5 Myths That Can Kill a Startup

79 Comments

Enroll in an academic program, make friends with some of the other really smart students, drop out of school with them to create a company, work 80 hours a week and one day, ka-ching! This is the startup formula to success that the media would have us believe — the new American dream, as it were. Granted there are some notable entrepreneurial dropouts who have made it big, among them Bill Gates, Larry Ellison, Steve Jobs and more recently, Mark Zuckerberg. But while many of us are familiar with the paths they’ve taken, such paths are simply not the ones most entrepreneurs walk down to ultimately find success.

We work with entrepreneurs everyday and as such, see the much less newsworthy but far more common success stories that dot the startup landscape. To that end, we wanted to share five myths that we’ve discovered lurking around the startup world and demystify them.

Myth #1: Hire Smart People and Let Them Do Their Magic

Truth: Hire Stars and Let Them Do Their Magic

Intelligence is important, but only insofar as it helps with performance and execution. As Malcolm Gladwell points out in “Outliers,” while some minimum level of intelligence might be necessary for superior performance, in many jobs it’s not in and of itself enough to ensure it. You need people willing and able to work as part of a team, and sometimes superior individual contributors can negatively affect team performance by creating affective or role-based conflict (for more on those, see Myth #3 below). As Reed Hastings puts it, you should eliminate all brilliant jerks from your team.

The fact that intelligence alone is not sufficient is especially true for leaders. Emotional and social intelligence, sometimes referred to collectively as EQ, are much more highly correlated to successful leadership and change than IQ. Consider reading Richard Boyatzis’ books “Primal Leadership” and “Resonant Leadership” to understand how critically important being “mindful” or socially and emotionally intelligent are. Interestingly, Thomas Stanley, a PhD who studies rich people, has identified the most highly correlated characteristic to wealth as integrity.

Myth #2: It’s About Your Great Idea

Truth: It’s About Your Customer

Many aspiring entrepreneurs are waiting to come up with the killer idea that will rocket them into fame and fortune. The reality is that ideas are a dime a dozen and even the best ones must be launched at the right time. Too early and there is no demand for your product, too late and you’ve missed the market. It’s much easier to fulfill an existing need with your product than it is to convince people they need it in the first place.

In other words, it’s about your customer. Start by A/B testing your products to get real user feedback on different features and designs. Adaptive experimentation, defined by the American Marketing Association as “continuous experimentation to establish empirically the market response functions,” has been shown (PDF) to be critical when it comes to successfully creating viral growth.

Myth #3: Conflict Is Bad

Truth: Affective Conflict Is Bad; Cognitive Conflict Is Good

Research shows us that some conflict is good and some conflict is bad. Cognitive, or good conflict, helps companies eliminate groupthink and open up strategic possibilities. That’s because cognitive conflict is characterized by healthy debates about “what” to do and “why” to do it; it thus generates multiple strategic choices and allows us to weigh options. It also helps us think more clearly and broadly about our competition. And from a biological standpoint, it stimulates the parasympathetic nervous system, creating a positive emotional state which in turn supercharges our brains. Indeed, cognitive conflict has been shown to increase firm performance and shareholder wealth.

Bad conflict is sometimes termed “affective conflict” and is usually role-based, as it consists of heated arguments about “how” to do something or “who” should be in control of doing it. Unlike good conflict, it’s been found to destroy morale and decrease firm performance. Not only does it stimulate your sympathetic nervous system, kicking off the “fight or flight” syndrome, the chemicals released by your body in the process limit your thought processes, so focus is put on the conflict rather than the opportunity.

Myth #4: It’s About Hard Work; Don’t Expect to Have a Life

Truth: It’s About Results and You Need a Life

Some companies have an unfortunate culture that mandates relentlessly hard work. When things get tough, people work harder. When things are good, people work harder still to try to keep the “good times rolling.” But this cycle of doom will ultimately fail as people burn out, get sick or simply quit.

As Reed Hastings outlines, and as we discussed in Myth #1 above, what’s more important is employee effectiveness. Certainly you want people who are intelligent enough to get the job done and who will work hard enough to accomplish the mission. But effectiveness, not hard work or intelligence, ultimately drives firm performance and shareholder value. This ability to start a company and have a life isn’t just for lifestyle businesses.

Myth #5: It’s an Uphill Battle Until One Day, When It All Comes Together

Truth: It’s a Rollercoaster Ride

Many aspiring entrepreneurs have been led to believe that the trajectory of a startup involves working really hard until they land one big customer or release one perfect product and after that, it’s easy street. The reality is that it’s a rollercoaster ride, with ups and downs that rarely let up. On Monday your company is sure to be worth $1 billion but by Wednesday you think you’ll run out of cash next quarter even though by Friday you’re positive your company’s next product idea will do nothing short of revolutionizing the industry. As Paul Graham notes, “In a startup, things seem great one moment and hopeless the next. And by next, I mean a couple hours later.”

79 Comments

Eric Cox

I agree with ifstone – the “Get rid of the brilliant jerks” idea is a bit oversimplification. It also ties in with “affective conflict vs cognitive conflict”: you have to ask yourself why a person seems to be being a jerk. If one of your brilliant people is constantly asking his/herself “Why am I having to do this guy’s job for him?” or “why was this person ever hired?”, he or she may turn into a bit of a jerk. Any role-based conflict is a sign of a bigger problem: probably that roles have not been properly defined and/or enforced by the leader.

Eric Cox

I agree with ifstone – the “Get rid of the brilliant jerks” idea is a bit oversimplification. It also ties in with “affective conflict vs cognitive conflict”: you have to ask yourself why a person seems to be being a jerk. If one of your brilliant people is constantly asking his/herself “Why am I having to do this guy’s job for him?” or “why was this person ever hired?”, he or she may turn into a b

Kyla Biegun

You meant that conflict stimulates sympathetic not parasympathetic, right?

Marty Abbott

Hi Kyla,
Cognitive conflict can (the emphasis is on CAN rather than WILL) stimulate the parasympathetic nervous system as long as that conflict leads to new paths, new opportunities and a sense of hope and vision. In this case, it’s related to what complexity theorists would cause a “Lorrenz Attractor” and what Richard Boyatzis calls the “positive emotional attractor” within his Intentional Change Theory. Hope and vision are key to the exercising of the PNS.
If left alone, cognitive conflict can escalate to affective conflict.

Affective conflict stimulates the sympathetic nervous system closely related to the “fight or flight” symptoms of which we are all familiar. Thanks for the question!

DAVILA CAPITAL

It was a pleasure to have read your feed on misconceptions about start ups. Anyone looking to start their business should read your insight.

Regards,

DAVILA CAPITAL TEAM

Bob Light

A very good summary, with excellent additional points made. My only comment is around #4. While it is a fact that at times working, especially at a startup, demands extra hours, the owner/management team must recognize and compensate the employees who in good faith and effort give up their time. That acknowledgemennt/comp can take many forms and doesn’t have to be cash, but in my opinion a happy, motivated staff is more focused and thus the foundation of success. This should also apply to partners as well……

Eric Janssen

To Myth #2: It’s About Your Great Idea, Truth: It’s About Your Customer – so true. Hearing the angel investor lessons learned speech so many times, I’ve heard often that an investor would much rather have a business with passionate customers than a business with a passionate owner! When looking for a business idea, look for a bleeding neck wound. The bigger the pain, the bigger the problem, the bigger the opportunity for the entrepreneur/investor.

Great post.

Vikash Shah

currently working on a startup idea and the point that really struck out to me was the A/B testing.

don’t plan everything out, b/c your market may want something different that you think

great article, keep them coming

qqqqaaaaa1234

Well, Yeah!
HIRE ALL THE BRILLIANT PEOPLE!
theyr teh utimate jerks!

qqqqaaaaa1234

Soz, I mean, FIRE all teh bright pplz cuz theyr teh ultimate JERKS!!! Every dimwit would agree and theyr like 99%!

Bettina Bennett

Michael, Marty,

Thanks. Great article! “Stuff” you think you know when you are the founder and CEO of a start-up, and then you realize that in the daily grind of living on the edge, you may have forgotten some of it. It’s good to know that we are not all that “crazy” after all …

StartupSurvivor

As for #4, I wonder if there are any startups that have succeeded where most employees were on a 40-hour week with long lunch and social breaks? I can’t say what it’s like now, but Microsoft, for example, certainly used to have a reputation along the lines of, “We’re flexible. You can work whatever 80 hours per week you want.” At any rate, I’d like to hear of a successful software startup which really does have an enforced work-life balance, with 35-40 hour workweeks. Come to think of it, I think Joel Spolsky makes that claim of his company, but I’m really doubtful that’s the norm.

Serialpreneur

These don’t apply to all businesses. There are businesses where every one of these rules fails.

Marty Abbott

Hi Vishal,
Thanks for the question. The key point we are making here is that some level of intelligence (i.e., smarts, IQ, brains) is necessary but that intelligence alone is not sufficient in a team environment for success. Scholarly research proves this out repeatedly. Where teams are important to accomplish a mission, teamwork is also necessary. People who are incredibly intelligent but consistently unwilling to cooperate within an otherwise high performing team are dilutive to team value creation.
Weeds of any variety, whether they be under performers or counterproductive individuals should be pulled such that the garden (your team) can flourish and reach its highest potential.
“Stars” is a term in recognition of people who are intelligent enough to accomplish the tasks (they may in fact be geniuses and in some cases genius IQ might be necessary), mindful and respectful of others, committed to the culture and success, and who consistently produce as part of the team.

Xbox mania

lol.. funny at few points. But, hiring smarter and stars together would definitely make up for a good startup!

Sometimes, it’s also about hard work..(myth 3) maybe a great idea would make it much more viral as well!

Nice writeup! Yet, to build my own startup.. God knows!

Derek

2 says it all. A lot of “engi-preneurs” think that the product can exist in a vacuum, when the truth is there is no product without a customer… just a piece of technology.

ifstone

“absolutely agree. You should eliminate both the brilliant jerks and the weeds of your team.”

No, I think you’re missing the point. Human relations are extremely complicated, which is why management is a black art that’s not amenable to formulas prescribed in most business books. There are some good points in four of these myths, but people problems are complicated and you don’t want to throw the baby out with the bathwater. This is especially true since merit is so often clouded by politics.

ifstone

“you should eliminate all brilliant jerks from your team”

This is more complicated. Sometimes brilliant people become jerks because there are dumb jerks on the team. No point in getting rid of the brilliant jerks and keeping the dummies.

Dan | Ask Dan and Jennifer

Ifstone, sorry, not seeing the point in keeping the jerks. your team is like a bunch of apples, jerks “rot” morale. in my personal opinion, there are plenty of sharp + competent and socially/emotionally mature people out there. then again, to each their own “team”. :-)

Have an awesome day!
Dan

ifstone

I’ve been on teams with smart people where things meshed well and I was a team player. I’ve also been on teams with imposters, childish types and folks who should never have been hired due to lack of technical knowledge, and I wasn’t much of a team player.

It’s angered me a couple of times to be branded “difficult” because I don’t work well with poor performers who themselves are not team players (usually because they know they’re not very good and afraid of people finding out).

These issues are far more complicated than “yank the brilliant jerks.” Ask Steve Jobs, Brilliant Jerk of the Century.

Romario Gonzales

Myth #3: Conflict Is Bad is the most instructive among the others. It motivates one to think towards the reality.

Just think about “what” you should be doing and “why”, instead of “who” and “how”.

Andrew

I think the biggest myth, is the idea of an overnight success. Most people think that all you need to do is get a product out there, and within 2 months you’ll have millions of users.

Dan | Ask Dan & Jennifer

Brilliant post, well said indeed. As a serial entrepreneur, these points are right on the money…

LOL on the brilliant jerk concept, it definitely isn’t just about IQ points however helpful those can be. In a way it’s like having an incredible supercomputer, but if you can’t interface it to anything, then it’s just a big expensive paperweight.

Have an awesome day!
Dan

Andrea Favale

The article is reasonably interesting although I have no idea where you get this list of myths. I don’t think any serious entrepreneur or investor would think these are myths of the serctor. Maybe n.4 a bit but there’s always been controversy about it.

Daniel DiRico

Great article! I was happy to read Myth #5 as it proves that “startup bipolar disorder” or SBD is normal and can be effectively treated by Myth #4.

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