Critique of PM101 Market Requirements Documents

Students in the Harvard Business School MBA elective course Product Management 101 (PM101) submitted Market Requirements Documents (MRDs) for their software applications last week. I thought a summary of the strengths and weaknesses of this work might be helpful not only to the students, but also to new PMs and first-time founders who lack experience evaluating market requirements.

I've described PM101 in an earlier post. In brief, we use a learning-by-doing approach to teach students who've never worked as product managers the basics of that role (course description here; syllabus here). Students specify functionality for a software application, then oversee its development and launch. This year, two-thirds of PM101 students are working on their own startup ideas; the balance are building apps that will be used only by the HBS community.

Product professionals and entrepreneurs who embrace agile development methods might dismiss the notion of writing an MRD — even a light-weight version like the one we assign — as "old school." We do bring seasoned PMs to class to explain agile's merits, but we also believe that students' understanding of agile is enhanced by experiencing waterfall techniques first-hand. Also, our students spend only one day per week on their project, which makes it impractical for them to serve as product owner on an agile team. Finally, requiring written MRDs and PRDs makes it easier for instructors and over fifty volunteer mentors from the Boston Product Management Association to provide feedback.

So, what patterns emerge from the MRDs?

• Problem vs. Solution Focus. Students were asked to prove the existence of a critical mass of potential customers with strong unmet needs that might be satisfied through a new application or online service. In their MRDs, most students avoided premature lock-in on a single, specific solution. They followed the design discipline of first exploring customer needs in depth, thus improving the odds of generating differentiated solutions.
• Research Methods. Only a modest fraction of the MRDs provided detailed descriptions of research methods employed. I accept blame for this, since I didn't include a research methods section in the MRD outline. But MRD authors should be aware that it is difficult for readers to assess the validity of claims about customer needs without understanding the quality of data behind those claims.
• Customer Interviews. Most students did a good job of summarizing what they learned from one-on-one interviews with prospective users. It's more difficult to discern whether the students followed interviewing best practices described in assigned readings, since only a handful submitted interview guides/protocols along with their MRDs. Next year, we'll insist that such guides be included in a research methods appendix to the MRD.
• Focus Groups. Only one student conducted a focus group. This research technique has well-known limitations, but focus groups can generate powerful insights with products that have strong emotional, status, or lifestyle associations. With such products, a comment from one focus group participant can trigger responses from others that might not be forthcoming in a one-on-one interview. 
• Surveys. In class, we emphasize that: 1) surveys should be used to explore associations between prospective customers' beliefs and behaviors, and to document the prevalence of unmet needs in a population; and 2) these objectives can only met through surveys after a researcher has gained a deep understanding of customer needs through interviews, ethnography, and other qualitative methods. This message — along with a strong admonition to avoid biased (e.g., "leading the witness") survey questions — evidently hit the mark, because most of the students' surveys were reasonably well designed. However, not many surveys were systematic about including questions that measured both the strength of respondents' needs (i.e., how important is attribute X to you?) and perceptions of the degree to which existing solutions satisfy those needs. This combination of questions can be very helpful in identifying customers segments with distinct needs, and in estimating the size of those segments.
• Personas and Use Cases. Students were exposed to personas in class; they made good use of them in their MRDs, especially in identifying use cases for their application.
• Competitor Research. Not surprisingly, given MBAs' penchant for analysis, most MRDs included strong sections describing the strengths and limitations of existing solutions. With rare exceptions, however, students did not conduct usability research with rival products, missing a learning opportunity.
• Market Size Estimation. Likewise, most students did a good job gauging the size of the potential market for their application. There was some confusion about whether this exercise should end with an estimate of the Total Addressable Market (TAM) or with a rough sales forecast reflecting projected share of the TAM. Obviously, projecting market share so early in the product development process entails lots of guesswork. But even an informed guess can provide helpful guidance on whether the envisioned product can plausibly generated enough sales to warrant further development. Only one student analyzed the magnitude of switching costs that would be incurred by customers adopting a new solution. Such analysis can significantly improve the quality of market share projections.

Students will submit their Product Requirement Documents in early December. I'll report back then on lessons from that exercise and also on what we've learned about the design and delivery of a learning-by-doing course like PM101.

Advice for MBAs Seeking Startup Jobs

This post was originally published at LinkedIn.

Searching for a job with a startup can be frustrating and confusing for MBAs, especially when compared with the “tried-and-true” process of recruiting with big companies who visit campus. In turn, MBAs who seek employment with startups aggravate entrepreneurs by making an alarming array of mistakes. The good news: it isn’t difficult to avoid these errors.

Below, I report findings from focus groups with 26 HBS MBA alumni running venture capital-backed startups in San Francisco and New York City. My colleagues from the HBS Rock Center for Entrepreneurship and I asked the founders what current students could do to better position themselves to get jobs in their startups. It’s fair to ask whether the interview findings apply in other geographies and entrepreneurial settings. I believe that they do.

Problem: Poor First Impressions. Startups usually rely on employees’ personal networks to source candidates, rather than online job sites or campus career services offices. To improve the odds that they’ll be referred when a startup is hiring, MBAs cast a wide net, reaching out to as many people as possible who can influence recruiting decisions.

Aggressive networking is crucial with a startup job search, but you can spread yourself too thinly. Overextended, you’ll lack the time to prepare properly for initial meetings, and as a result, you may make a poor first impression. Startup CEOs complain about MBAs who ask them for information that is readily available from a Google search, such as “Can you tell me about your business model?” or “How are you funded?” Founders of consumer-facing startups will be disappointed if you’ve never used their products. They’ll be annoyed if you haven’t checked their website to determine whether positions are open in the function you’ve targeted. Finally, entrepreneurs will lose interest quickly if you aren’t up to speed on sector trends—say, if you profess interest in social networking platforms but lack an informed response to a question like, “What do you think of Facebook’s changes to Instagram’s terms of service?”

Solution: Screen Targets, Focus Your “Ask,” and Do Your Homework! You’ll have more time to prepare for initial meetings if you waste less time pursuing jobs with the wrong startups. I won’t describe approaches for screening startups here, but venture capitalists David Beisel and Jeff Bussgang and serial entrepreneur Simeon Simeonov have written great posts on that topic.

Having narrowed your target set, make sure you approach people in ways that capture their attention and demonstrate networking savvy, for example, crafting requests for introductions that are readily forwarded, as VC Charlie O’Donnell recommends. If you ask for a meeting via email, make sure that your message is short and presents a specific objective, as suggested by James Clear. Busy founders may deflect a vague request, such as “Can we have coffee to chat about careers in your space?” They are more likely to agree to meet if you say, “I understand that you are building a BD team. I’d love to be part of it.” Asking for a short meeting—say, 10 minutes—is also more likely to succeed, and short meetings can stretch into long ones if you engage your audience.

Problem: Not Understanding Startups. In positioning themselves for startup jobs, MBAs often fail to convey that they understand what’s required of startup employees. This raises doubts about whether candidates have been thoughtful about their motivations for seeking a startup job. Perhaps they are simply following the MBA herd chasing fashionable startup careers? Every hire on a small team is a high stakes event, so founders need to ensure that new employees bring:

• Tolerance for ambiguity and for lack of structure, in particular, around roles and career paths. The founder of an early-stage startup may need to tell a candidate, “You could be in this role for two weeks or two years. We just can’t say.” Employees must be flexible and be willing to pitch in to do whatever needs to be done.
• Independence and a “can do/will do” attitude. Early-stage startups often lack processes and routines. In contrast to business-as-usual in big corporations, nothing happens in startups unless someone makes it happen. A founder needs to surround herself with team members who can identify problems and take charge of fixing them, without requiring lots of direction.
• Resilience and passion. Startups encounter inevitable bumps as they try to build something new in the face of severe resource constraints. Rolling with the punches is easier for employees who are passionate about a startup’s mission or about the space in which it operates.

Solution: Know Thyself and Show You “Get It.” Reflecting on your motivations and aspirations is a crucial first step for any job search, but it is especially important with startups because founders focus so much on candidates’ attitudes. Your MBA program’s career services office can coach you through a self-assessment process that helps gauge your fit with a startup career.

If you lack prior startup experience, you can still communicate that you understand startup priorities in many ways. A creative approach when initiating contact with a startup can project passion. My former student Jeanne Hwang did this by launching a clever social media campaign to get the attention of managers at Pinterest. Likewise, a candidate seeking a community manager position at Ridejoy created a boisterous video that captured her enthusiasm and qualifications.

Problem: Not Showing How You’ll Add Value. MBAs routinely fail to demonstrate how they can immediately add value in a startup. They emphasize the same generic strengths that they’d cite in an interview with a consulting firm, for example, “I’m smart, analytical, hard working, and a superb team player. Point me at any problem and I’ll deliver great results.” From a founder, this is likely to engender the response: “That’s cool, but what can you actually DO?” As one entrepreneur said, “I do value an MBAs’ analytical skills and their ability to troubleshoot strategy problems. But focusing too much of the recruiting conversation on strategy or asking for a strategy/biz dev job in a 5-10 person startup shows a lack of understanding of our most urgent priorities.”

Founders also complained that MBAs show little interest in or ability for sales roles. One entrepreneur said, “In a startup, you are selling ALL of the time: to customers, partners, prospective employees, and investors. A startup does better if more of its employees are able and willing to sell. MBAs’ classroom training encourages a dispassionate, analytical perspective. That’s not what sales is about, so MBAs need to unlearn certain attitudes to succeed in startups.”

Solution: Bring a Solution! Charlie O’Donnell suggests that you reverse engineer the requirements for the startup job you are pursuing, and then systematically address any gaps in your skills inventory. For example, business development managers are expected to have a deep understanding of ecosystem trends and participants. Blogging is one way to show that you have such knowledge. Similarly, as I’ve argued elsewhere, MBAs seeking product management jobs can significantly enhance their marketability by learning to code. Doing such work for academic credit is a perfect way to kill two birds with one stone: building job-relevant skills and perspective while completing your MBA.

Founders are in strong agreement about the best way for candidates to make a strong impression: they should propose a bold idea for improving performance —one that is germane to the position they are seeking. For a biz dev role, for example, this might entail making a case for a specific partnership, along with an assessment of pros and cons for each side and potential deal terms. A PM candidate might offer a proposal for how the startup could reorganize its site navigation, based on analysis of competitors’ products.

You may be thinking, “Isn’t my proposal likely to be off target?” Indeed, founders said that 90% of the time, such proposals had already been considered and rejected, or were fatally flawed in some way. But they maintained that receiving the pitch demonstrated that the candidate was a self-starter; showed that she could sell; gave a sense for what the candidate knew and could do; and crucially, showed how she reacted on the fly when told that her idea wouldn’t work. Did the candidate listen well, and adapt the plan in intelligent ways? Did he become too argumentative and defensive? Was he too quick to abandon his idea? Balancing bold and creative ideas with a willingness to listen demonstrates a killer combination of passion, confidence, and humility.

Problem: Unreasonable Expectations. MBAs make a couple of other mistakes when seeking startup jobs, which can attributed to flawed expectations about entrepreneurial careers and startup recruiting.

First, they worry too much about not having a full-time job by April or May as they are completing their degree. Startups can’t plan their manpower needs with precision, so they tend to commit to hiring someone at most a couple of months before that individual begins work. If a startup wants you, they typically want you NOW. That means you’ll probably spend the final weeks of your MBA program hunting for a job, while your peers who accepted corporate or consulting gigs months ago are planning summer vacations. It can be depressing to tell them, “I’m still looking for a job.” But these are the natural rhythms of the long startup recruiting season, which starts early in the school year with lots of networking to build relationships and credibility and may not end until after graduation. If you understand and accept this, you’ll feel less pressure.

Second, MBAs often expect too much seniority and have unrealistic expectations about becoming a general manager quickly—especially in later stage startups. For example, a founder in a startup with 300 employees complained about a candidate who wanted to know, “How much exposure will I get to the board?” Founders acknowledged that some degree of ego and impatience are valuable traits in employees—after all, pursuing risky opportunity when resources are scarce does require self-confidence. But the best candidates are self aware, able to modulate their egos, and always focused on how they can contribute, rather than what they can extract from a new job.

Should MBAs Learn to Code?

by Tom Eisenmann

“Should I learn to code?”

MBAs who lack programming skills often ask this question when they pursue careers in technology companies.

Bloggers like Yipit co-founder Vin Vacanti have shared views on the payoff from learning to code, as have several students at Harvard Business School, including Dana Hork, Matt Boys, and Matt Thurmond.

I thought it’d be helpful to supplement bloggers’ perspectives with some survey data. I received responses from 24 of the 41 HBS students who enrolled over the past two years in CS50, the introductory computer science course at Harvard College.

My survey didn’t ask for comments on the quality of CS50 itself. The course is widely acclaimed; my colleague David Malan has grown its enrollment five-fold to 715 students over the six years he has served as lead instructor. Rather, my goal with the survey was to learn whether MBAs saw this well designed and rigorous course as a good investment of their time, given their career objectives and other course options. The tradeoffs are tricky: survey respondents reported spending an average of 16.3 hours per week on CS50—perhaps 2-3x more time than they would spend on an MBA elective that yielded equivalent academic credit.

So, was it worth it? Of the 18 survey respondents who founded a startup, joined an existing startup, or went to work for a big tech company upon graduation, 83% answered “yes” to the question, “On reflection, was taking CS50 worth it for you?” and 17% said “not sure.” Of these 18 respondents, none said that taking CS50 was not worth it. By contrast, of the six respondents who pursued jobs outside of the tech sector—say, in consulting or private equity—only two said CS50 was a worthwhile investment; three said it was not; and one was not sure.

Benefits

Respondents cited several benefits from taking CS50.

Writing Software. Respondents differed in their assessments of their current ability to contribute working code on the job, based on their CS50 learning. Several said they regularly do so, for example: 

• Kyle Watkins, who joined an existing startup, said he has “used CS50 skills to create a half dozen VBA programs that will likely save the startup I'm working for tens of thousands of dollars."
• Michael Belkin, who founded his own startup, said, “After taking CS50, I was able to build an MVP that would have cost at least $40K to outsource. And it was better, because I understood all the small details that drive a user's experience. After HBS, I became one of the lead developers at my startup, which has saved the company several hundred thousand dollars.” 

Communicating with Developers. Other respondents, especially those employed in large tech companies, said they couldn’t really write production software, but felt more confident in their ability to discuss technical issues with developers as a result of taking CS50. For example:

• Jon Einkauf, a product manager for Amazon AWS, said, “I work with developers on my team every day to define and build new features. In addition, the users of my product are developers and data scientists. Taking CS50 gave me a glimpse of what it's like to be a developer — to get excited about complex computer science problems, to get frustrated when you hit a bug. It taught me enough about software development that I don't feel lost in my current job. I can ask intelligent questions, I can push back on the developers when necessary, and I am confident that I could teach myself anything else I need to learn."
• Luke Langford, who joined Zynga as a product manager upon graduation, said that CS 50 “gave me a working knowledge and confidence to be able to review code. PMs at Zynga don't often work in code, but there were several times when I was able to diagnose issues and help the engineers identify why certain algorithms that calculated scores were wrong.   Pre-CS50, I wouldn't have been able to do that.”

Recruiting. Several respondents mentioned that their CS50 experience had helped persuade recruiters that they were committed to a career in technology. As one anonymous respondent reported, “I wanted to get a job at a tech startup and ended up as a product manager at one of NYC's hottest tech startups. The founder, who is a CS PhD, was really impressed that I'd learned to code.  I think it made a difference in getting the offer.”

Costs

The benefits from CS50 came at a considerable cost, however, in terms of workload. In addition to lectures and section meetings, the course has weekly problem sets, two mid-terms exams, and a final project that requires students to design and build an application.

Beyond the heavy workload, respondents who were less sanguine about the payoff from CS50 often cited its use of C to teach fundamentals such as functions, loops and arrays, rather than a more modern programming language. While acknowledging that C is well suited for this purpose, these students would have preferred more focus on languages used in web development (e.g., JavaScript, HTML, and PHP), which are covered in the last one-third of CS50’s syllabus. Likewise, some students said they understood why certain “academic” concepts (e.g., algorithm run times, security) were covered in an introductory CS course, but they did not view such concepts as salient to their “just learn to code” personal priorities.

Advice

I asked respondents for advice on how MBAs who enroll in CS50 can get the most out of the course.

• An anonymous respondent said, “Go to office hours Monday night; it’s the least busy night, so you have the best chance of getting lots of TA help. Get to know the undergrads: they are fabulous! Build something for your final project that you're passionate about, and use a language that’s relevant to your career plans.”
• Einkauf added, “You need to really commit to it.  If you just watch the lecture videos, complete most of the problem sets, and build a basic final project, you can get a decent grade—but you'll only get a fraction of the possible value.  You should plan to attend your section meetings, set aside plenty of time for the problem sets, really invest in the final project, get to know the other students, go to the hackathon, etc.”
• Vincent Ho-Tin-Noe advised, “The class is very easy for 2-3 weeks, and then it just gets crazy. Don't be caught off-guard. Start working on your problem sets as soon as you get them to gauge the amount of time you'll need. Don't start 2 days before the deadline; you won't be able to manage your workload otherwise, even with all-nighters. Also, make sure to watch the lectures live or within 24 hours online. Don't try to catch up on lectures and short videos all at once, right before starting your problem set, or you'll get swamped. Watch all the videos, including problem set walkthroughs and shorts, if you want to get the most out of the class. Finally, make sure to attend sections. They're extremely useful, and bonding with your teaching fellow will definitely be helpful.”

Many respondents acknowledged that there are online options for learning to code that would not require as big a time commitment as CS50. However, they saw a graded course for academic credit as good way to ensure they would actually get the work done. An anonymous respondent said, “I knew that I would never learn programming if I didn't have something—a problem set or test—to keep me accountable every week. I don't want to generalize, but I highly doubt that most HBS people after doing their cases/travel/socializing are going to set aside time to consistently do Codecademy or Treehouse every week.”

Justin Ekins added, “You can learn everything in this course online, but, let's face it, you're not going to force yourself to do that. And you won't get the depth of knowledge that CS50 will provide. It's an outstanding course, and it's incredibly well taught. I'd recommend taking it and then spending J term [three weeks in January when regular HBS classes do not meet] with Stanford's online CS193P, which will get you to the point of building iPhone apps.”

Sixteen of the survey respondents are happy to be contacted by current HBS students who have questions about taking CS50. You can email me to get their contact info.

Head Games: Ego and Entrepreneurial Failure

This post was originally published at O'Reilly Programming

“Ever tried. Ever failed. No matter. Try again. Fail again. Fail better.”

—Samuel Beckett

Entrepreneurial success hinges in large part on a founder’s mastery of psychology. This requires the ability to manage one’s responses to what Ben Horowitz calls “The Struggle,” that is, the emotional roller coaster of startup life. Paul DeJoe captures the ups and downs of being a startup CEO in a post reprinted in a book that I edited, Managing Startups: Best Blog Posts.

It’s all in a founder’s head: the drive to build something great; the resilience to dust yourself off when you repeatedly get knocked down; the passion powering a Reality Distortion Field that mesmerizes potential teammates, investors, and partners. But inside a founder’s head may also be delusional arrogance; an overly impulsive “ready-fire-aim” bias for action; a preoccupation with control; fear of failure; and self-doubt fueling the impostor syndrome. That’s why VC-turned-founder-coach Jerry Colonna named his blog The Monster in Your Head. In a recent interview with Jason Calacanis, Colonna does a nice job of summarizing some of the psychological challenges confronting entrepreneurs. So does a classic article by the psychoanalyst Manfred Kets de Vries: “The Dark Side of Entrepreneurship.”

Causes of Entrepreneurial Failure

If entrepreneurial success hinges on a founder’s mastery of psychology, it stands to reason that a founder’s flawed ego is often the root cause of startup failure.

Categorizing causes of entrepreneurial failure is tricky. Asking entrepreneurs why their venture failed doesn’t always yield reliable answers. To bolster our fragile egos, we credit our successes to our own brilliance and skill, and we attribute our failures to the shortcomings of others or to events outside our control. This pattern is so deeply ingrained that psychologists have labeled it the Fundamental Attribution Error.

Furthermore, just as a living organism might die for many reasons—for example, hunger, predation, or illness—startup failure has diverse causes. Paul Graham cites 18 reasons why startups fail; in her post, What Goes Wrong, reprinted in Managing Startups, Graham’s partner at Y Combinator, Jessica Livingston, warns founders that they must navigate a “tunnel full of monsters that kill.”

Finally, explanations for startup failure are often linked in a complex chain of causality. Running out of capital is often the proximate cause of death. But this implies that an entrepreneur couldn’t raise more funds. Why? Because the venture had little traction. Why? Because the team was slow to market with an inferior product, relative to rivals. Why?

In the spirit of “Five Whys” analysis, one should continue probing until the root cause for failure is revealed. Digging deeper often reveals that startup failures have ego problems at their core.

Ego-Driven Failure

At the risk of oversimplifying, the ego issues that can derail an early-stage startup come in two broad groupings. Some founders are ambivalent about their vision or their level of commitment to their venture. Others are headstrong—too confident about their vision and their ability to lead. In fact, Peter Thiel hypothesizes that plotting founders along such a spectrum would yield an inverted normal distribution—one that is fat at both tails, rather than in the middle.

Ambivalence. Steve Blank tells a tragic story of a founder failing from a lack of nerve. Entrepreneurs who are irresolute, weak-willed, and wavering can cause problems like these:

• They fail to recruit a great team because strong candidates can sense the founder’s ambivalence and know that resolve is required to lead a startup through its ups and downs.
• They pivot too quickly, never devoting enough effort to any one opportunity to refine their offering and gain traction. Some founders get bored easily and rapidly cycle through new ideas. Others are overly compliant: they lack the strength to say “no” to team members, investors, or customers who suggest different course corrections. Another post from Blank republished in Managing Startups describes Yuri, an indecisive entrepreneur who shifted strategy constantly because he was unable to distinguish between vision and hallucination and was thus “buffeted by the realities of his burn rate, declining bank account, and depressing comments from customers.” His team “was afraid to make a decision, because they couldn’t guess what Yuri wanted to do that week.”
• They scale prematurely, burning through their capital before they have achieved product-market fit, because they are unwilling to resist pressure from investors who urge them to “swing for the fences.” The anonymous author of the new blog My Startup Has 30 Days to Live, a moving real-time account of the pressures, doubts and personal costs confronting a struggling startup’s founder, acknowledges making this mistake: “I had the power to reject these suggestions, at the risk of being labeled as un-coachable… These men never put a gun to my head, never threatened me into making the decisions I did. I just didn’t challenge them.”
• They stay in stealth mode too long, missing a window of opportunity or launch a flawed product due to a lack of early customer feedback. As Paul Graham points out, such procrastination sometimes stems from a fear of being judged.
• They provoke cofounders disputes—especially when, in Livingston’s words, a cofounder’s irresolute behavior raises questions about whether he is “trustworthy or works hard enough or is competent.”
• They throw in the towel without putting up much of a fight, because they lack, in Livingston’s view, the drive and determination “to overcome the sheer variety of problems you face in a startup” or they are “immobilized by sadness when things go wrong.” As Jason Cohen says, “It’s so easy to stop. There are so many reasons to stop. And that—stopping—is how most little startups actually fail.” Andrew Montalenti adds, in a post republished in Managing Startups, that founders are likely to get “antsy” when they pursue a startup mostly to advance their career but lack personal passion for its mission.
•  They follow the herd, perhaps because they are insecure about their ability to set direction. Such founders often pursue derivative ideas or copy rivals’ features, as in Cap Watkins’ post-mortem of Formspring’s failure.
•  They take their eye off the ball. Mark Suster bemoans entrepreneurs who crave the limelight and lack the discipline to say “no” to offers to speak at conferences. Livingston warns founders to avoid distractions—in particular, conversations with corporate development executives who want to learn about a startup but have no real intention of pursuing a deal.

Obstinacy. Startups run by founders who are control freaks, headstrong, or arrogant often precipitate the same problems listed above, but in very different ways: 

• They fail to recruit a great team because they don’t recognize their own shortcomings or they are unwilling to delegate. According to Kets de Vries, they also may be prone to driving away talented colleagues by scapegoating or by viewing employees in extreme terms, putting some on a pedestal while vilifying others.
• They fail to pivot because, in some cases, an overconfident entrepreneur simply cannot comprehend that customers might be rejecting their product. Or, they may be cocksure that the path that led to success in their last venture will prove true again. In still other instances, founders who Steve Duplessie describes as zealots may be loath to pivot away from a vision to which they are fervently committed—even if sticking with the startup’s original plan puts the venture in peril. This risk is compounded when an entrepreneur relies on a Steve Jobs-style “reality distortion field”—using personal charisma and riveting rhetoric to inspire people to go to extremes to achieve a startup’s vision. When a vision is sold this way, it is especially difficult to subsequently admit that it might have been flawed.
• They scale prematurely due to overconfidence or an impatient drive to see their vision become a reality. Kets de Vries says such founders often defend against anxiety by “turning to action as an antidote.”
• They stay in stealth mode too long. In some cases their founder, with a vision burning so brightly, feels no need to secure early market feedback. In other instances a founder’s perfectionism prevents a team from “launching early and often.”
• They provoke cofounder disputes by battling ceaselessly for dominance and control of their venture’s direction. 

There’s no science behind my characterization of founders’ egos as lying somewhere on a spectrum that ranges from ambivalent to obstinate. I’m sure this one-dimensional view makes trained psychologists cringe, because it ignores a mountain of research pointing to a “Big Five” set of stable personality traits: openness, agreeableness, extraversion, conscientiousness and neuroticism. Adeo Ressi’s Founder Institute draws on such research in the admissions test for its training program. Based on analysis of responses from over 15,000 aspiring entrepreneurs, the test sheds light both on the traits of successful founders and the attributes of Bad Founder DNA: excuse-making, predatory aggressiveness, deceit, emotional instability, and narcissism. Founder Institute’s research confirms: it’s all in the head!

Failing Better

So, what should a founder to do to master the monsters in her head?

Self-reflection is the starting point. What motivates you? How do you respond to pressure and uncertainty? For some, therapy with a professional psychologist will put this in focus. For others, a startup coach like Colonna can provide helpful guidance, as can a good mentor. Regardless of where you seek such counsel: ask for help, tell the truth, and listen.

If you are thrashing around and pivoting too quickly, follow Steve Blank’s advice to Yuri: sit on any new insights for 72 hours, and brainstorm them with someone you trust.

Build the discipline of debriefing to learn from your startup’s failures. Discerning the causes of small setbacks may help you stave off big ones. The U.S. Army’s After-Action Review process provides a template. With an AAR, a team asks four simple questions: What was our objective? What happened? Why did it happen? What do we do next?

In conducting post-mortems, however, be on guard for the Fundamental Attribution Error, that is, a tendency to blame failure on events outside your control. Also, as Blank points out, you’ll be in a better position to learn from a big failure if you recognize that your emotional response to it may follow Kubler-Ross’s five stages of grief—denial, anger, bargaining, depression, and gradual, grudging acceptance.

Follow the advice of Spencer Fry and find healthy ways to relieve stress. Recognize that such stress puts entrepreneurs at increased risk for depression. If you believe that you or someone you work with may be depressed, seek treatment NOW. And read Brad Feld’s posts to learn more about depression and how to manage it.

Finally, follow the advice of David Tisch, and never lose sight of the ‘why.’ Tisch advises founders to constantly ask whether they are still on the path that originally motivated them to launch a startup, for example, the desire to disrupt an industry, to build a great company, or simply to be independent. If not, Tisch says, it’s time to wind things up. As Brad Feld points out, sometimes failure is your best option.

What Is Entrepreneurship?

This post was originally published at HBR.org.

What is entrepreneurship? You probably think that the answer is obvious, and that only an academic would bother to ask this question. As a professor, I suppose I am guilty of mincing words. But like the terms “strategy” and “business model,” the word “entrepreneurship” is elastic. For some, it refers to venture capital-backed startups and their kin; for others, to any small business. For some, “corporate entrepreneurship” is a rallying cry; for others, an oxymoron.

The history of the word “entrepreneurship” is fascinating and scholars have indeed parsed its meaning. I’ll spare you the results, and focus instead on the definition we use at Harvard Business School. It was formulated by Professor Howard Stevenson, the godfather of entrepreneurship studies at HBS. According to Stevenson, entrepreneurship is the pursuit of opportunity beyond resources controlled.

“Pursuit” implies a singular, relentless focus. Entrepreneurs often perceive a short window of opportunity. They need to show tangible progress to attract resources, and the mere passage of time consumes limited cash balances. Consequently, entrepreneurs have a sense of urgency that is seldom seen in established companies, where any opportunity is part of a portfolio and resources are more readily available.

“Opportunity” implies an offering that is novel in one or more of four ways. The opportunity may entail: 1) pioneering a truly innovative product; 2) devising a new business model; 3) creating a better or cheaper version of an existing product; or 4) targeting an existing product to new sets of customers. These opportunity types are not mutually exclusive. For example, a new venture might employ a new business model for an innovative product. Likewise, the list above is not the collectively exhaustive set of opportunities available to organizations. Many profit improvement opportunities are not novel—and thus are not entrepreneurial—for example, raising a product’s price or, once a firm has a scalable sales strategy, hiring more reps.

“Beyond resources controlled” implies resource constraints. At a new venture’s outset, its founders control only their own human, social, and financial capital. Many entrepreneurs bootstrap: they keep expenditures to a bare minimum while investing only their own time and, as necessary, their personal funds. In some cases, this is adequate to bring a new venture to the point where it becomes self-sustaining from internally generated cash flow. With most high-potential ventures, however, founders must mobilize more resources than they control personally: the venture eventually will require production facilities, distribution channels, working capital, and so forth.

Because they are pursuing a novel opportunity while lacking access to required resources, entrepreneurs face considerable risk, which comes in four main types. Demand risk relates to prospective customers’ willingness to adopt the solution envisioned by the entrepreneur. Technology risk is high when engineering or scientific breakthroughs are required to bring a solution to fruition. Execution risk relates to the entrepreneur’s ability to attract employees and partners who can implement the venture’s plans. Financing risk relates to whether external capital will be available on reasonable terms. The entrepreneur’s task is to manage this uncertainty, while recognizing that certain risks cannot be influenced by their actions.

Entrepreneurs face a Catch-22. On the one hand, it can be difficult to reduce risk without resources. For example, outside capital may be required to develop and market a product and thereby demonstrate that technical and market risks are limited. On the other hand, it can be difficult to persuade resource owners to commit to a venture when risk is still high. Entrepreneurs employ four tactics in coping with this Catch-22:

• Lean experimentation allows them to resolve risks quickly and with limited resource expenditure, by relying on a “minimum viable product,” that is, the smallest possible set of activities required to rigorously test a business model hypothesis.
• Staged investing allows entrepreneurs to address risks sequentially, expending only the resources required to meet a given milestone—before committing the resources needed to achieve the next milestone.
• Partnering allows entrepreneurs to leverage another organization’s resources and thereby shifts risks to parties better able/more willing to bear them. In a variation of this tactic, entrepreneurs rent resources to keep costs variable and to avoid the big fixed outlays associated with resource ownership.
• “Storytelling” by entrepreneurs—conjuring a vision of a better world that could be brought about by their venture—can encourage resource owners to downplay risks and in the process commit more resources than they would if they had not been inspired. Steve Jobs, for example, was famous for his mesmerizing “reality distortion field,” through which he impelled employees, partners, and investors to go to extraordinary lengths to help fulfill his dreams.

So, does Stevenson’s definition of entrepreneurship matter, in practical terms? I’d argue that it does, for two reasons. First, it sees entrepreneurship as a distinctive approach to managing rather than a specific stage in an organization’s life cycle (i.e., startup), a specific role for an individual (i.e., founder), or a constellation of personality attributes (e.g., predisposition for risk taking; preference for independence). In this view, entrepreneurs can be found in many different types of organizations, including large corporations. That should be encouraging if you believe that entrepreneurship is an engine of global economic development and a force for positive change in society.

Second, the definition provides a guidepost for entrepreneurial action; it points to tactics entrepreneurs can take to manage risk and mobilize resources. One of my former students put it well when asked to give advice to aspiring entrepreneurs: “For me, ‘pursuing opportunity beyond resources controlled’ sums up perfectly what I do day-to-day. You need to be inventive, creative, opportunistic, and persuasive, because you rarely have enough resources. Embracing this definition helps me in my role.”