4.2. Are You Ready?

“According to the book Super Founder, by Ali Tamaseb, around 60 percent of the founders of billion-dollar startups started another company before their wild success and many lost a ton of money. Just 42 percent of them had a previous exit of $10 million or more, so the majority “failed” by the standards of venture capital.

But they came out on the other side with a basic mental model of a startup. They understood the operational details and what it might look like if that tiny startup became successful. That’s it. That’s the magical key to success.

Our Stanford colleagues Perry Klebahn and Jeremy Utley made the “add nothing unnecessary” philosophy a cornerstone of their ten-week LaunchPad class. As we said in chapter 3, more than a hundred companies have been founded by LaunchPad students since 2010, and more than 50 percent are still alive in some form. Perry says each founding team is taught to experiment with one or a few narrow prototypes at a time and to assume they won’t be able to predict which offerings customers will want. That means most teams will need to keep abandoning and changing offerings before creating an offering that customers want and will pay for—and will generate enough revenue over the long haul to build a company. As a result, Perry and Jeremy teach students not to take or to delay, many steps that other entrepreneurial classes and investors preach as essential for starting a company. For example, many start-up experts recommend writing a detailed business plan to help founders flesh out and explain their product or service, financial model, target market, and backgrounds. Perry and Jeremy do teach students to keep iterating a three-to-five-minute pitch, because potential investors, employees, and customers will want to know what your company does. Perry and Jeremy also coach strategic inaction, because they believe that writing a detailed business plan is useless or worse. That’s because the company’s offering (and target customers) will almost certainly keep changing. Founders who work hard on writing a perfect plan, Perry and Jeremy argue, waste time that is better spent prototyping, iterating, and learning. And—since labor leads to love—all that effort can cause founders to become irrationally attached to bad early ideas. Perry and Jeremy aren’t alone in their dim view of business plans. A study of seven hundred start-ups led by David Kirsch of the University of Maryland found no relationship between the quality of business plans and whether start-ups received venture-capital funding. Carl Schramm, economist and author of Burn the Business Plan, argues that Amazon, Apple, Facebook, and Microsoft never had business plans, and “empirically, it appears as if you don’t need a business plan.” In short, before you heap some burden on people and eventually figure out that it wastes their time (or worse), slow down and ask, “Suppose we did nothing?

“1. Pause to Start Right

When you launch a new project, team, or organization, pause to consider the talent, roles, norms, and resources that you will need to succeed. A great way to begin is to harness the human capacity for imaginary time travel: Pause to pretend that you have succeeded (a “previctorem”) or failed (a “premortem”) and write a story about the events that led to your wonderful or awful fate. Then build those lessons into how you design and do your work. Psychologist Gary Klein uses premortems to help teams identify dangerous risks and delusions. Gary asks teams to imagine that it is, say, a year after they’ve made a decision, and it is a massive and unambiguous failure. People look back from that terrible future and develop lists and stories to explain what happened. Gary’s research finds that premortems are “a low-cost, high-payoff” method for making better decisions and running better projects. Huggy Rao and his Stanford colleagues conducted a “back to the future” study that suggests doing a previctorem, in which you pause to look back from an (imaginary) successful future, may be even more effective than doing a premortem. Both forms of time travel can improve decisions and designs because treating an event as if it did rather than might happen—thinking about it in the past tense—makes it seem more concrete and likely to happen, which motivates people to unpack its nuances....

2. Ask Questions That Make People Stop to Think—Before They Do Something Stupid...

3. Where’s Your Times Square?

We learned this lesson from Becky Margiotta, who led the 100,000 Homes Campaign that we talked about in chapter 1. Becky is now CEO of the Billions Institute, where she advises leaders of nonprofits and government organizations on how to imagine and implement large-scale change. Becky has many impatient clients who want to go big with half-baked and unproven ideas. She asks them, “Where’s your Times Square?” That’s because, before she led the nationwide 100,000 Homes Campaign, Becky was hired by Rosanne Haggerty, founder of the nonprofit Community Solutions, to reduce the homelessness problem in New York City’s Times Square by two-thirds over a three-year period. That goal turned out to be unrealistic—it took five years. Becky’s team spent from 2003 to 2007 on the Street to Home initiative in Times Square. It took them until 2007 to develop the mindset, skills, and methods for tackling the problem, but that year, they surpassed their original goal and achieved an 87 percent reduction in street homelessness. It was a long, frustrating slog. Becky’s team tried many methods that failed before they figured out what worked. For example, it took them years to identify who was homeless in Times Square. They finally learned the best way to “get the count” wasn’t to visit Times Square during the day and to ask people if they were homeless. It was to go out at 5:00 A.M. and count the people sleeping there. They also learned to find homes first for people who had been homeless the longest and who suffered from the most severe health problems—because they faced the greatest risk of premature death. Becky says that, without those five years of frustration, failure, and—eventually—development of a “playbook” that would work elsewhere, she and Rosanne couldn’t have launched the 100,000 Homes Campaign in 2010. And the campaign wouldn’t have reached its goal of finding homes for one hundred thousand chronically homeless Americans as it did on June 14, 2014....

At Rippling, Parker’s approach was the opposite of what he did at Zenefits. In 2021, Parker admitted, “it was almost too easy for us to close customers early on” at Zenefits, and leaders made the mistake of believing that their employees could do the manual work for clients “with an eye toward automating those processes afterward.” They were wrong. The bigger Zenefits got, the harder it was to automate processes. Parker said that employees were doing so much manual work that costs soared and profits plummeted, and “that’s when a lot of things started to come apart.” In contrast, during Rippling’s first two years, Parker said, it was “basically me and like fifty engineers.” They focused on building a robust product, on “pruning any operational function and trying to replace it with software.” Parker prohibited employees from doing the manual chores that Zenefits employees did. Parker insisted, instead, that Rippling employees work with customers until they developed sound automated solutions. To assure that engineers understood customers’ needs and challenges (and to save money), Rippling didn’t hire any customer support staffers in those early years. Parker said, “I was personally doing—and the engineering team was personally doing—all of the customer support.” Parker learned other lessons from Zenefits that he applies at Rippling, including selling bundles of software to customers rather than individual products—and developing each kind of software, from the start, so it is easy to integrate with other Rippling products. Parker’s focus on getting things right before going big, and other lessons he learned the hard way at Zenefits, seems to be working. By May of 2022, venture-capital firms had invested almost $700 million in Rippling, and it was valued at $11.25 billion—nearly twice as much as Zenefits’ $6.5 billion in its (brief) heyday...

The struggles that we’ve seen in so many teams provoked us to suggest, and sometimes coach and lead, an exercise that Harvard Business School’s Tsedal Neeley calls “a team relaunch.” This intentional pause entails convening one or two meetings in which a team considers its goals, norms, rhythms, rituals, and use of resources. The team starts by discussing what is working and what isn’t. Then members decide what ought to change and how to implement their decisions...

Members generate wild and practical ideas about norms and practices that once worked but now get in the way. The team then selects up to three of these “targets” and commits to getting rid of each. Next, Kathryn guides them in “the strengths game,” following Gallup research that shows the best employees and teams play to their strengths. The team identifies and rallies around a few cherished norms, skills, or strategies that are (and will continue to be) crucial to their performance and sanity...

5. Use Friction to Create Cadence

Friction fixers can dampen confusion, reduce wasted effort, enhance coordination, and strengthen relationships by slowing down to implement routines and rituals that create a shared cadence...

John emphasizes that, as Mozilla grew from one team to multiple teams, rather than adding a lot of rules and specialized roles to bolster coordination and communication, his leadership team developed a “drumbeat that the organization marches to.” As Mozilla grew to roughly fifty people, confusion emerged—especially among newcomers—about how to fit in, whom to talk to and work with, and when to ship changes in code. Life got less chaotic after Mozilla’s leaders added a “closed” meeting every Monday where they made decisions and plans. Later that day, the leadership team convened a company lunch and an all-hands meeting where they announced goals, answered questions, and talked about challenges Mozilla faced. When Mozilla grew to about eighty people, the leadership team added more “pacing mechanisms,” including data reports every night at seven (to help people make short-term decisions) and quarterly company goals (to help people blend individual and collective efforts). Then, when Mozilla grew to about 120 people, and companywide goals were too vague, the top team added quarterly group goals. Mozilla also started holding a worldwide summit every two years for employees, people from outside the company who wrote open-source code for Mozilla, and other key stakeholders, as a “time to see everyone, reconnect, and remember humanity.”...

6. Communicate a Lot, or Not at All

Shared rhythms also help people get work done and avoid exhaustion because they know when to work with others and when to work alone...

Patty McCord, who was Netflix’s chief talent officer for the company’s first fourteen years, told us, “The most important role I played at Netflix was, at the end of every executive meeting, to say, ‘Have we made any decisions in the room today, and if we have, how are we going to communicate them?’”...

The differences between well-crafted and badly crafted endings are striking during employee layoffs. If you must lay people off, pause and remember there is a difference between what you do and how you do it.

The lesson for friction fixers, in the words of UCLA’s legendary basketball coach John Wooden (who won ten national championships in his final twelve years as coach), is “If you don’t have time to do it right, when will you have time to do it over?

The moral to the stories of Dave, Melanie, and John is this: Don’t make a doable problem into an anchor problem by wedding yourself irretrievably to a solution that just isn’t working. Reframe the solution to some other possibilities, prototype those ideas (take some test hikes), and get yourself unstuck. Anchor problems keep us stuck because we can only see one solution—the one we already have that doesn’t work. Anchor problems are not only about our current, failed approach. They are really about the fear that, no matter what else we try, that won’t work either, and then we’ll have to admit that we’re permanently stuck—meaning we’re screwed—and we’d rather be stuck than screwed. Sometimes it is more comfortable to hold on to our familiar, failed approach to the problem than to risk a worse failure by attempting the big changes that we think will be required to eliminate it. This is a pretty common but paradoxical human behavior. Change is always uncertain, and there is no guarantee of success, no matter how hard you try. It makes sense to be fearful. The way forward is to reduce the risk (and the fear) of failure by designing a series of small prototypes to test the waters. It is okay for prototypes to fail—they are supposed to—but well-designed prototypes teach you something about the future.

Prototypes lower your anxiety, ask interesting questions, and get you data about the potential of the change that you are trying to accomplish. One of the principles of design thinking is that you want to “fail fast and fail forward,” into your next step. When you’re stuck with an anchor problem, try reframing the challenge as an exploration of possibilities (instead of trying to solve your huge problem in one miraculous leap), then decide to try a series of small, safe prototypes of the change you’d like to see happen. It should result in getting unstuck and finding a more creative approach to your problem. We will talk a lot more about prototyping in chapter 6.

Note that healthy attributions about failure not only stay balanced and rational, they also take account of the ways—small or large—that you may have contributed to what happened. Maybe you didn’t prepare sufficiently for the interview. This is not to beat yourself up or wallow in shame. Quite the contrary; it’s about developing the self-awareness and confidence to keep learning, making whatever changes you need so as to do better next time. Each of us is a fallible human being, living and working with other fallible human beings. Even if we work to overcome our emotional aversion to failure, failing effectively isn’t automatic. We also need help to reduce the confusion created by the glib talk about failure that is especially rampant in conversations on entrepreneurship.