Archive for October 16, 2007

The Challenge of Advising Entrepreneurs

Written by Sean Murphy. Posted in Consulting Business, skmurphy, Startups

“The more I heard that I couldn’t make it, the more I was determined to do it. I never liked being told that I’m not good enough to do this or that.” Archie Griffin

Entrepreneurs “need to be a little crazy” if you believe Barry Moltz. They get advice from well meaning friends and family that consists primarily of admonitions to stay on the beaten path: “Don’t quit your day job” or “Stay in school” to recall two, the latter normally a good idea (Bill Gates, Steve Jobs, and Michael Dell are convincing counter-examples but not a representative sample). But those friends are not normally entrepreneurs.

There was a nugget I extracted from Fortune’s November 2006 profile of Larry Sonsini that helps to explain his success in advising strong willed entrepreneurs:

“I don’t take orders well,” says T.J. Rodgers, the founder, chairman and CEO of Cypress Semiconductor. “But taking advice from Larry Sonsini is easy. He’s professorial. He’s nonjudgmental. ‘You can choose to do this, you can choose to do that, and these will be the consequences.'”

It’s a sound approach when working with entrepreneurs: present likely consequences and the reasons why you believe that they will ensue.

Dharmesh Shah was complaining in July of this year that the customer is not always right and that “In most cases, our understanding is much higher than that of our customers.” He is selling to startup and small businesses who can’t figure out whether to accept his firm’s advice. He identifies four concerns that they may have that will prevent them from following his advice:

  1. What’s in it for you?
  2. Do you understand me?
  3. Are you really an expert?
  4. Did the expert make the call?

It’s a good blog post even though his frustration shows through a little too clearly. He offers two choices: you can be a “trusted advisor” (to borrow David Maister‘s phrase) or a “responsive assistant.” He closes with “Have you ever had to tell a customer they were wrong? How did you handle it?”

My answer follows, slightly amended from the comment I left on September 20 on his blog (and with formatting restored).

We offer strategic advice and business development consulting to early stage firms.

As such we fit your model of “trusted adviser” to entrepreneurs. In my experience it’s very difficult to tell an entrepreneur “you are wrong” (and have them listen and change their actions) because they hear this from so many of the folks around them (“get a real job”, “your idea will never work”, “no one else does it that way”,…) that they are no longer sure who to trust. In some instances this is like waving a red flag in front of a bull: we meet entrepreneurs who are more interested in proving someone else wrong (typically from their last company) than in building a company.

We work with them to estimate the likely future impacts of present decisions and understand the likely consequences. I find that a simple plan or decision tree can do more to illuminate the situation for an entrepreneurial team than any amount of telling. It’s normally the question that gets them to think through likely consequences that is more likely to change behavior than statements like “you’re wrong” or “this is a mistake.” Although we still try the other approach from time to time to see if it has started to work.

We also try and follow Russell Ackoff‘s “decision record” approach where we treat decisions as experiments and write down our hypotheses (“guesses” or “informed judgment” depending upon your perspective) about results in advance and then review them against measurable outcomes after enough time has passed.

True expertise means that you should be able to explain:

  • the symptoms you looked at,
  • symptoms you discarded as not germane,
  • the diagnosis you have reached,
  • the differential between the customer’s relevant symptoms and your diagnosis versus other potential diagnoses,
  • the prescription (advice) and how to apply it,
  • and a prognosis or range of likely outcomes.

In some sense it’s less about who’s right and more about developing a shared understanding and shared situational awareness. Trust is built over time through competence, commitment, and care. You have to find a model that let’s you work with a customer in a way that earns their trust.

I think you also have to distinguish between decisions that are values conflicts (e.g. we want you to misrepresent a product or service to the point where you are knowingly committing a fraud) and decisions that are less than optimal, or may not necessarily get good results but are not in conflict with your values.

At the end of the day it’s still their company and it’s distinct from yours.

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