What must young entrepreneurs know before they build a company?

Published May 31, 2013 by rudraprajapati

Answer by Cody Rapp:

It is the very first lesson they teach about entrepreneurship. And yet, it is also the lesson that most modern-day, young entrepreneurs ignore. It goes something like: "Businesses solve problems. So find a problem and solve it." Sounds simple enough, but there is a subtle nuance that they aren't teaching that makes all the difference: The best entrepreneurs design solutions to problems they understand better than anyone else in the world. Here's how:

Business from a Scientific Perspective:

Whether they know it or not, many entrepreneurs have begun to approach business from a scientific perspective. Personally, at an early age, I wanted to be a doctor. I consumed a plethora of books about medicine, and signed up for as many science classes as I could. In EVERY, science class I have taken, the very first lesson has been: the scientific method. Pounded into our psyche, year after year, was the following process: ask a question, do research, form a hypothesis, test the hypothesis, and then either draw conclusions or reframe the hypothesis.

What occurred to me a few months ago is that I have been subconsciously  applying the same methodology to business and entrepreneurship. I have looked at an industry, done a bit of research, made a hypothesis in the form of a unique business model or novel solution (which typically connect otherwise disjointed industries or, perhaps, which fill a void), and then I go out and test that hypothesis.

After testing it and seeing how people, entrepreneurs, customers, investors, and clients respond, we either draw a positive conclusion and push forward or, in entrepreneurship lingo, we iterate. We iterate like crazy. We don't stop iterating, ever. All we do is iterate, and its becoming a bit of a joke.

Business is about designing solutions, not theorizing…

While I acknowledge now that this method can work (and has worked), I also acknowledge that it is a circuitous, roundabout, time-consuming, and somewhat stressful path as compared to the alternative approach that I'm about to explain. Not only that, but it is also a path that relies more on luck than that with which any knowledgable businessman should ever feel comfortable.

So what's the alternative? Business, they say, is about "finding and solving problems". True, but that's not the half of it. They don't really teach you how to find the problems. And I'd even argue that anybody looking for a problem, rather than observing/perceiving a problem, is fundamentally misguided. Its a subtle difference, but an extremely important one.

Business is about UNDERSTANDING an industry or a domain so well that you UNDERSTAND the pain points within that industry or domain. Its about becoming an expert in something, typically by accumulating a wealth of experience in that 'thing' (but there are other ways), and then KNOWING exactly what it will take to fix it, make it better, or create an alternative that adds enough value to a consumer or customers life such that they will CHANGE their behavior to adopt your new model/approach/solution.

It is about understanding the intrinsic motivators, be they money, prestige, simplicity, or ease-of-use of a product, of EVERY single player in a transaction. It is about understanding who in the transaction is unhappy or in desperate need of change, and then it is about modeling a solution that not only fits, but exceeds, the expectations of every one of those players.

Then, on top of all of that, this perceived, understood, felt problem demands a profoundly simple solution. Notice too that I say "felt". Logic goes a long way in science. Logic IS science. Math = logic = the scientific method. But in business, the only way thusfar to understand the intrinsic motivations of every player in a game or transaction is to either feel them for yourself or fundamentally understand psychology, behavioral economics, and why people make decisions. The latter is much harder to find, much less robust and concrete, and typically involves a scientific approach which lacks the following element…

   You have to feel the pain. It sounds cliche, but not only is it fundamentally important to the perception and design of the solution, but it is also THE motivator that pushes driven entrepreneurs through the massively fluctuating turmoils of a start-up. The pain is what grounds you during the highs, and it is also the thing that keeps you going during the lows.

Creating a business is not just about understanding the rules and the weaknesses of the status-quo, its about feeling the limitations that those weaknesses impose and acting on them.
  
The Puzzle Metaphor

    Metaphorically, its like a 1000-piece puzzle that is missing its last piece. It takes a while to put together, but in the process of putting it together you see and understand the picture you are trying to complete. As you build it, you notice certain pieces act as the edges of the puzzle, and others can be grouped by their shapes and colors. You enjoy putting it together, a lot of times with people that you respect and with whose time you value.

And then, to your utter dismay, you can't find that last piece. You get frustrated, search desperately, maybe whine and complain a little bit, and then you do one of two things: one, you could give up and say that you completed the puzzle "for all intents and purposes" and move on, or two, you can grab a piece of cardboard and some scissors and cut a piece that fits perfectly into, and completes, the puzzle. You know exactly what the piece has to look like, you know exactly why it will fit, and it is this realization that powers the development of really great companies.

The tricky part (and the reason timing is everything) is that every time a new piece is added to the board, all the pieces change shape and sometimes a few pieces pop out of the puzzle because they can't keep up. The puzzle will never be finished. The name of the game is which player can have the most, biggest, fastest growing pieces (or sets of pieces) on the board…

One qualification of this argument:

   That being said, there are numerous examples of companies started by young entrepreneurs who take the "hypothesis-based" approach from the get go. This approach absolutely can work. You can start with a framework, dive into a field that you find fascinating, understand the motivations of all of the chess pieces involved, and iterate until you find your model. Doing so is, after all, a noble pursuit.

But I would argue that it is also the reason why there is a less than 10% chance of success for young entrepreneurs today. We spend our time and money iterating until we get it right, and even with this approach, only 1 in 10 of us makes it big (ie. exits with a larger than 10x return). My theory is that quite a bit of this 10%, which is actually closer to 5%, is absolutely dependent on luck and timing. Just as so many of our significant scientific discoveries happen by accident (which you could call luck), so too do our ideas, models, and hypotheses follow a chaotic, unpredictable, and chance-dependent path.

   Just to be clear, I am also not bashing the scientific method, at all. Instead, I am suggesting that entrepreneurs should wait to apply a similar method to business until AFTER they fundamentally understand a problem and the players in its space. Starting with a theory, without understanding its context or being emotionally invested in that context, is the wrong approach.

For all of the young entrepreneurs out there…

Don't stop. Keep hustling. Just focus. Don't seek a problem out, but instead seek to understand the problems worth solving. Start with asking yourself: "What frustrates you, right now?" But beyond that, ask: "What do I know more about than anyone else in the world, and how can I use my knowledge to design the puzzle piece that everyone else desperately needs." If the answer to the previous question is that you don't know anything better than anyone else in the world, then focus your attention on how to get there. Choose something you're deeply passionate about, and dive in, with the intent of understanding that field, those players, and the problems that make their life and your life difficult. THEN start a company.

Or, if you are a student, or a PhD. candidate, or have a great job with a little time to spare, and if, like me, you can't help but dream up a plethora of fascinating, disruptive (unvalidated) new business models or industry shaping/inventing solutions, then by all means try them out! Instead of playing video games or partying, go out and buy the start-up lotto ticket and take your chances. You have absolutely nothing to lose and everything to gain. Just make sure that you do so with the intention of learning and absorbing absolutely everything about a particular field. Then, when you've positioned yourself appropriately and validated your model consistently, take the real leap (not the dramatized leap that young entrepreneurs who have nothing to lose think they are taking). I'm happy to help here too (email me at cody@theupexperience.com).

   Or, if none of this is for you, you could just add to the mix and continue trying to be the next "Instagram". But before you go out and do that, ask yourself this: If you are starting a company and you aren't really solving a problem or don't know what problem you are solving, what are you really doing for the world? How does your solution drive progress and innovation? What value are you really adding to people's lives? There are so many urgent problems that need to be solved, so do the world a favor and devote at least some of your resources to solving them. We revert to finding profound meaning in life when we lose ourselves in pointless pursuits, so… instead, seek out that meaning now and don't pursue the pointless.

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What made Mahesh Murthy start his crusade against IIPM and Arindam Chaudhury?

Published May 31, 2013 by rudraprajapati

Answer by Mahesh Murthy:

I have answered this elsewhere on Facebook, but it may be tough to make out a timeline from the fragmented posts there. So here's some sort of general progression of events. This will be long, so brace for the ride:

  • 2005 – yes that long ago – JAM magazine writes about IIPM's tall claims. See their redacted articles @

    @ and

    and @

    .

  • IIPM does the nasty – it sues the publisher of JAM in Assam – where she chooses not to contest because it's too much of a pain to go there and fight a case – and a court order comes from there essentially asking her to remove said articles from the net. She does. Thankfully, others put it up so you can still see it.
  • At the same time IIPM runs a rather disgusting bad-mouthing campaign against the publisher of this piece, saying she was expelled from IIMA for lesbian sex and/or failing to get good grades etc.
  • Then a few months later, Gaurav Sabnis blogged about the lies that IIPM used in their ads. IIPM responded by blackmailing Gaurav's employer IBM who it had bought laptops from – and this ended with Gaurav leaving / losing his job. More details are @Vantage point: An Update.
  • This pattern of publication followed by threats followed by deletion followed.
  • Then Maheshwar Peri of Outlook Group / Careers360 stepped in. He was quite aware of the JAM and Sabnis issues and went ahead and published an enormously damning expose of IIPM as a fake education company in @Best only in claims?.
  • The IIPM response was prompt. Peri got sued in Guwahati. But unlike JAM he went and fought there. IIPM got a stay order, convincing a judge that Careers 360 could not publish more articles on it till the defamation case was resolved. Once the stay order was obtained, IIPM then promptly never followed up in Guwahati and deliberately has avoided any further court dates since 2009. So it's a stalemate there.
  • Unfazed, Peri continued. This time IIPM sued him in Uttarkhand. But Peri fought and won. The judge, in fact, asked for IIPM to be banned. @Think higher education! IIPM: Uttarakhand Registrar recommends a ban.
  • Meanwhile, every single claim IIPM made in its ads was falling apart. It's apparent European b-school degree granter was found to be a fraud. It's apparent collaborations with universities in UK and US were found to be non-existent. In fact, everything stated in IIPM ads was a lie. And as my friends at The Times of India tell me, IIPM has a contract with all print papers saying, in effect, "if we give you ads, then you can't write about us without our permission" so they had ensured censorship there too. For a few years, IIPM was the largest print advertiser in India.
  • Other journalists tried to piece together a story. Siddhartha Deb wrote a balanced piece in Caravan. It also served as an intro to his book on modern Indian business. A lawsuit was filed against them. The book – actually the IIPM excerpt of the book was banned via legal wranglings. As was his piece. It is mirrored here: @Sweet Smell of Success- How Arindam Chaudhuri made a fortune – Pastebin.com.
  • Other found that in contrast to the apparent world-class education IIPM claimed to offer its students for their Rs. 15 lakhs, what they actually offered was a correspondence degree from MS University in Thirunelveli that one could get direct for Rs. 17,000
  • A host of "Delete" requests went from IIPM and its legal efforts to Google, various web sites (including Facebook) to get this content to stop coming up. Google said no way. Facebook complied.
  • Through all this, I just wanted to keep the content in one place. So I published a bitly bundle of links @Dare to think beyond IIPM's lies & daylight robbery. Its distance learning 2-yr MBA costs Rs. 17,000 if taken direct from the same MS Univ in Tirunelveli. Why pay more to these scamsters? See documents below. to make sure the content wasn't lost through the legal wranglings and the harassment. 
  • Then all was quiet for a few years. I suddenly am told that this bundle of links is #2 in a list of links ordered to be blocked by the DoT after it received a court order from Gwalior based on a petition filed by some IIPMtard there. Medianama has a comprehensive listing of IIPM censorship attempts @3-7% Paid Users in India, Close to Global Standards – Linda Kozlowski on Evernote in India. The #1 link was the UGC Govt Of India link that called IIPM a non-degree granting body.
  • This pisses me off. IIPM gets a court to block what I wrote – and I wasn't called to defend it? And it was done ex-parte? So I decide to engage.
  • I have a few Twitter followers now, so I start tweeting: Search – maheshmurthy iipm
  • I also engage on Facebook. Facebook sucks at content search and I yet don't have its graph search so I can't leave a robust set of links for this. But here are two https://www.facebook.com/maheshm… and I understand… | Facebook
  • By now this thing starts to go viral – and hundreds, sometimes thousands of people re-tweet, re-share and a significant chunk of India online figures out the man is just a scamster.
  • IIPM responds by hiring people who write on the posts under fake names and fake profiles. Allegations that Pinstorm didn't get his digital marketing business so we're retaliating (ha ha, bloody ha). I out the fake people, including one Krishanu Bhattacharjee writing as some Rohina Dubey.
  • He comes back with a "Happy 75th birthday Daddy" campaign across all print media to try re-instate his reputation. So I responded with evidence that his dad's qualifications were also likely fake.
  • That was 6 weeks ago. There was a full-page Economic Times story How IIPM's Arindam Chaudhuri built the Rs 533 crore business that did further damage.
  • And hey, things have been quiet since! I'm waiting for more news to break.
  • I have no particular grouse with this man – and didn't have any for many years. I got after him only when he had me banned.
  • And now I do think he deserves to be outed. The world of education in India is full of scamsters and thieves. But none are as loud and loutish as this one.
     
  • I hope students stop enrolling with him, and I hope his business collapses – for all the lies he's said so far.

Hope this helps,

My $0.02

Mahesh 🙂

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