A winning strategy is critical: Find it and you can’t lose!

Ever heard of the story of Edmund Hilary? He’s the guy who climbed Everest. Originally he planned to establish a base of supplies near the summit, and from there he planned to make the dangerous ascent. Very quickly he realised that that was not a workable solution – getting supplies up there was an arduous task. So he made the decision to break free from a supply base and to just make the ascent with the little, bare minimum supplies he had. This proved to be a winning strategy. So it is the same with everything else. With start ups especially. As with all things, you need a winning strategy.

Minimise your investment and get revenue going from the beginning

Does it make any sense to make a billion dollar bet without any assurance that it will pay off? I think not. If you’re gonna make a billion dollar bet then you have to be pretty confident that you’ll be able to make another billion or two from it. Otherwise you’d be crazy: nobody wants to lose that sort of money.

Example: The production of movies

(A) Start small and Grow Big

There seems to me to be a very common-sensical way to make it in “show-biz”. Look at how all the great directors of the past made their mark: they didn’t go out fishing for funding in the order of $100m-800m budgets right away. No, they cut their teeth doing small time work. They honed their craft with small indie films, that they shot with a hand held cam-corder, that made money from the beginning, and from there, they built upon those same concepts – building increasingly sophisticated products, which were different, but essentially the same as their small time indie films. They proved their worth with a home video camera and when people saw the value in that, they were able to get the funding to do the bigger projects. Most importantly, the indie film proved that the concept was a workable one without placing at risk vast sums of capital.

But let’s take a step back. The ability of the small films to make money proved two things: (i) that the concept was a workable concept – i.e. that the director can make good films which make money and (ii) it made it extremely clear and likely that the director could be counted on to produce a return on more complicated films.

(B) Another Example: Ship Building – start small and build-up

If somebody comes up to you (a kid with no experience) and says he needs a billion dollars to build a ship: what would you say? Well it depends on how risky that investment is. But how do you know that it can be done profitably? You don’t.

Let’s look at the scenario a little differently. Suppose a kid makes a paper boat. It’s successful and he makes a few dollars from doing that. Using those funds and the skills he gained, he then builds cardboard boats, and then wooded toy boats. Soon he graduates to building small skiffs and sail boats. Then he starts building bigger and bigger boats – more complicated ones. All the while he’s making money and honing his skills. Now, in his current financial state, if he comes to ask for a billion dollars – that’s an entirely different situation. He’s proven his ability to build, he’s proven that there is a demand for ships and large ships. And if he needs to, then he’s also able to plough the money he’s earned on previous projects into his current venture.

(C) Tech Start ups

It’s the same with tech start ups. Start small with the minimal application that will make you money from the beginning. If it’s not making money from the beginning then you have no chance to build a larger more complicated and expensive version. Once you have a basic design that is proven to be profitable, then your next job is to iterate like crazy to produce better versions. Soon you go from having a small skateboard to moulding that skateboard into a space ship that is capable of inter-galactical travel. Of course, in order to do that you need to design your code well. Cheap programmers who are inexperienced may be able to get something that works, but if it is not easily malleable then the code will eventually fail to meet changing requirements and the entire project will burn to the ground. That’s why AGILE practices are critical from the outset.

A bad software design will prevent changes from being made, and will eventually kill your application. It is literally impossible to make any changes to a poorly designed code base. It’s called spaghetti code – everything’s so tangled up and messy that it’s easier to solve the proverbial Gordian knot.

(D) In other words: Start small, fail hard and fail often

There’s no point spending 10 years on a concept when you could have found out whether it would succeed in 6 months and with minimal funds. That’s why you gotta start small, and fail hard and fail often.

So now we have established that you need to build something minimally viable. In the next post we will discuss how to outsource the development of your software, and to do it successfully.