"Because We Can" is Not a Good Reason
The two business books that have most influenced me are Geoffrey Moore’s Crossing the Chasm and Andy Grove’s Only the Paranoid Survive. Grove’s book explains that, for long-term success, established businesses must periodically navigate “strategic inflection points”, moments when a paradigm shift forces them to adopt a new strategy or fade into irrelevance. Moore’s book could be seen as a prequel, outlining strategies for nascent companies to break through and become established themselves.
The key idea of Crossing the Chasm is that technology startups must focus ruthlessly in order to make the jump from early adopters (who will use new products just because they are cool and different) into the mainstream. Moore presents a detailed strategy for marketing discontinuous hi-tech products, but to my mind his broad message is relevant to any company founder. You have a better chance of succeeding if you restrict the scope of your ambitions to the absolute minimum, create a viable business and then grow it from there.
This seems obvious: to compete with companies who have far more resources, a newcomer needs to target a niche where it can fight on an even footing with the big boys (and defeat them with its snazzy new technology). Taking on too much means that financial investment, engineering talent and, worst of all, management attention are diluted by spreading them across multiple projects.
So why do founders consistently jeopardize their prospects by trying to do too much? Let me count the ways.
In my experience the most common issue is an inability to pass up a promising opportunity. The same kind of person who starts their own company tends to be a go-getter with a bias towards action, so they never want to waste a good idea. In the very early stages this is great. Creativity is all about trying as many ideas as possible and seeing what sticks. But once you’ve committed to something that you believe in, taking more bets doesn’t increase your chances of success, it radically decreases them.
Another mistake is not recognizing quickly enough that a project has failed. Failure is rarely total. Every product will have a core group of passionate users or a flashy demo or some unique technology that should be worth something, dammit! The temptation is to let the project drag on even as you move on. Better to take a deep breath and kill it off so you can concentrate on your new challenges, rather than letting it weigh you down for months or years… until you inevitably cancel it anyway.
Sometimes lines of business need to be abandoned even if they are successful. Let’s say you start a small but prosperous company selling specialized accounting software to Lithuanian nail salons. You add a cash-flow forecasting feature and realize after a while that it is better than anything else on the market. Now you have a product that you can sell to any business in any country. But you might as well keep selling your highly specialized accounting package in the meantime, right? After all, it’s still contributing to your top-line revenue. Wrong! You’ve found a much bigger opportunity now and you should dump your older business as soon as financially possible.
Last, but certainly not least, there is the common temptation to try to pack too much into a new product. I’ve talked to many enthusiastic entrepreneurs who are convinced that their product will be complete garbage unless it includes every minute detail of their vast strategic vision. What they don’t realize is that it is going to take much longer than they think to develop something far simpler than what they have in mind. This is where all the hype about the Lean Startup and Minimum Viable Products is spot on. They force you to make tough choices about what you really need before going to market. In the early stages you should be hacking away big chunks of your product spec with a metaphorical machete, not agonizing over every "essential" feature you have to let go.
The common thread is that ambitious, hard-charging individuals, the kind who start companies, have a tough time seeing the downside of plugging away endlessly at old projects, milking every last drop out of old lines of business and taking on every interesting new challenge that comes their way. But if you don’t have a coherent, disciplined strategic view of what you are trying to achieve, if you aren’t willing to strip away every activity that doesn’t contribute to this vision, then you probably aren’t working on the right things.