There are a lot of discussions about the relative importance of an idea versus execution in a startup; Quora 1, Quora 2, TED, Blogs, The Innographer, Others, Paul Graham and Derek Sivers. For the most part, more recent literature has had a bias towards devaluing ideas and correctly valuing execution, probably largely due to lean thinking and the historical over-importance of ideas.
The major flaw with arguments that pit execution and idea against each other is that they make the implicit assumption that ideas are stationary, that there is some magical line in the sand where an idea gets handed over to be executed and never again will the two meet. But what if we viewed a startup as two creations, the first one mental, the second one physical?
What we have is a startup that exists twice; as a conceptual version and as a physical version. To improve the physical version, we first need to improve the conceptual version, i.e. we need to learn.
Broadly, there are two ways of learning; through Experience and Independent of experience. Experience is execution, its experimenting, its the lean startup, its the second creation. Independent of experience is learning from secondary data and others, because some things you can learn without doing. Importantly though, the most important things in a startup you can only be confident in by doing, especially if your startup is different to what has come before. (See note 1)
Put simply, a good startup idea is an educated hypothesis about;
- what value to create
- how to create and deliver that value, and
- how to capture and retain a significant number of customer/s.
BUT — You can never know that what you are doing is the right thing, the only thing you can do is become more and more confident you aren't doing the wrong thing.
What the current batch of arguments that say that execution is more important than the idea are really saying, is that once you have an idea (A first creation) that could work (i.e. You are confident enough that it could work) it is important to start executing (i.e. creating the second creation). They say this because;
- You can never know the future, you are just trying to be confident enough about your hypotheses to commit to make a bet on the future. (See note 2)
- The evaluation of the idea is done by three parties; The idea holders, everyone else and history. The only way to prove you have a good startup idea is with a history of good execution.
- The only way to become more confident (and convince others, like investors) that you aren't wrong is through execution, i.e. to have learnt by doing.
As your second creation is created, you will learn things to improve your first creation, your idea. You will begin working on your business, as well as in your business. In the future, when you hear someone speaking about ‘working on your business’, you know what they mean, you are working on improving your first creation, your idea, the conceptualisation of your business. (See note 3)
So the common argument that an idea is nothing without execution is the wrong one to have. Having an argument about idea versus execution is irrelevant. The argument to have, when all you have is an idea, is over what can be learnt only through execution and what and how much you need to learn independent of experience in order to begin executing. (See note 4)
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- There are some things you can learn without having to do them yourself and there are some things you can’t. For example, You can know what consumers will pay for similar products without experience, but you can only know what consumers will pay for your product once you start selling it to them.
- If you look at a startup as a learning journey with a series of hypothesis to be tested about value creation, distribution and capturing, there are 3 significant learning milestones to achieve. Or rather, there are three significant confidence levels you need to hit. The first milestone is for the entrepreneur to be confident enough to commit time and energy into making the second, physical creation. The second milestone is the confidence level needed to convince a funder to exchange capital for equity. The third milestone is when the board is confident enough that the startup has found a repeatable and scalable business model. I will write something more extensive about this.
- If someone is speaking to you about their startup idea, i.e. pre-execution, they are either looking for things they can learn, or they are using you as a crutch to postpone executing. So a useful response for you to have, is either; 1 — Is there something I have learnt that will be beneficial to improving some part of this idea or 2 — Is this person using me as a crutch because they aren’t confident enough to start executing. You can then plan your responses accordingly, for example if they need confidence you could say “Wow, if consumers preferred your value x over competitors, this could work, you should just try start by selling x”.
- The more complex the business model, as defined by the number of different exchange groups (i.e. multiple customer/consumer/partner groups),the longer it is normally necessary to stay in pre-execution idea phase, because there are more educated hypotheses needed.