Loss of passion for a project is probably the most obvious indicator that it is time to stop. The problem with the other indicators you suggest is that they are more difficult to notice, as they appear in different forms and originate from different sources. What makes it even harder is our inclination to “edit reality. Our brain’s natural tendency is to suppress unwanted indicators and revert to whatever we have pre-programmed in our minds. This denial of failure is often what makes founders continue with a project that should be shelved long ago.
The checklist that you propose is a good way to manage this denial process. I would also suggest using data to inform decision making during the life of a startup. There are numerous companies that provide data analytics both free of charge and paid for premium subscribers. Data analysis tools offer valuable insights into progress of social media campaigns, customer satisfaction, resource usage, and many more. Declining trends or skyrocketing customer churn rates are good indicators that the business is not gaining customer traction. After all, it is harder to argue with tangible metrics.
Dave, I found it quite interesting how you drew a parallel between combat and entrepreneurship. You meander between a few different concepts, but I was particularly intrigued by the term “fog of entrepreneurship.” It is certainly true that entrepreneurship does often feel like walking in a dense fog; you never know whether the next step will indeed propel you forward or will be deadly. I’d be curious to know whether there is any approach in the military used to limit the uncertainty that could be applied in the context of entrepreneurship.
You mentioned Clausewitz, but another great strategist comes to mind – Sun Tzu. His ancient Chinese treatise The Art of War has been referenced by business leaders for years. Sun Tzu’s recommendations can certainly be applied by entrepreneurs. As an example, Becky Sheetz-Runkle recently wrote The Art of War for Small Business drawing on Tzu’s teachings. This article on Huffington Post offers a good summary of the book. Below are some key points:
• Scout the territory first and pick your battles: Pick ‘battles’ that have the most value; especially important when faced with limited resources
• Prepare thoroughly and strike fast: Be prepared but don’t get bogged down in planning; do not hesitate to strike
• Capitalize on strengths and shore up weak points: Entrepreneurs must be able to recognize and leverage the competencies of their current team, and provide the backup to minimize weaknesses
• Attack competitor weaknesses and be alert for opportunities: Every competitor has weak points; small wins build momentum for a startup
• Limit your focus to key objectives on a single front: No army (or startup) can manage more than five priorities without becoming unfocused
• Capture territory the opposition does not yet own: Look for new opportunities, but be aware that there might be a good reason why no one has attacked this territory yet
• Negotiate and leverage win-win alliances: Your toughest competitor may turn out to be your best strategic partner
• To win you have to take risks, but don’t be reckless: Charging into a battle with your eyes closed is reckless; take smart risks with trained resources and due diligence
Great post with good data to back your comments. There is an interesting related phenomenon that I have observed in the VC industry over the last few years. The declining average age of founders compared to a decade ago, has had a profound impact on the composition of VC teams. Some of the established VC franchises struggle to remain appealing to 20-something founders who prefer to take money from investors who they can easier relate to. The VCs response has often been to promote to Partners individuals still in their 20s, whereas a decade ago you didn’t have a shot at a Partner position until your late 30’s at the earliest, in the hopes that they will help generate stronger dealflow from the 20-something demographics. It is too early to evaluate the performance of these new breed of VCs but this poses an important question of the value of experience in the VC industry.