A long term viable business model embraces ebb and flow: it organizes the abandonment of failed and obsolete products to enable an investment strategy for new growth that emphasizes experimentation in anticipation of a high rate of early small failures.
Ebb and Flow
Smith: What do you see in your future?
Stafford: We’ll go back West and I’ll keep on writing poems. I keep following this sort of hidden river of my life, you know, whatever the topic or impulse which comes, I follow it along trustingly. And I don’t have any sense of its coming to a kind of crescendo, or of its petering out either. It is just going steadily along. So I inhale and exhale. I experience, write poems, get now and then great feelings of being on the edge of writing something that reverberates through my own self and that’s very interesting. But I don’t have any big or sustained project or any ending revelation that I can tell you about.
Stafford’s confidence in his ongoing creative explorations bearing fruit from time to time is an inspiration for entrepreneurs who want to build sustainable businesses.
A Viable Business Model Embraces Ebb and Flow
The right model for a successful business that is long term viable is not the crescendo (the “hockey stick”) but ebb and flow. I think it’s more important how you manage cutbacks and necessary expense reductions, the organized abandonment of products that have failed or are obsolete, and the intelligent pruning of initiatives that either have not worked out or are not longer working.
The VC ecosystem profit model is predicated on “the exit” or “the liquidity event.” The professional investor’s goal in an early stage firm is to make the ongoing management of the firm someone else’s problem. Their advice will not guide you to a long term viable business model.
A Resilient Business Model Is a Forest of Offerings
Successful firms look more like forests, where each tree is a different product and you have a mix of offerings at different stages in their lifecycle. I admire entrepreneurs who are not afraid of running out of new ideas, in the same way that William Stafford was not afraid of having his best days behind him.
You Need A Bushel of Acorns, Not a Diamond
The alternative is to look for the one big idea that is the home run, and to guard it jealously like a precious gem. The problem is that when you guard your best ideas you don’t subject them to the scrutiny they need so that you can refine them and you don’t seek advice and perspectives from prospects, potential partners, domain experts, and others that would allow you to improve them.
“A myth about innovation is that it is about big ideas. Of course, in the end you want an idea with the power to transform your core business. No idea ever started out as a billion-dollar one, yet large companies often start out asking for $100 million ideas. But imagine if somebody asked, in month six of e-Bay, “Do you have a $100 million idea here?” Nobody could have told you that. So instead we have to create a lot of low cost experimentation. We need lots of $25,000 and $100,000 experiments.”
Gary Hamel, in an interview with David Kirkpatrick in Fortune Sep-6-2004
VC Business Model Focus is on Exit Not Sustainability
If you can look at your business as ebb and flow–acknowledging the need of renewal even at the core and requiring constant exploration at the edges to find new opportunities–you may not tell the crescendo story that excites the professional investor, but you may have a much better map for how to prosper.
On a visit to Leningrad some years ago I consulted a map to find out where I was, but I could not make it out. From where I stood, I could see several enormous churches, yet there was not trace of them on my map. When finally an interpreter came to help me, he said: “We don’t show churches on our maps.” Contradicting him I pointed to one that was very clearly marked. “That is a museum,” he said, ” not what we call a ‘living church.’ It is only the ‘living churches’ that we don’t show.”
It then occurred to me that this was not the first time I had been given a map which failed to show many things I could see right in front of my eyes.
The opening paragraphs to E. F Schumacher’s “A Guide for the Perplexed.”
Advice For Entrepreneurs Who Want to Build an Enduring Business
A long term viable business model embraces ebb and flow: it organizes the abandonment of failed and obsolete products to enable investing in new growth.
Related Blog Posts
- Sustaining Is More Important Than Starting
- Exits vs. Enduring Companies
- William Feather on ‘Perseverance Rewarded‘
- 8 Tips for Evaluating Funding Alternatives
- Ben Kaufman on “What Raising Money Means”
- A Guide for the Perplexed: Mapping the Meaning of Life and the Four Levels of Being : Maria Popova offers a detailed exploration of Schumacher’s four levels of being (he actually outlines a hierarchy of four levels of physical existence–mineral plant, animal, man–and two spiritual).