stay there because customers who are loyal to the cheapest will never be loyal to you. It makes your brand one-dimensional and extinguishable in a day by any competitor who cuts his number below yours. It’s out of your control. And while customers will always be looking for cheaper, they’ll also always be reluctant to accept what cheaper usually means: lower service and poorer quality. Promising cheapest without lowering quality is a recipe that will seduce customers once. It’s bad for both of you.

Price is one whole side of any business equation and your idea should include the fairest price possible. But don’t make price your cornerstone. Hang your hat on faster or easier—or any of the other timeless human values, like smarter, sexier, safer, or more dependable. Leave cheapest to Low Price Lenny, and see how long he lasts.

WHAT ALL BUSINESS IDEAS MUST DO

A business idea is different from other ideas in one respect: it makes a customer a promise. From the customer’s perspective, the promise is to fix something, solve something, take away something bad, or give me something of greater value for one purpose: to make my life better. Specifically, to make me safer, sexier, healthier, richer, or more secure, popular, successful, or comfortable.

In return, I will pay you money. It’s a service contract.

When you’re looking for a good business idea, you’re looking to fill a need, take away pain, or add some pleasure—and that’s it. It’s never more complicated than that. The people who are good at coming up with these ideas ask simple questions of themselves and others, and they practice a lot. The more they look and ask, the more they see.

They ask these eternal entrepreneurial questions:

• What pain or problem can I take away?
• What new experience can I give?

They get the answers by listening, observing, being open to possibilities, and perhaps most of all, asking themselves the “What if?” and “Why not?” questions.

• What if there was a way to do _____?
• Why can’t I get _____?
• How come no one ever fixed ______?

It’s not a matter of cleverness as much as inquisitiveness. The folks who ask these simple questions most often come up with the most answers.

Then the question becomes: Is it feasible? Is it possible? Possible for me? This is where the physical mechanics overlap with emotional mechanics, and the answer throughout the ages is: nobody knows but you.

Ninety-nine percent of human progress was impossible—except for the one person who decided to do it. But that’s why you’re an entrepreneur—remember?