I call it the unifying principle of entrepreneurship. Whether you’re selling software or sausage, offering consulting services or dreaming up the next Uber, it’s the single most important thing you need to know to succeed. It’s not the only thing, but forget it and you are likely to face almost certain failure.
Three essential truths
Why “unifying”? Because this fundamental principle encapsulates three essential truths about entrepreneurship.
First, it describes the earliest and most basic form of all entrepreneurship—barter, as when our ancient ancestors might trade warmth-producing animal fur for grain, making each of the parties to the trade happy. Such trade is at its core the entrepreneurial transaction, whether you’re trading real estate, products, or services. Often today’s more complex entrepreneurship terminology—phrases like “value proposition” and “product market fit”—can obscure this fundamental truth.
Second, this unifying principle of entrepreneurship conveys the fundamental fact that emotions drive transactions. The positive emotions associated with acquiring a product or service must be big enough to overcome the negative emotions associated with handing over money (which is referred to as the endowment bias). Remember, too, that someone who said they like something you do or make may not like it enough to actually want to part with their money to buy it.
Third, understanding the emotional state of your customer pre- and post-sale is critical. The jargon of value propositions causes many businesses and entrepreneurs to neglect monitoring or measuring the emotive responses of customers, yet those responses will largely determine whether they’ll buy the product or service in the first place and come back for more later.
Some of the most famous entrepreneurs in history certainly understood this principle and its underlying truths. Sam Walton’s success is often attributed to his ability to relentlessly squeeze out operational inefficiencies so he could undercut the competition, but the real secret of success was his unflagging determination to make customers happy. Every Saturday for 45 years he met with his managers to share ideas about how to make customers not just happy, but happier.
Similarly, Steve Jobs is often remembered for his disdain for focus groups and the like. But in the early days of Apple he spent countless hours observing how people used the Apple I inside the shops where they were first offered. That’s how the company came to include keyboard, TV driver, cassette interface and BASIC software in the Apple II.
The hundreds of thousands of people who start businesses each year and through patience and hard work build them into successful enterprises understand this fundamental principle as well. These “bedrock entrepreneurs,” as I call them, don’t make the headlines, but they do make people happy. I’ve spent the past several years talking to many of these bedrock founders, watching them at work, getting to know them, and discussing their motivations and their aspirations. Most of them started with next to nothing and created enterprises that made countless people happy and better off.
When forgetting can be fatal
This principle is so simple that it should go without saying, no? But it’s surprising how many entrepreneurs fail to fully grasp it, lose sight of it, or conclude that it doesn’t apply to them. And it’s doubly surprising that many of them make this mistake when they can least afford to—in the earliest phase of their startup. That’s when they’re likely to find that few people are interested in the product or service as it was originally conceived.
Rejection of a cherished idea can hurt, especially when you’ve just spent enormous amounts of time and risked your personal finances trying to get a company off the ground. Nevertheless, you must figure out what part of your original idea is worth saving and what part you must jettison. It’s the first big test you are likely to face as an entrepreneur.
It’s not easy. You may feel anxious and disoriented. You may feel that you’ve lost control. You will certainly find change exhausting: you must work through the many possibilities, from simple tweaks to extreme makeovers, to figure out how to deliver something valuable that people will happily give you money for. You must find and contact many potential customers to validate your changes. You will need to alter your prototype, or your service description, or your specifications, or your website, over and over as your idea evolves. This is an enormous amount of work, and it’s emotionally draining.
Unfortunately, instead of staying tightly focused on customer validation, many entrepreneurs pour enormous energy into devising a business plan. That is perhaps the most common mistake startup leaders make in the early stages. You cannot have a meaningful business plan until you know what customers want.
Entrepreneurial success is not nearly as complicated or as out of reach as it is sometimes made out to be. While some businesses need to be complex and all businesses become more complex as they grow, the fundamental principle of entrepreneurship is simple and straightforward. You do not need to be brilliant and technically savvy to be a successful entrepreneur. But you do need to ask yourself how badly you want to make other people happy.
From Forbes online Sept. 24, 2018 by Derek Lidow