fm Entrepreneur.com 19 Feb 16 enhanced by Peter/CXO Wiz4biz
As Clint Eastwood once said, “A man’s got to know his limitations.” Every new entrepreneur soon realizes he or she has some big ones, but very few figure out how to use these them to their advantage. I believe that the resourcefulness to turn constraints into competitive differentiators & new opportunities, is a trait that separates the great Entrepreneurs from the “wannabes.”
The Facebook business model of offering a product “free” to customers – while gaining revenue from advertising – was born out of the need to survive as a business while offering a fun service. By contrast, as a startup investor, I still see too many entrepreneurs looking for another check to keep them going — without any convincing plan to ever be self-sustaining.
Downfalls of Funding. Smart entrepreneurs understand that more funding often comes with cumbersome constraints on who is in control, what can be done by whom, & who gets to share in the returns. These founders follow alternative strategies, including the following, to push themselves & their team harder for innovative & less expensive approaches to a complete product, advertising & new markets.
1. Do it Yourself [DIY] with new tools rather than hire outside help. New Entrepreneurs look for creative solutions to problems that are inhibiting progress, rather than the conventional solution of out-sourcing or hiring people. For example, many founders now use makerspaces – such as TechShop – to build prototypes without the costs & long lead times of manufacturers.
2. Focus on 1 top Productivity Bottleneck each week. Startups funded by large venture-capital [VC] investments rarely think about productivity. I can think of cases where executives actually created “make-work” activities to keep idle people on the payroll – in case they might be needed later. It’s better to use creativity & tools to find better ways of doing things.
3. Use BiG Constraints to drive Innovation. Doing things the way they have always been done, only works with unlimited resources. Constraints are great motivators to finding a better way, or maybe even deciding that something doesn’t really need to be done at all. Sometimes the quality of a result is “inversely proportional” to the amount of money spent on it.
4. Strategically reduce the Budget on your most expensive Projects.
It always amazes me how work expands to exceed any deadline or budget, and, conversely, how the important work still gets done when budgets & staffing are cut. Apply the 80/20 rule for maximum value, and urge people to work more efficiently on the 20% most important things (that gets 80% of the results), rather than longer hours.
5. Find Partners to Complement your Strengths. If you have a great product and need customers, find a partner with many customers who needs a new product. If your strength is building businesses, find a partner who is a technologist. These are many win-win situations requiring less resources & time for each side.
6. Look for Disruptive Solutions rather than Linear Innovations. Without constraints on pricing & size, computers could still look like mainframes – rather than fit on your wrist. The most successful & innovative solutions come from understanding & honoring constraints — rather than feeling like the victim of limitations.
7. Create “new” Business Models & new ways to measure Value. The focus in recent years on social issues & saving the environment has created whole new industries – including solar power & the electric automobile. On the business side, we now have the subscription model, the free-mium model & others. There is still room for many more.
8. Savor the Challenge. Entrepreneurs need to celebrate the fact that constraints & limitations are sources of opportunity in the marketplace, and sources of profit & competitive advantage inside the business. Get past the “victim” mentality — where every limitation is seen as an inhibitor to the realization of your Vision.
Conclusion: The challenge of being an entrepreneur, is in being able to turn constraints into advantages for fun & profit, and enjoy the journey as well as the destination. Are you having fun yet in your new venture, despite the limitations? Share that info in the Comments.