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Our Decisions Determine Startup Success - or Failure

Foundations for Success
Building foundations for product success

So much of our human potential is wasted. Thrown on the scrap heap. 90% of startups fail. That new feature your team worked so hard on for weeks or even months - never even released. Never even tested. That design you were working on today - that screen or rebrand concept - never even saw considered by decision-makers in your company as they hastily moved on to some other seemingly important, seemingly urgent problem.

And when we think about it, even when we are doing work that creates value for our customers - work that is building and sustaining a profitable business - if that business eventually fails, then all that work is wasted. It stops serving a purpose. It stops solving a problem. It just lies in pixels and in code, archived away somewhere. Forgotten.

For 6 years, I have been asking myself the question:

Why, despite all these conventional advantages (investment, experience, following a strict process), do startups still fail?

That journey has taken me to work across South America, Portugal, Spain, Berlin & London in the pursuit of an answer.

Because I needed an answer. My first company, BackTracker, failed back in 2012. And the next two companies I joined failed. And the pain from my dream of building my own business, as well as the patterns I started to see in the other companies I worked in, drove me on to find a coherent answer.

I was angry, ashamed - annoyed even - that all the advice, from mentors, from our accelerator programme, from other startups, from academics - none of it helped us avoid failure. None of it seemed to help at all.

So, why do 90% of startups fail?

And the conclusion I have drawn, from my own observation, from scientific studies, from putting my theories into practice with my own business, is as follows:

The decisions determine outcome.

That a bad hire, building the wrong feature, not building a profitable product, building up technical debt. All of these phenomena, at their core, stem from poor decision-making.

All of it stems from the quality of your decision-making.

Therefore, improve the quality of your decision-making, and you dramatically increase your chances of success as an individual and as a company.

Yet the quality of our decision-making is poor because of the following observations I have made in the majority of startups:

  1. A focus on process engenders poor decision-making

  2. Team culture rewards poor decision-making

Why a Focus on Process Leads to Failure

When I say ‘process’, what I mean specifically is the process we use to manage product development i.e. what we are building and how we go about building it as a team.

Agile, for example, is a product methodology. A kanban board or simple to-do list would also be a product methodology.

Yet these processes can be the very reason we make poor decisions, and therefore lead our company to failure. Why?

  1. When we try to plan our work, organising in detail for days & weeks ahead, it makes us feel like we are in control of our work. Yet this can create a dangerous sense of control - a false negative - as when we operate in the context of a startup, we operate in a world of inherent uncertainty. Why? Because a startup doesn’t know their market. Doesn’t know their target customer. Doesn’t know what solution to build. Sometimes even which problem they are trying to solve. Everything is based on assumptions that rely on other underlying assumptions to be true. And when we plan ahead, we create a sense of control that blinds us to the need to adapt & adjust what we are building - and why - based on new information that comes in about our customer & product.

  2. Furthermore, humans have a tendency to over-simplify. This is exacerbated in the context of product. We want to feel in control - to feel some clear, tangible measure of progress - so we latch on to one thing, one simple metric, to provide us with that sense of control. We think of a ‘good’ day (a productive day) in terms of how many lines of code we wrote, how many screens we designed, how many tasks we completed as a team

  3. And the danger of over-simplifying, of focusing on one metric to measure progress, is that we end up focusing on a metric of efficiency, rather than a metric of effectiveness. We measure how much we get done - and how much more we can get done each week - rather than the more difficult, nuanced task of determining whether the work we are doing as actually having an impact on 1) solving a customer’s problem and 2) helping us build a profitable, self-sustainable business. So we continue in the pursuit of more, of busying ourselves, of just thinking about execution at the expense of impact.

Thus our decisions are focused on making us more efficient, but not on being more effective, leading us to build mediocre products with lots of features & lots of work involved, but products that do not best solve our customer’s problem - and therefore unlikely to form a robust foundation for building a profitable business.

And that is not to say that the product development methodology we use is not an important part of success as a product team and, ultimately, as a business. They direct and provide a framework for making better product decisions.

The problem is that theory does not translate into practice.

Agile and lean, for example, clearly focus - in theory - on addressing a user’s problem (not exclusively on how to be more efficient) and focusing on validating important questions we have as a business. However, in practice, because teams are stressed & over-worked, they forget to ask these important questions and jump straight to just building something - anything - to feel like they are progressing.

They cling on to the sense of control a metric of efficiency provides, rather than asking the harder question of how much impact they are having with their work.

The 1973 Good Samaritan Experiment

The problem with many theories is that their successful application is thwarted by human nature & thus too fragile to effectively apply in the real world.

When they come into contact with reality, even the experts fail to apply them effectively.

Take the example of a 1973 psychological experiment on whether teaching (specifically, what we say we believe and should do) actually influences behaviour (on the veracity of applying theory in practice).

A select group of religious experts were asked to deliver a talk on the learnings from the parable of the Good Samaritan (the moral of the story being to always stop & show compassion to those in need).

During this experiment, the supposed Good Samaritans would all walk the same way to deliver their sermon on how they interpreted the Good Samaritan parable, being told they had a varying number of minutes to get there, thus instilling different levels of urgency for each test group. On the way, however, psychologists John Darley and C. Daniel Batson had placed a dishevelled, helpless homeless person (an actor) along their path, clearly in need, who was there to test whether they actually lived by their teachings and stopped to help.

You know how many of the priests stopped & showed compassion when in a hurry? Under 10%. Despite their strong religious beliefs & their theoretical knowledge of ethics and compassion., in the heat of the moment, theory went out the window.

How many of you profess to care for others or critique the behaviour of others, yet failed to stop & offer assistance last time you saw someone in need? I certainly know that I have been guilty of this more than once.

Why Team Culture Rewards Poor Decision-Making

Firstly, on a structural level, the nature of work has changed, but most companies haven’t.

Despite working a work day that hasn’t much changed since the Industrial Revolution, with a fixed 8-hour day & being tied to a desk, our work itself is has changed dramatically.

It is no longer about efficiency (about building something quantifiable like 10 cars per day in a factory), but about problem-solving. About being creative.

And that model of efficiency, of being at the desk for 8-10 hours per day, is doing a huge amount of damage to the quality of our decision-making and the quality of our work.

To do great work, where we focus on impact, rather than on getting more done each day, the formal structure of the traditional work day must change.

Hours, working in a physical office, constant meetings, distractions like social media. All are leading your business to failure.

All rob us of any incentive to do great work. To be effective with our work. To even bother to be efficient with our work. Because what’s the point of thinking strategically & coming up with a better solution to a problem when you’re still stuck at your desk for another 6 hours?

All rob us of the mental space - the fertile ground for creativity - that comes from the freedom of going for a walk, listening to a podcast, playing sport, having a coffee with a friend or colleague.

This leaves us frustrated & restricted in our ability to solve problems effectively. It handicaps the quality of our decision-making.

Secondly, an unintended consequence of startup culture ’s celebration of being stressed, being under slept and being overworked encourages poor decision-making.

It’s a badge of honour to be stressed, overworked & constantly busy (making us look important to others). It may make our ego feel better, but when we are stressed, when we are tired, when we are anxious, we do not make clear, calm, rational decisions. We panic and think short-term, not long-term. We think in terms of quickly getting something done, not why we should be doing it in the first place - or how we could use our time better to create impact.

And so our decision-making is handicapped. By the formal structures of our company, as well as the informal beliefs we share about how we should work.


So if our focus on process leads us to focus on efficiency - and not on being effective - and our team culture reinforces this focus on efficiency - what are we to do?

How can we avoid the high chance of failure when our product & team - ultimately our business - are built on such fragile - dangerous - foundations?

Well this is the subject of my book. And my belief - one backed up by experience, science & testing within my own company, Scribe - is that we must start with the foundations:

Ourselves.

Unless we start with ourselves, on improving the quality of our decision-making on an individual level, nothing else matters:

If our foundations are weak as an individual, we are unable to resist the allure of stress & busyness that persists in our companies. We are unable to actually enact the right process in practice.

And to build strong foundation for decision-making, we must cultivate 3 key pillars to making ourselves more effective, and therefore making our decisions have more impact on our product - and our business.

1. We must become robust

If we are not robust, we cannot deal with failure, an inevitable outcome of experimenting with new, different ideas, we cannot deal with honest feedback, we cannot deal with the inevitable uncertainty - and anxiety that comes from uncertainty - of working in an early-stage startup.

By practicing specific techniques to cultivate this trait, we improve our decision-making, and ultimately our work.

2. We must become mindful

If we are not mindful, we allow our decision-making to become blinded by urgent, seemingly important things. We become blinded by our ego - in the pursuit of our idea, rather than the best idea. We become unable to see things clearly and to change direction when it makes sense.

By practicing specific techniques to cultivate mindfulness, we improve our decision-making, and ultimately our work.

3. We must become able to focus on the essential

If we are not able to focus on the essential, we busy ourselves with the inconsequential. We fill our time - and our minds - with rubbish. With things that have no impact. With focusing on getting more done - not deciding what we really should get done. What is going to have the biggest impact.

By practicing specific techniques to help us 1) understand what is essential and 2) execute to achieve it, we improve our decision-making, our effectiveness, and ultimately our work.

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Once we build a strong foundation starting with ourselves, then we can focus on building our team to be a team of high-quality decision-makers, as well as applying a process - a data-driven & user-centric one - to help focus our decisions on building a successful product - and ultimately a successful business.

But to learn the specific strategies to build the right foundations for a successful product - and business - you’re gonna have to read the book.

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