The title might be offensive for people working in a “Zero to One” phase. But it looks essential for me to stay foolish while planning and executing new businesses. I’ll explain why in this article.
Many successful startups began with a crazy idea
When you think of disruptive businesses, you probably think of startups. People tend to believe that people working for startups are intelligent and logical. But actually, they often are regarded as crazy at the point of founding.
Paul Graham, a founder of Y Combinator, a known accelerator, said that almost all startups’ ideas seem wrong and crazy at first glance.
For example, he mentioned Airbnb as follows.
When we invested in Airbnb, we thought it was too crazy. We couldn’t believe large numbers of people would want to stay in other people’s places. We funded them because we liked the founders so much. As soon as we heard they’d been supporting themselves by selling Obama and McCain branded breakfast cereal, they were in. And it turned out the idea was on the right side of crazy after all.
Staying at someone else’s home must have seemed to be a ridiculous idea. Many startups other than Airbnb, like Facebook, Uber, Twitter, Instagram, and PayPal, were refused investment from various investors. They could not prove that there was a market and their business could grow.
Why is being foolish essential?
It’s often said that “Google is the 10th search engine.” Many very successful startups started with an old idea that someone has tried many times before. In other words, those businesses appear to have failed in the past already. People may assume that such an entrepreneur will fail.
But often, what appears to have already been answered turns out to be completely different when you change a few factors. People judge success or failure by looking only at the concept and the surface of the product. However, in reality, success factors vary way more than one can imagine.
A good example is the comparison of Facebook and MySpace. The factors in the social networking business are as diverse as the following, to name a few that come to my mind.
- Which community to start acquiring users
- The core value of the product (Connecting people or music)
- Closed or opened
- Business models
- Penetration of internet
- Real name or anonymous
- Penetration of mobile devices etc
For a business to progress, decisions must involve many factors, as described above. There are many cases where one of these decisions has been the key to great success.
Before Facebook’s success, MySpace was the best social networking site. Many investors were betting against Facebook since it appeared to be a similar business. A situation where most people would disagree, but only that group of people think differently, is what “Staying foolish” is.
An entrepreneur, who believes in his concept and acts for it even if others say he is crazy, can grab incredible success.
The difficulty of successfully launching a new business within a big corporate
Big corporates have been trying to reform their business models and often launching new businesses in recent years. But there is a great difficulty for them. As an organization grows, there are more and more approval processes, and crazy ideas will get buried.
Stakeholders in a large company often complain about a new business saying things like “This will fail for X reason” or “We should rather invest in our core business.” A person in charge modifies the original unique idea to a boring, ordinary one so that everyone can agree.
With such ordinary ideas, you may have some success, but not great success.
Because such an elegant idea must have been realized by other companies, there is no more fruit for latecomers to reap.
Even tech giants such as Google, Amazon, and Facebook struggle to create new businesses other than their initial scaled businesses. The fact that M&A has become the mainstream method of business expansion indicates the difficulty.
How can we make people stay foolish in an expanding organization?
From an organizational perspective, how can we continue to launch Zero to One business?
I believe that two factors are essential. First, divide the organization into business development and expansion parts. Second, invest in people, not businesses.
Separate the new business team from the existing team
Prioritization is essential at any time in an organization. OKR, which has become common in recent years as goal management, emphasizes the concept of focus. On the other hand, measuring the core business and new business with the same scale isn’t easy. It is common for new businesses to be excluded from the scope of the company’s focus.
Today’s ever-changing market and business environment require us to change resource allocation frequently. We have to convince stakeholders continuously about the importance of new business every time there is a change in resource allocation. This explanation cost is much higher for the team than you can imagine.
Therefore, I propose to have a separate organization for the core business and the new business. This separation eliminates the cost of explanation and allows for long-term investment. However, separating new business teams in this way is different from the R&D organization in large companies. New business teams are not just for creating technology seeds but for developing the actual business value.
Invest in people, not businesses
Under the mindset of investing in a business, the investment may cease once the project is determined to be unsuccessful or has a low ROI. However, Under the mindset of investing in people, it is possible to pivot even if the first trial failed.
It’s true that venture capitalists who invest in the seed phase are interested in the market and the product of the startups. Still, many of them also place the highest priority on the team. This is because it is common for startups to make a pivot as they grow, and the most important thing is the team’s ability to deal with the challenges of the uncertainties that arise.
Staying foolish = Being insensitive
We have talked about creating crazy new businesses from an organizational perspective, but how do we as individuals “stay foolish”? The meaning of “stay foolish” here does not mean being a nut but rather being able to endure being continuously ridiculed by others.
I believe that staying foolish is close to being insensitive. The earlier stage that your business is, the more you will be constantly ridiculed by the people around you. If you do not have the tolerance not to care what people around you say, you will lose your motivation each time, and your project will lose its drive. And the wiser you are, the more you focus on the others’ opinions and stop trying. Without the tolerance to properly ignore the views of others, it’s hard to continue your business.
How can we stay foolish?
You can’t rely on the individual’s talent or skill to stay foolish. I believe that people can stay foolish by creating an organization or team that tolerates such people.
Even with a high level of insensitivity, it is mentally tough for people to continue working with no one to support them. Therefore, it is crucial to find teammates who will go along with unrealistic ideas and early customers so-called “innovators”. That’s why sometimes it is said that “startup is like a cult”. Keep attracting other foolish people is the critical element for a startup to become a new social standard.
As a side note, the video “First Follower: Leadership Lessons from Dancing Guy” is an excellent example of the cultic side of startups, where foolish people attract the other foolish.
https://www.youtube.com/watch?v=fW8amMCVAJQ
The approach in Ubie Discovery
At Ubie, which I have co-founded, we are committed to simultaneous multi-site breakthroughs. Although it is unusual for a startup, we’ve separated the company into PMF and growth teams to continue to create new business. Ubie Discovery is a Zero to One business development team, and Ubie Customer Science is a team for business growth.
In addition, Ubie Discovery has adopted an organizational framework called Holacracy, which allows members at each site to make decisions on their own. That way, we can eliminate unnecessary approvals for launching projects and keep teams innovative. At first glance, it may seem that we are abandoning the responsibility of maximizing ROI as management. However, I believe that doing so will allow us to continue creating new business and maximizing ROI in response to market changes.
Conclusion
We have seen why we cannot achieve great success in Zero to One business without being foolish and how to build a company that embraces crazy decision-making. I believe it is necessary for a new business to be crazy. I wrote this article for people who are committing to the idea that they believe in, even though they are ridiculed by stakeholders day and night.
We’re hiring
Ubie Discovery is always looking for people who can make crazy decisions. If you are interested in creating new businesses or solving social issues in healthcare, feel free to contact us.
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Ubie Global Team — We Are Hiring
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