Sunday Reads #135: The 6 secrets to building a future-proof business.
Gary Hoover studied businesses for 60 years, and this is what he found.
Welcome to the latest edition of Sunday Reads, where we look for cheat codes to life, business, and careers (sometimes we even find them!).
If you’re new here, don’t forget to check out some of my best articles: The best of Jitha.me. I’m sure you’ll find something you like.
And here’s the last edition of my newsletter, in case you missed it: Sunday Reads #134: A boring neuroscientist got more views than the Emmys??.
This week, let’s talk about building. Building a business that lasts. What are the key principles to build a company that can last a hundred years?
And other golden nuggets and link love, of course. How a logistics bottleneck in one port has brought global shipping to a standstill. The power of product-led marketing. And what to do when you see a $100 bill on the sidewalk.
Oh, and Elon makes an appearance too.
PS. Do subscribe if you haven’t 😊.
1. Six simple rules to build a futureproof business.
There are many secrets to building a successful business.
Better marketing. Great branding. Financial innovation. Cohesive corporate culture. And so on.
But all of these work only if you have the foundation right.
Gary Hoover is a business historian par excellence. He has been studying businesses for 60+ years. He's seen businesses succeed, and he's seen businesses fail.
In Six Simple Steps to Building A Great Lasting Company, he shows how nearly every successful business has the same foundation.
A foundation built on six simple principles.
#1: See or find a real need of society.
This one may seem obvious. Yet, so many startups get tripped up because of not keeping this in mind.
My favorite example of this is a "social network for pet owners". I talk about this in How to save yourself from a bad startup idea that looks good:
If you have pets, this sounds like a good idea. Sure, you can imagine posting photos of your pet parakeet on PetLife dot com, where others are waiting with bated breath to “like” them. Or, what’s far more insidious, you can imagine others around you loving this service.
I actually polled the audience during my lecture in IIM Trichy, and people loved the idea. But it’s bad on two levels:
• It’s erroneous to assume that if people say they like a product, they’ll use it. I might like 30 different websites, but that doesn’t mean I’ll check all of them every day. Given my limited attention span, the only social network I’ll use daily is Facebook.
• If you talk to 100 people and they all say they “know someone who would use this”, then you’ve found yourself a community of 100 almost-users. Or to be precise, exactly zero users.
What you have here, is a "sitcom startup idea". It's one that sounds plausible, but is actually bad.
A good heuristic to keep in mind - sell painkillers, not vitamins.
#2: Build a better mousetrap.
This one is interesting. The most interesting and novel of the six principles.
Conventional wisdom says: "Do you want to sell a faster horse, or do you want to sell a car?" Umm, car obviously.
In fact, if you google "better mousetrap", all you'll find is... actually, there seem to be a lot of people selling mousetraps on Amazon 😝.
Anyway, what I meant is, startup lore says, "Don't waste your time building a better mousetrap".
Pundits channel Steve Jobs: "Give people something they don't know they want."
Sometimes, it's Peter Thiel: "I build 0 → 1 businesses, kid."
But if you want to build a future-proof business, then your best bet is:
Build something people want.
Even if it's a tiny segment of people. But it's something they want. And they want it today.
#3: Improve your product or service every day.
This is critical. You don't stop at building a better mousetrap. You improve it every day.
With the power of compounding, a year or two later, the Before vs. After pic is magical.
You become an overnight success 😉.
As Hoover says:
There are a million things to distract leaders from their core products and services: financial engineering, big “transformative” deals, acquisitions, dealing with Wall Street’s analysts and Washington’s regulators, and on and on.
Those things may earn headlines. A shoe company making its shoes last a year longer does not.
But that’s what makes companies last longer.
Toyota is a great example of continuous improvement.
All car companies (and many others besides) have now copied Toyota's Production System.
But Toyota hasn't been standing still either.
Which is why, when the global semiconductor shortage hit, every car company suffered. Except Toyota.
How did they manage that?
As Cedric Chin says,
Reminds me of Fred Wilson's comments on degree of difficulty. I quoted him in Sunday Reads #84:
Unlike sports like diving or skating, you don’t have just one or two of three attempts to win. In startups, you get to show your stuff every day, all the time.
So the better approach is to pick something simple to execute, nail it, then build on it with another relatively simple move, nail that too, and keep going.
When, ten years later, you look back at what you and the team accomplished, it may well look like a reverse triple somersault with two twists in pike, and it will have been exactly that, and you will have won the prize too.
But you will have done it by doing the easier things perfectly thousands of times instead of the hard thing just once.
#4: Continuously listen to the customer.
Keep talking to your customer. Understand what they want.
Don't just listen to them. Watch them.
Shaan Puri has spoken about how, when he started Bebo (later sold to Twitch), he visited Twitch streamers to see how they work.
He didn't only talk to them. He sat on their beds and watched them stream. For hours at a stretch!
That's where insight comes from.
#5: Be ambitious and grow.
This is self-explanatory.
Growth is important. Stagnation is decline. Stasis is death.
#6: Believe in yourself.
This may seem like motherhood and apple pie. But it's actually quite strategic.
If there's anything that increases your chance of success, you should do it. Even if it's "irrational" belief in yourself.
As I wrote about Tiger Global in Sunday Reads #125: The Fast and the Ferocious,
If believing in yourself helps you succeed, then why shouldn’t you believe in yourself?
You will imagine a future anyway, with worry, anxiety, etc.
Why not imagine a future where you win?
2. When you see a $100 bill on the sidewalk...
Something very interesting happened on Twitter this week.
The founder of Flexport, Ryan Petersen, toured the Long Beach port in LA. The same port whose congestion has caused a supply chain crisis across the world.
Lots of intelligent people have thought hard about this problem.
JP Morgan even wrote a detailed research report on the topic (entertainingly titled Dude, Where’s My Stuff?).
Anyway, so Ryan toured the port, and wrote a Twitter thread making one specific suggestion to resolve the blockage.
And within 8 hours, an executive order was passed by the government to make it happen!
Read his entire thread here. As Sriram Krishnan said:
But the meta-lesson here is this:
Most markets are not efficient.
There are often $100 bills lying on the sidewalk.
What may be obvious to you may not be obvious to everyone. What may be obvious to everyone may not get spelled out.
So here you are: You've seen that $100 dollar bill. Now, you can theorize for hours as to whether it's fake.
Or you could, ya know, pick it up!
3. The power of product-led marketing (and Elon).
I was amazed to see this chart about the R&D and marketing spends of the top auto majors.
Tesla's ability to spend *zero* dollars on marketing (except Elon's time on twitter) gives it such a strong advantage in innovation.
And when you're working on the bleeding edge of tech, even a tiny advantage can make all the difference.
That's it for this week! Hope you liked today’s edition. Drop me a line (just hit reply or leave a comment through the button below) and let me know what you think.
Would love if you could also share it on Twitter so more people can see it. Thanks a lot!
Until next time, wish you good health, safety, and sanity.
Jitha