Great Innovators Challenge Their Own Assumptions
I spoke last week at the European Innovation Academy. My audience was almost 300 students and faculty from university engineering programs around the world.
They are here for a 3-week full-immersion program on creating new innovations and successfully launching them into the marketplace. Not surprisingly, the students are all incredibly smart and passionate. Every one of them passionately believes that they can change the world.
So the message I wanted to deliver to them was to be aware that passion can sometimes blind you (in love as well as in startups).
As an entrepreneur, once you are in love with your startup idea you tend to ignore evidence that runs contrary to what you want to believe. Many startups have failed because of this (I know; I’ve killed a couple this way myself).
I began my presentation with a quote from Harvard Business School professor Howard Stevens. He defined Entrepreneurism as “The pursuit of opportunity without regard to resources currently controlled”.
Most young entrepreneurs will see this quote and they will read “resources” as “money”. They believe they have everything else they need: the passion, the knowledge, the skills. Now if they can just raise some yummy venture capital, their startup will take off like wildfire.
And yet there have been many startups which have raised huge amounts of capital and failed spectacularly. Others have raised very little money and grown into very successful ventures. So the evidence is that the key resource isn’t actually money. I think it’s knowledge.
“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Mark Twain
The knowledge that you know you don’t have is easy to fix. You can learn it. But the things “you know for sure” but are just simply wrong will sink you every time.
When an entrepreneur gets an idea for a new venture he is very excited about it. He is head over heels in love what what an amazing idea he has. And he knows for sure that he has found an opportunity. Now he’s at risk to fall into two nefarious traps that are built into the human brain.
Confirmation Bias is a deep-rooted human trait. As humans, we tend to notice all the things around us that confirms our personal beliefs, and we dismiss the things that might suggest that our beliefs are wrong. My kids are the greatest kids ever. I notice everything about them that confirms this belief.
The Echo Chamber Effect is also a very human thing. We are social animals, and so we tend to surround ourselves with friends who think like us, who have had similar experiences, who hold similar beliefs. Politically, for example, I’m a pretty die hard liberal Democrat. And it turns out that most of the people I’ve chosen as my close friends are also liberal Democrats. So when we get together for dinner we pound the table and violently agree with each other. That’s the Echo Chamber Effect.
So once an entrepreneur chooses an idea to pursue, he begins to see confirmation all around him. And once he starts bouncing the idea off his friends, he finds that all of his friends love it. Confirmation Bias and the Echo Chamber effect. They make you feel good, but they’ll sink your startup.
So purposely look for evidence that your idea is wrong or needs to be adjusted. And purposely break outside your social circle in order to find other people to give you input on your idea.
I think 2016 is the best time ever to be working on an innovative new product or service. One of the reasons is because the tools available to actually test your assumptions – before actually building your product – are enormously powerful and ridiculously inexpensive. The market data available on Google Trends can give you instant insights that a generation ago would have required a $100,000 market research study. A/B tests on Google or Facebook can by funded for less than $50. Or just create a free Survey Monkey questionnaire and post it to social media. You will get salient input that will help stop you from building the wrong product.
Testing your assumptions doesn’t stop once the product is built. Digital products today should have analytics tools built into them so that each new feature you add is informed by deep insights into the way that the current features are being used.
So use metrics to prove that your assumptions were wrong and then celebrate that you were wrong (but smart).
Passion is the fire that powers entrepreneurs. Remember that tempered steel – the strongest steel – is achieved by alternating fire and cooling water. So use your passion to power your venture but then test your assumptions with cold data. If you do that, you’ll build a strong foundation for the new venture.
The last word on this? Well, we’ll give the last word to Warren Buffet: As you examine a business opportunity, remember that “the human mind tends to reject discordant information, much as the body rejects transplants. Man’s natural inclination is to cling to his beliefs, no matter what. That’s not good business strategy”
Congrats to all the students in the 2016 European Innovation Academy. Now go build some great companies!