The Entrepreneurship Playbook: A 3-step framework to generate value in extreme uncertainty

  Reserve your spot for our Future of Work Report today

Sadly, most entrepreneurship books are crap.

It's not the fault of the authors...per se...but rather the sad truth of entrepreneurship: it requires action, failure, and creating value around concepts that currently are unknown.

When talking about entrepreneurship there are three sad realities:

1. There's no power in planning. Unless a book can help us predict the future and wrap a value capturing model around this future rather than following it, each "truth" will be wishful thinking. For example, where was a book in 2005 that talked about creating a mobile application connecting those with spare time and a car with those needing a ride? If there was such a book, would it teach us about "entrepreneurship" or would it teach us how to link API's into a platform ecosystem? Even sadder is the reality that if there was such a book, it's value would be short-lived as the market doesn't have room for everybody.
2. There's no standard. As the saying goes, "sh** happens", and most times in entrepreneurship predictions fall flat. This can be traced all the way back to the history of flight as two underdog brothers were massively undervalued and underfunded compared to the American hero Samuel Pierpont Langley. Both were competing in the race to flight, but only one had the weight of prediction behind it. The masses bet on Langley, but as we all know the first to flight were the Wright Brothers. Yet legend has it their first flight wasn't even attended by a single member of the press. Another place we see this is in the portfolio strategy of VC firms as a common strategy is not one of prediction but of probability. In a VC portfolio the 80/20 principle becomes more of a 99/1 principle, meaning 99% of a funds performance comes from one of it's investments. This investment is the Unicorn, and thanks to this principle a common strategy is to distribute one's portfolio amongst a narrow but diversified amount of billion-dollar valuations. It only takes one, and instead of predicting the sustainable & stable growth company the probabilities favor investing in enough billion dollar valuations so that by chance one hit makes up for the 99 losses. There are examples galore of our prediction incompetence, to the point that I have an upcoming separate article highlighting just how off our prediction historically has been: Be the first to receive this.
3. It's not easy. Nowadays it's sexy to be a founder. I bet if we tracked the amount of "founder" LinkedIn headlines from start to now you'd see more growth than any technology throughout history. Yet very seldom do you see those creating our future have the time to talk about how. For the reason I'll let Chris Sacca handle it:

"This is a very special different journey, that is not actually suited to everybody, you have to be a little f****ed up, you have to be a little weird, a little crazy, a little obsessive....maybe you go off a little bit, maybe you struggle a little bit with manic depression, if none of those things sound familiar to you, you should probably quit right now".

****

I apologize for setting the mood so bleak. Yet now that expectations are set let's build the skeleton of what an entrepreneur is.

What is an entrepreneur

In the Lean Startup, Eric Ries tells us: “A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.”

If we translate this to the entrepreneur, I believe:

An entrepreneur is someone who identifies, creates, and captures value under conditions of extreme uncertainty.

How do you "entrepreneur"

With each and every entrepreneurial journey the story sounds pretty much the same:

• X was extremely passionate about Y, he/she tried solving it through Z, found out it was more like A, built A then found out it was more like B, had trouble scaling and had 3 months of cash so took a week to breathe somewhere really cheap (most likely Thailand or Mexico...possibly Costa Rica), then while on this week he/she heard or saw something that lit a spark for a new wave of thinking. X then built what is now C, hit virality and built the next Unicorn.

If your a fan of Guy Raz's podcast How I Built This, you probably realize the "inspiration" piece for Instagram was while walking on a beach, one of the co-founders asked his girlfriend why she didn't post pictures on their app. When she told him it was because his friend had much better pictures, he told her how his friend went online to add filters, to which she said, "then why don't you add filters". He then went to a coffee shop, learned how to code the filters, and after that update Instagram hit virality and became the Unicorn we know today.

No entrepreneurial journey ever goes smoothly

While it usually seems like luck, or by chance, underneath this storm of chaos are predictable patterns that converge to form insights that convert to value. If we were to visualize it we could imagine it as below:

From CargoCollective, The Squiggle of Design

What we'll be doing next is creating a skeleton that aid in driving this chaos from anarchy to controlled chaos. I've condensed the framework into 3 components - observing, questioning, acting.

• Step 1: Observe
• Step 2: Question
• Step 3: Act

Within each component lie a plethora of methods that act as tools and can be used on their own or in conjunction. As every beaten and battered entrepreneur knows, there's no one plan, rather continuous adjustment/improvement using each method as a lever and pulling whichever levers seem to make sense and drive you towards insights and wrapping value around these insights.

Entrepreneuring can be broken into 3 activities: Observing, Questioning, Acting

Step 1: The Observing System

Important: All this happens without any judgment.

Who here likes to people watch? If you're an entrepreneur, you make a living off of people watching.

For Steve Blank, father of the Lean Startup movement, he learned this the hard way. While sitting in a company-wide planning meeting as a young marketer, engineers were debating the sophistication of the graphics portion of their computer, to which Blank chimed in, “I think our customers will want 24-bits of double-buffered graphics.”

As he tells us:

"Silence descended across the conference table. The CEO turned to me and asked “What did you say?” Thinking he was impressed with my mastery of the subject as well as my brilliant observation, I repeated myself and embellished my initial observation with all the additional reasons why I thought our customers would want this feature.

Now in a voice so quiet it could be barely heard across the conference table our CEO turns to me and says, “That’s what I thought you said. I just wanted to make sure I heard it correctly.” It was the last sentence I heard before my career trajectory as a marketer was permanently changed. At the top of his lungs he screamed, “You don’t know a damn thing about what these customers need! You’ve never talked to anyone in this market, you don’t know who they are, you don’t know what they need, and you have no right to speak in any of these planning meetings.” He continued yelling, “We have a technical team assembled in this room that has more knowledge of scientific customers and scientific computers than any other startup has ever had. They’ve been talking to these customers since before you were born, and they have a right to have an opinion. You are a disgrace to the marketing profession and have made a fool of yourself and will continue to do so every time you open your mouth. Get out of this conference room, get out of this building and get out of my company; you are wasting all of our time.”

But in this moment of reckoning Blank learned the first lesson every entrepreneur understands. As he was leaving the conference room thinking he was fired 90 days into the job, the CEO turned to him and said, “I want you out of the building talking to customers; find out who they are, how they work, and what we need to do to sell them lots of these new computers.” The CEO then said to their VP of Sales: “Go with him and get him in front of customers, and both of you don’t come back until you can tell us something we don’t know.”

Through learning by fire, Blank had three major takeaways:

• An intelligent opinion is still a guess
• The dumbest person with a fact trumps anyone with an opinion
• There are no facts inside the building so get the heck outside

This stuck with Blank and built the foundation Toyota had previously called Genchi Gembutsu. The takeaway is this:

Insights (problems & solutions) are found outside of the building through a toolkit that enables concentrated people watching

Toolkit For People Watching:

What separates the entrepreneur's people-watching from ours? Entrepreneurs have tools at their disposal to concentrate what should be observed & how it should be organized. These tools predominantly come from the field of design-thinking, a problem-solving framework that leverages empathy & creativity to develop solutions at the intersection of viability, desirability, and feasibility. We'll highlight the tools below, but if you want to get in detail about DT check out my article Design-Thinking: A framework for consistently generating disruptive innovation

1: The Anthropologist, the Tourist, and an Empathy Map

The Anthropologist: How do anthropologists find the fossil's that shape the history of humanity? By going to the natural habitat of where these fossils are. With observing you'll be doing the same thing by getting out of your conference room and heading to the natural habitat of your customer.

The Tourist: Ever notice how when you're in a new city you notice everything from the color of a fire hydrant to peculiar cracks in the sidewalk? This same objective wonder will be needed when observing customers in their natural habitat, and we can call this the tourist mindset.

The Empathy Map: How do we know what to look for? Insert the Empathy Map below, a framework that builds the lens for which to look through.

Take action today by sitting at a coffee-shop for 2-3 hours and simply observing everything you see in accordance with the Empathy Map. Bottle up these findings and organize them through the three tools below.

2: The Customer Persona

Typical business plans describe customers in a boring & statistical way. Age, race, gender, purchasing power, etc.

Today's personas need to describe your customers as if you were speaking with your grandmother and not your business school professor. What do they like? What are they trying to accomplish? What's in their way? What are they currently doing? Why do they need this? What norms do they follow? Etc.

Simple Example

Complicated Example from IDEO/VA Engagement

3: The Journey Map

Put simply, a journey map describes your customer journey from beginning to end.

Below I've attached examples. They can be as simple as a sketch describing the customer journey, they can be analyzed logically as a flowchart, or a flowchart with emotions attached, or as complicated as the example from IDEO and their engagement with the VA. As long as you can understand at both a high and deep level the experience your customers are/will go through.

Simple Storyboard Sketch

Emotional Journey - let's see if you can piece together the problem....

**Did you guess that it was an executive who needs to read a book in preparation for a big report, and that this executive didn't have the time to read a full book, yet finds an audio summary he can listen to on his way to work? And that on the day of the presentation (a presentation in which he baited the audience to ask a question pertaining to the book) he freezes and can't answer the baited question, only to receive an email that the client is going elsewhere?

Complicated Flowchart w/ Emotion from IDEO/VA Engagement

**A journey map in isolation looks cool - but action comes when you can explain what your customer is going through and where their shortcomings are. The best way to do this is by charting customer journey maps for not just your own process, but also the existing solutions.

4: Customer Needs

Once insights are compiled, you can explain your customer, what they go through, and how they feel at each step. The next objective is to plot out all these needs.

** ALL THIS HAPPENS WITHOUT JUMPING TO ANY CONCLUSIONS

Step 2: Questioning

Before I was properly introduced I always thought of entrepreneurship as the buzz-word for pyramid scheme or self-help book. School didn't help. In undergrad, the "entrepreneurship" concentration was rumored to be the easiest one next to management. Unfortunately - yet pretty deservedly so - entrepreneurs predominantly fall under the "jack of all trades, masters of none" umbrella. The informal name is wantrepreneur, but it's not the wantrepreneurs fault - there's no professional measurement like a CPA or CFA to decipher.

Yet underneath every influential entrepreneur from Elon Musk to Bill Gates to Arthur Blanke to those running sustainable & profitable business not in the headlines, lay a superpower not constrained to a discipline: the art of questioning.

Entrepreneurship is the art & science of asking the right questions

So how do they do this?

ToolKit for asking the right questions

1: How might we....

In step 1 we generated a bunch of insights around possible problems/needs we could solve for. Entrepreneurs pick which questions are most promising and frame them in the format: How might we... (Alleviation of Pain).

For example, in the user needs chart above, we can ask: How might we provide a feeling of support for our patients?

From this question we then build off tools below.

2: Yes, And

The art of old business lies in a meeting with everyone giving up their voice to the HIPPO (highest paid person in the room).

While this worked when the key was in having expertise in answers, today's frequency of change requires getting to the right questions - a skill that no one person can claim expertise on. The common stereotype for this is a bunch of hipsters with sticky notes & a whiteboard. Yet beneath this brainstorming technique lie a secret that elevates the collective intelligence over the sum of each part.

How does this happen? According to Google's Project Aristotle, high performing teams are those that provide a psychological safety - the confidence that no one on the team will embarrass them or punish them for making a mistake. As they put it, "The researchers found that what really mattered was less about who is on the team, and more about how the team worked together."

So how can we enable psychological safety within our brainstorming? By stealing a play from the Improv playbook - the Yes, And tool. In Improv the objective of each actor is to make other actors look good. In entrepreneurship the objective is to make everyone around you look good - your customers, your employees. Both Improv actors and entrepreneurs can do this by saying yes, and to everything rather than talking/thinking about why something won't work.

Entrepreneurship requires making everyoone around you look good - your customers, your employees. You can do this by framing every answer with yes, and...

3: Why

The art of questioning comes down to the art of asking why.

For Toyota they do this through the Five Why's, in which every problem isn't understood until one asks 5 times to get to the root source. We take this a step further by not only repeating why, but adding variables to that why to accelerate seemingly unrelated components to one source. I get a lot deeper into these why's in my article I Have a Great Idea - Now What, but for this toolkit, these are the 3 forms of why:

1. Why You - This is arguably the most important question to ask yourself. If it's a good idea, that means at-least 100 people around the world are working on it around the clock to beat you at it. Some are "experts", some are "novices", but each one of you believes you're the one. This question isn't meant to deter you, but rather to alert you on the key success factors of any idea and align yourself with these success factors.
2. Why the Idea - Are you personally ready to bet your life on this? Can you sleep at night having this idea become your reputation? My favorite question is if money wasn't an issue, would you be doing this? I say this because if the answer is no, I highly doubt you would be able to grind through the trough of disillusionment amongst the Gartner Hype Cycle for this. I also say this because if you study successful entrepreneurs, you start to see a phenomenon where everything they do is related, and every action they take is moving them forward. Ashlee Vance expresses this through what he calls “The Unified Field Theory of Elon Musk”, in which “Each one of his businesses is connected in the short term and the long term”. I go deeper into this in my article, The Tesla Model of Entrepreneurship...Creating Moats.
3. Why Now - Idea's don't happen in isolation, they require many moving parts that converge to form a window of opportunity. A good method to evaluate this in a structured way comes from Oren Klaff in his book Pitch Anything, in which he breaks the logic into three factors - economic factors, social factors, technological factors. For example, here would be a good analysis for a company wanting to make a wrist device that wakes you up at the right time:

• Economic: Cost of making product has just gone below 10 bucks. We’ve been waiting for this so it can be priced at 69. 
• Social: One of the changes in our society is that people don’t get enough sleep or “good” sleep. While this problem is growing only 1.8% a year, awareness is skyrocketing. People know they need better sleep; it is a hot topic at all levels of society.
• Technological: Device requires controlling chip and solenoid that now can be manufactured small enough and at a controllable price, allowing us mass market capabilities.

Toyota uses the Five Why Analysis - every problem isn't understood until one asks 5 times to get to the root source. We add a second dimension to this by adding the elements of social, economic, and technological change to decipher the timing & movement within the macro-environment of our venture.

Step 3: Act

"Everyone has a plan until they get punched in the mouth" - Mike Tyson

Up until now, everything's been a plan. We've observed, we've questioned, but as our opening warned of - idea's go through numerous iterations & pivots until the right one is found.

The way to truly put action to a plan is through an MVP - minimum viable product - which can be as elaborate as a full application or as little as manual hacks called mechanical turks. For example, one past venture was building a platform that connected students to small businesses through project-based "Gig Work". A comparable company is Upwork except catered for students. One of our MVP's was simply a basic website with a landing page for both students and small businesses. We were testing desirability, and once we confirmed this we went into our second MVP that tested technicality - a Google spreadsheet listing students & small businesses that we used to manually match both agents. What we learned was that students didn't have as much tangible value as we assumed, and that our team didn't have the necessary skillset to take over projects that went wrong. Luckily we found this out by only wasting hundreds of dollars rather than the thousands that a platform as such would've required to build.

A plan needs action - an MVP is that action

The Secret

We've successfully ran all the way from observing a problem, to understanding what the problem is and how we'll solve it, to physically building a solution.

But what did we learn in the beginning?

1. There's no power in planning
2. There's no standard
3. It's not easy

Thus what we left out was the secret....

The secret to entrepreneurship is speed, persistence & repetition. Repeat, repeat, repeat the cycle until you've reached what seems to be product-market fit, in the fastest way possible since everybody everywhere is trying to beat you to a solution. This repetition is commonly called the build-measure-learn feedback loop, but what we've created is an observe - question - act feedback loop.

Ideally, you'll be running through each cycle in two-week intervals called sprints.

The secret is speed, repetition & persistence through an observe-question-act feedback loop

The Challenge

Entrepreneurship is hard. It isn't sexy. And 99 times out of 100 you'll fail.

Thus the challenge is immense - create value in an environment of extreme uncertainty and an even higher rate of failure.

But for those that stick to the observe-question-act feedback loop success will be narrowed and within reach.

Are you up for the challenge?

______________________________________________________________________

First off, a big thank you to all entrepreneurs fueling this article. 

Second, I'd love to hear what you have to say and how you think about the process of entrepreneurship. Drop a note in the comments or find me below to further the conversation! ______________________________________________________________________

***

About the Author

Matthew R. Mottola builds the Future of Work, a paradigm shift in the way we leverage technology to match & manage labor. At Microsoft, he owns user experience for the on-demand/freelance economy, and drives a number of key initiatives including product strategy and enterprise execution of freelance programs. At Georgia Tech, he teaches this future. Globally, he speaks on this future. And for early stage ventures, he advises on & invests in this future. He is the author of university-level textbook StartUp not StartDown and upcoming book Ready For It: Automation & the Future of Work.

Reserve Your Spot For Our Future of Work Report Today 

More From Matthew

Design-Thinking: A framework for consistently generating disruptive innovation

I Have a Great Idea, Now What?

Why Stealth Mode Is Crap

The Tesla Model of Entrepreneurship: Creating Moats