What we learned from Peter Thiel, Instagram’s Kevin Systrom, Facebook’s Chris Cox, Y-Combinator’s Sam Altman and more.
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Last week, I was invited to speak at the Khosla Ventures annual CEO Summit to share what eatbigfish has learned about how challenger brands compete with the big fish. The theme of the summit was “taking risks,” and the speaker line-up was so strong that I had to attend the entire day and a half event.
Here are some things that struck a chord with me, and make a useful checklist for start-up founders and entrepreneurs to run through.
1. Hard prune to stimulate growth
The gardeners among you will know how pruning stimulates growth, and start-up founders know it too: Instagram’s Kevin Systrom spoke about the need to be “very strict about doing fewer things better,” even if that frustrates your talented people. And he referenced Jack Dorsey’s belief that product editing is the main function of Product Managers. Chris Cox credited the rapid growth of Facebook in its early days to having just one big initiative per year: one year was to get high-schoolers onto the platform, the next year businesses, and only then to push beyond the English language.
It can seem counterintuitive to do less in the quest for more growth, and clearly the trick is in choosing the right things to cut and commit to. But the key question to ask is, Are you making the tough choices about where to focus? Could you create energy and momentum by cutting more?
2. Turn red oceans blue
The prospect of having no one to compete with in warm, blue waters is a very seductive prospect for any business leader. Peter Thiel of Founders Fund laid out his three fundamentals for making such a monopoly: find a small market that you can quickly take over, create a very sticky product, drive marginal costs to zero. Such business strategy fundamentals are often overlooked in the Valley, he feels, when they can be predictive of huge cash flows in the long-term.
But blue oceans aren’t easy to see and create. Chris Cox noted that many people questioned Facebook building a social network when we already had MySpace! And, “everyone assumed photos were a red ocean” said Kevin Systrom, and that “there was no money to be made in books and mugs.”
But Instagram made sharing photos from mobiles much faster and created a blue moment in that red ocean. “It was mostly luck and timing,” Systrom said, YouTube and video was the hot new thing, and no one else was paying attention. Then suddenly all those new connected cameras on mobile phones enabled more photo sharing than ever before. A set of filters made the photos look a lot better, and then network effects kicked in. Instagram fulfilled a need no one else had seen.
And this underscores another theme of the summit: the importance of need finding. Instagram may have been lucky, but they created their luck by being more in tune with customer needs. Every organization will tell you they are customer-centric, but few are as intimate as they need to be to anticipate needs before a customer can articulate it.
This kind of customer empathy that IDEO and the Stanford d.school teach as part of their design thinking method thrives in corners of Silicon Valley, and is something all entrepreneurs must develop. Get closer to your customer, and you may preserve what Vinod Khosla calls the “founders instinct”–an almost innate sense of what’s coming next.
3. Don’t remake today’s stuff with tomorrow’s technology
Autodesk President and CEO, Carl Bass, described the kind of “generative design” that is now possible when we allow the software to iterate thousands of possible solutions to a design brief in order to arrive at the optimal solution. With costs below 2 cents per CPU hour, we can now analyze every aspect of a design problem, and try endless permutations and new models.
Using this approach, Autodesk has been able to create far stronger, yet much lighter jump seat fixtures on an aircraft, for example, saving money on fuel costs. And has iterated its way to far lighter and stronger racecar chassis.
Interestingly, when the machines are freed from the built-in biases and path dependencies of conventional approaches and try out countless new permutations, they will often come up with the elegant, fluid, organic forms that seem to mimic nature–the kind of deep structures that Kevin Kelly has noted when describing the biology of machines. The chassis design was quite beautiful.
The Autodesk team uncovered a number of specifications in the airline jump seat brief that were simply no longer necessary when using new materials in new ways. Challenging the old specs allowed them to further reduce the weight of their jump seat design by fifteen per cent.
The larger point here is about the shortcomings of imagining the future using the models of today. Just as the earliest TV shows resembled filmed radio productions, so many of our ideas about how to use AI, VR and so on, are limited by our mental models of how the world works now. The entrepreneur must work hard to show these biases and assumptions and challenge them. This is a way to get to the blue ocean first.
4. Create something people love
Y-Combinator’s motto used to be “make something people want.” But after reflecting more on what created success, changed it to “make something people love.” What all start-ups need in the early days are evangelists who will spread the love.
This shift from want to love may seem like a subtle one, but it’s everything in an age where most of our basic wants are already taken care of. Love cuts through.
And love is measurable. Dheraaj Pandi, CEO of Nutonix, described his firm’s desire to make beautifully simple user-experiences in the enterprise software space that people would love using. With design that is “intentional, opinionated, and delightful” his firm has a net promoter score of 92.
5. Develop a powerful narrative, and make the slogans real
Business success is always obvious in hindsight, but at the outset, people will rejoice in telling you why you’re bound to fail. This is why it’s so helpful to have, as Chris Cox’s Facebook put it, “a narrative to combat the idea that what we were working on was not something dumb.” Facebook’s narrative from the beginning was about connecting the world. Y-Combinator is on a mission to enable the most innovation in the world.
A number of speakers addressed the importance of a strong purpose; the fabled need to start with why. This purpose will help you rally the troops when the world seems against you, and it will help you attract and keep the talent you’ll need to sustain the mission. People are meaning seeking.
But that purpose will also guide decision-making. “You have to make the slogans real,” Sue Desmond-Hellmann, now CEO of the Gates Foundation, but long time Genentech scientist, said. “At Genentech, we did the right thing for the patient, always,” she said. “Belief and reality matched.”
6. People matter most
For an event that mostly featured people with brilliant technical chops and disruptive business models, it was striking just how many spoke about the importance of people and culture in building a great business.
“The most successful CEO I know,” said Y Combinator’s Sam Altman, “takes his top ten leaders to dinner once a month for a one on one conversation.” This is a massive time commitment, but one that keeps that CEO connected to the business, and more importantly, that keeps the key people connected to the founder, whose time they crave.
Uber’s Ryan Graves talked about how they had learned from Amazon’s bar-raising method to make sure they only recruit the best people. Bar-raisers are those people who excel at recruiting. They are expected to take part in recruiting for positions all across the company, which takes a huge amount of their time. Bar-raisers are expected to advocate for the right candidates, but also have veto power.
Wharton professor, Adam Grant, implored the audience to support Givers (those who will generously give their time and attention to helping their peers succeed) over Takers. “Get the right people on the bus,” he said, creating a culture of generosity is essential to success. The only thing more essential, however, is “getting the wrong people off the bus.” Takers can poison your entire culture.
Grant’s research found a strong correlation between “commitment cultures”–where people are willing to commit to the vision and values–and getting to IPO. He also flagged the importance of “psychological safety”–building a culture where people are not afraid to challenge leadership if they feel they need to correlates well with growth.
The 6 key take-aways:
- Do less, achieve more: what few things that really matter?
- Turn red oceans blue: anticipating needs requires deep customer empathy
- Don’t plan the future based on today: throw out your dated assumptions
- Satisfying a want is not enough: create something people love
- Make the slogans real: develop a narrative, and let it guide all decisions
- People matter most: Hire Givers and get the Takers off the bus