The Challenge of Advising Entrepreneurs

By | 2018-11-27T16:37:46+00:00 October 16th, 2007|Consulting Business, skmurphy, Startups|11 Comments

The key challenge in advising entrepreneurs is to help them walk around the options and explore the consequences of each decision.

The Challenge of Advising Entrepreneurs

“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?”

How To Tell a Customer They are Wrong

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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  1. Liz Greer October 18, 2007 at 8:45 am

    The way that I have dealt with the issue of clients not taking my recommended course of action is that I figure it’s my responsibility to ensure that the client understands my point of view and rationale. If they fully understand it, and then still choose to do something else, that’s totally their call.

    I switch between the “trusted advisor” and “responsive assistant” roles; I don’t see them as mutually exclusive. Once the client makes a decision–even if it’s not my recommendation– then it’s my job to be the ‘responsive assistant’ and help them maximize that course of action to the best of my ability (unless of course I have an ethical issue or believe that their chosen course will actually be damaging, but that’s generally not the case).

    As much as I might want to walk off in a huff because they’re not taking my advice exactly, I think it’s important to meet clients where they are right now in their process, not where I necessarily would like them to be. After all, my objective ultimately is to be of helpful service to them, not to force them to bend to my will.

    (Interestingly, although most of my background is in corporate consulting, I switched over to advising individuals earlier this year, and I find the basic principles to be the same.)

    Just my 2 cents’ worth.

  2. Sean Murphy October 18, 2007 at 10:28 am

    Liz, I think your comment might have been better left on Dharmesh’s blog. I think most of your comments related more to his post than what I wrote.. In particular I offered a multi-point test that I believe a trusted advisor has to pass in explaining advice:

    • 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.

    I am not sure where “walking off in a huff” comes in. When I said that it was “their company” it was to acknowledge at the end of the day the entrepreneur is much more affected by the outcome of any decision that gets made. Unless it’s a clear values conflict then clearly we would continue to support them.

  3. Barry Moltz November 24, 2007 at 7:39 pm

    You got to be a little crazy- and that’s okay. It isn’t logical to want to run your own business. It takes passion, ideas and execution. Sometimes we just have to stop thinking and go jump!

  4. […] I blogged about the challenge of advising entrepreneurs in mid-October. I thought I would try and capture it from the entrepreneur’s perspective: the challenge of integrating all of this (seemingly) contradictory advice and into an understanding of their own entrepreneurial journey. As Josh Billings advises “It’s not the things we know that get us into trouble, it’s the things we know that aren’t so.” From Jan 15, 2002 Word Detective “To See The Elephant” Back in the early 19th century, the arrival of such a carnival in a small town was a major occasion, affording the town’s residents the opportunity to sample all sorts of exotic attractions, from the grotesque denizens of the sideshow to wild beasts from Africa and Asia that many people at that time had only read of in books. The big draw at many of these shows was an elephant, a far bigger and stranger critter than any animal native to North America. […] So ritualized was this small-town pachyderm-mania that by about 1835 “to see the elephant” had become a catch phrase meaning “to experience all that there is to see, to see all that can be endured,” with the sense that after having “seen the elephant” there was nothing left to see. A related, more general sense arose a few years later, in which “to have seen the elephant” meant “to be worldly, no longer innocent, to have learned a hard lesson.” Many young people of the day who left the country for the big city with stars in their eyes only to experience hardship and disappointment were wryly said to have “seen the elephant” in this sense. And by about 1840, “see the elephant” had acquired the specialized military sense you have heard, meaning “to experience combat for the first time,” with the brutal loss of innocence that ordeal conveys. […]

  5. SKMurphy » Advising Entrepreneurs November 28, 2010 at 9:22 pm

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  7. […] In “Thinking Fast and Slow” Daniel Kahneman observes that, “Hindsight bias makes surprises vanish.” Ackoff’s Decision Record model is also designed to guard against this. See “Doing Less with Less” and “Overnight Success” as well as “The Challenge of Advising Entrepreneurs.” […]

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  11. […] the conversation or derailing the speaker’s train of thought. It’s especially important to create a decision record to prevent hindsight bias from cutting off your ability to […]

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