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Does your startup have a devil’s advocate?

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Find a devil’s advocate for your startup who can minimize the risk in your portfolio of one

Reading the book on the Cuban missile crisis, ‘Thirteen Days’ for the negotiations course taught me the importance of having a devil’s advocate. The book emphasizes how having one averted the disaster of a full blown nuclear war. Could a Curt Schilling have avoided failure by having someone take an opposing point of view?

Ideally, a negative response to fund raising is considered a good signal for entrepreneurs to look back. In the Dinr example, potential investors were able to tell the founder that his excitement does not show in his numbers. However, in a bull market like the one we are in today, where raising angel and seed financing has gotten much easier, this may not be the case. We saw the example of Blue Apron raising money a valuation of over a billion dollars. Does this mean it is a success? It faces many of the same issues as what Dinr faced. It may well be that the fund raising market has failed to deliver the signal it should have and may have extended the runway for failure. We saw such late failures in companies like Fab.com and Livingsocial.

The other candidate for a devil’s advocate is the Board. They should be able to objectively tell you their views. However, in many instances, the Board consists of either people who are too close to the entrepreneur or have vested interests because they are investors. So, their opinions need to be weighed appropriately.

The third alternative is the management team. Debating with the management team which comprises of people with different risk profiles could be helpful to the founder. It is of course eventually the founder’s decision but they could add some data points to the founder. We saw the Yabbly founder call in some trusted employees to ask them about the acquisition offer. Their answers seemed to have contributed to his decision.

The last alternative which founders can consider is family. While they are emotionally invested in the company as well, family can be an effective risk reducer for entrepreneurs. Unlike all the other available options, they are in the same boat as the entrepreneur. They face the same financial and social risk and may point the entrepreneur to factors beyond just business.

From the cases, it was unclear if Wessman and Tim (Savage Beast, Pandora) who came back remarkably from a trough had such a devil’s advocate who pushed their thinking and helped them stay in it for longer. Who would you pick as your devil’s advocate?

4 thoughts on “Does your startup have a devil’s advocate?

  1. Thanks Kaushik for your post! I also believe in the power of devil’s advocate to help us identifying blind spots and providing a new perspective. However, I wonder whether it takes certain condition for devil’s advocate to be effective. For example in Curt Schilling’s case, even though his female CEO has stated multiple times how the company process should work and seemed to explain to him why it is important for her to take charge, he still can’t control himself from pulling out his checkbook when his employees need more money. To me, I think there are a few factors play in for devil’s advocate to be effective:
    (1) The devil needs to be well respected – I found it if the devil is someone who is powerful in the organization, or has relevant experiences or established credibility in the past, it is much easier for him or her to be in the position to challenge the majority thinking.
    (2) The listener needs to be open-minded – similar to providing feedback, it is truly a gift for someone to offer honest opinion because it takes courage to do so and it helps you to learn better. However, if someone is defensive about it, it would be really difficult for that person to actually appreciate the intention and focus on the learning.
    (3) Devil’s advocate is more effective when company is not in a good position. If a company is in a good position, it is less likely for people to take in opposite view because “my plan just works perfectly!” Ironically but true, it would be easier to start the conversation by objectively analyzing the company’s position, and frame it as a threat if such opinion is not taken seriously.

  2. Great post Kaushik. I actually recently read this very advice in Guy Kawasaki’s The Art of The Start 2.0. Guy specifically recommends having someone on the management team as that person, there to provide pushback and highlight where things can go wrong. I think of the options you have listed management is the most helpful in that they understand the business, unlike friends/family, and tend to be similarly aligned, where investors sometimes are not. However, having been in the devil’s advocate position in startups before, it’s definitely a tough position to take. You need a founder who’s very open to seeing all sides of the story and empowers employees to speak their minds even when you as the CEO may disagree.

  3. Kaushik – thanks for a great post! I agree that generally having devil’s advocate will improve thinking, but I wonder if there are certain circumstances where moving fast is most important and having “soldiers that fall in line”, so by definition, eliminating the devil’s advocate is actually the better way to go. One example where this type of culture and decision-making seems to be prevalent is 3G’s approach in their investments in ABI, Kraft Heinz and Restaurant Brands International. Clearly, they have shown some of this effort had paid off from a profitability standpoint (I’m skeptical of the long-term viability of their overall strategy, but that’s for another day), and I’m wondering if there are similar examples in the start up world where we’ve seen this type of mentality win out, even if just for a limited period of time.

  4. Agree Caitlin that this shouldn’t come at the cost of speed. However, in decisions like in Schilling or Yabbly’s case, they have enough time to think through the decision (many months). I was only hinting at cases like those where someone taking an opposite stand may have helped them.

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