Why This Business? Data, Confidence and Shit-Testing

almostfitz (32)in #startup • 6 years ago (edited)

Having an epiphany, a eureka moment. Or just finally saying “To hell with it” after hours or days struggling to make up your mind. Somehow or another, for the majority of choices in our lives we eventually get around to the moment of decision. A final push of the stone that sends it throttling downhill. An agreed upon finding among many psychologists is that human beings seem to choose with emotion and then rationalize after the fact with supporting evidence. We tend not to weigh objectively the good and bad of each of our decisions. For example, buying that new car while it was a little more expensive that we can afford was smart because affording it a year from now when you're also in college seems unlikely. Plus, its safety rating is so much better than our current one. These are a few reinforcing statements pulled out of the bag-of-tricks that support our narrative. Indeed, we are smart and able to apply those smarts when it counts.

In every decision there is a place for data and there is a place for heart. The time for evaluating your decision is before you’ve acted on it. After that, the only value you extract from analysis is correction or improvement.

Don't Buy This Book: The first thing I should say is that this is not advice. It is my own psychological process for how I landed on my idea for my current company. It is a thought process to examine. I'm not trying to make you follow my path. I’ve fallen out of fandom with the entire business management/self-help category of literature for one main reason: It’s all reactive. Every business bro writes a book to sell you their secret how they got from A to B. The problem is your A and their A are lightyears apart. The factors, timing, decisions and consequences that led them to where they are are never going to be the same for you. They don’t hold water. Those books aren’t for learning, they are for meta-learning. And almost no one who writes them gives you the pre-text of "This worked for me, and while it's a good story, it's not going to work for you bud." Looking back on them I was told how the river felt when they stepped in it. But you never step in the same river twice. This whole genre's value comes from reading a ton of them, extracting practices and situations that are consistent across all the books, and then applying the learning to your own unique situation and decision making process. This is one more star in my own universe of self correction. One blip in your lifelong process of meta-learning.

Get Experimentin': I took a year sabbatical from my last company and the first thing I did (after trekking around Nepal for two weeks) was jump in on every one of my friends projects, startups or ideas who would allow me in. Mostly in an advisory manner. Giving away my work for free in exchange for a bunch of different environments and experiences. With each of these I gave myself enough time to fully expose myself to what the daily grind in this space would be like. Might be 10 hours, might be 100. But enough to get a feel of the highs, mids and lows of working in that industry. A storage project in San Diego, carbon offset startup in Guelph, a conference services startup in San Fransisco. The point was to get in reasonably deep and try. Finding the right answer often means eliminating many wrong ones.

What Have You Built: One of the major skills I learned in my last position was trail-blazing. Not in a grandiose sense. We were just doing things in our company that hadn’t been done and making decisions about situations people had not encountered yet. So you get used to making things from scratch. Keeping when they work, and burning them down when they fail. Often celebrating both outcomes with four fingers of whiskey. So cutting a path through the jungle where no one else has gone before. It’s not an easy skill to learn, but once you get it, it’s hard to ever feel good again just following someone else’s path. Why the hell do you think Indiana Jones can’t stay in his classroom?

What Talent Can You Draw On: I had a design expert who skills I could draw on. She was also willing to lend her skills and gives an entry points into many of the communities I would need in order to get quilting products off the ground. I decided that I wanted to improve my eye for design. Fly or fall, one of the outcomes of working on a company in this space meant I would sharpen up my eye for design. Strangely enough I had a guru right in the family! My mother is an award-winning textile and mixed-medium artist. With tons of recognized show entries as a quilter and many of her pieces traveling North America in different shows at one time. She does wild, beautiful and groundbreaking stuff with her textile art and she has for as long as I could remember. Having this value nearby cannot be understated. Not only in having someone to draw ideas from and create with, but also someone with huge experience to check my strategic and operational decisions against so that I don’t spend my early years in the business falling into pits that could otherwise be avoided with some institutional knowledge. The old adage “the quickest way to find out how something is done, is to ask someone else who’s done it” gives me shortcuts I want to be able to take. It cuts down the learning curve when opening a new business so drastically that it is not unreasonable to say it may have been the final weight on the scale that tipped me towards Yes. Can't say for sure until we've explored the rest of my process.

Setup Your Arguments / Destroy Your Arguments:

You owe it to yourself to look into and try to actively disprove all of your theories about Why This Business, Why This Moment. You’re going to need to know where you stand in terms of resources, mindset and limitations, and you’re going to have to do a lot of research. This means both primary research (new, previously un-gathered data) and secondary research (“desk” research that has previously been gathered.)

You will need plenty of both. Because some of your ideas will not stand up to the glaring Light of Data. Some will fall to the Goliath of other people’s Opinion. And some of your assertions, the hardest ones to kill, will be so resilient as to require a tag-team of elbow drops off the top turnbuckle from both of the Dudley-Data and Opee-nion Boys. Bull Shit Idea.png

Opinion beats Data - Looking at the businesses already in this space I had to decide if I wanted to work Business-To-Customer (B2C) or Business-To-Business (B2B). Initial research looked good to open up a retail front or online store. StatsCan on their website reports that 86% of the small businesses from 1 to 99 employees in the Sewing, Needles and Piece Goods industry were profitable. Becoming a retailer myself was certainly an option, but would mean adding on an entire skill set required for retail. Retail in an industry which I had no background. I could have gone either B2B or B2C with this data. So I worked out a way not to minimize my competition. In my mind if such a high percentage of businesses are profitable that means you could become a supplier and those profitable businesses have money to buy from you. Yes, I acknowledge that that just bumps me into a new bracket of “who is my competition?”. But I’d rather be in their competition bracket because I know more about what that looks like.

Data beats Opinion - People said "everyone’s going after the same customers". Which is true of many industries. My research turned up a counterpoint that in the 3.5 billion dollar quilting industry, there is a tiny leading segment of Dedicated Quilters (about 6-7%) who account for more than 70% of the total spending. So within a huge customer base, there is a small dedicated customer base that I can design products for. I’m sure the competition for these dedicated customers is high, but at least my target is small. Aim small, miss small.

Opinion vs. Opinion - A few retailers were telling me that quilters don’t care about where their materials come from. They said the same thing, feel of the fabric and quality trumps everything else. The opposite side of the coin is that obviously there is a portion of customers who would buy from a company with a philosophy and a mission as long as they also provide products that are the feel and quality that they are used to working with.

Opinion beats Data - I saw beautiful things being made in a places that couldn’t get them to the developed market. Anyone who has been to Nepal knows the infrastructure problems they currently face. Just moving building materials and fuel around the country is an uphill battle. Food, gas, sanitary products are carried to villages on the backs of people and mules, sometimes motorcycle if you’re very lucky. World Bank rates them as the 105th overall country in Distance To Frontier (essentially a ranking of how easy it is to do business in Nepal). So it will be hard to work with companies in Nepal, hard to move things around and more challenges will arise than if you worked with a country in which international trade was more standardized. But I decided that while this was an obstacle to overcome, it was one I wanted to overcome. This was part of my road less travelled. Hard to work with, means less people are inclined to put in the work. Which means if you can do it, you map out your own opportunity.

Data, Opinion and Schmutz get all jumbled up - I loved the story of the Buy-One, Give-One business model, of which the most famous instantiation is Tom’s Shoes. They have spawned a litany of copy cats and modifiers since their meteoric success. A great deal has been written about BOGO in the decade since this idea took off. For all the good that it does I came to realize it was not without it’s issues. In brief, here’s a timeline on how this model has changed in the past decade:

BOGO 1.0 ($1 of products sold provides $1 of products to a person in need)

Effect: Buyers feel great, and targeted communities get great products such as shoes, glasses, etc
Blowback: Huge shipments of free product coming in destroys some local businesses in communities where small vendors sell similar products

BOGO 2.0 ($1 of products sold provide X$’s of professional training to communities in economic need)

Effect: Buyers feel great and members of a community get professional development skills
Blowback: Business owners feel as if you are coming into their community and telling them they don’t know shit about running their own businesses

BOGO 3.0 ($1 of products provides X$’s of targeted micro-loans for entrepreneurs and small business startups)

Effect: Buyers feel great, some of their dollars going to fund new businesses, and entrepreneurs in targeted communities will receive financial backing along with other support to start and run their own businesses
Blowback: Micro-loans can be applied through sketchy and enslaving tactics

Where All This Landed Me: With Miiru I created a combined business model. I didn’t want something completely out to lunch. Just a little off the beaten path. We're living in a time of unparalleled financial prosperity, but also a time of huge resource inequality. Massive inequality doesn’t work, but massive redistribution also doesn’t. The fact is that every new or modified business model is one more data point in the galactic experiment of human production. I reasoned that no one has quite figured out the perfect capitalist model and seemingly no one has put into practice even a decent model of re-distributive economics. I wanted to learn more about both of these forces as well as have an effect on the communities that I cared for. This all needed to be grounded in what I considered a foundational business model.

Old, tested, solid - Import/Export in the form of bringing in textiles from producers in Asia - a business model older than the hills and easier than ever to get into now

New, vibrant, experimental - Give a percentage of revenue from products sold to fund startups in the countries you’re importing from. Funding new startups in your sector should in theory give you more suppliers to work with, but also certainly some competition as well.

Worthwhile - Can you tell the story when you need to? We’re a small business, working with small businesses and we help start new small businesses - the tag lines basically write themselves

New Import Infographic.png

This is far from giving me any assurance of success. It does however allow me at least to claim these three statements:
1 - I’ve reasoned out and destroyed some of my own poorly held assumptions.
2 - I’ve given myself ammunition for when people have questions about what I’m doing and why I’m doing it that way.
3 - I have the confidence that what I’m working towards in the short term is aimed in the right direction, for the right reasons.