In life the things that you do depend on the degree of certainty.
A few days back Salma mailed this image and asked me which company seems to have the best revenue split.
The instinctive answer was to say – Microsoft. They seem to the most diversified. They are not dependent on any one stream of revenue for their survival. Facebook seems the most skewed; If anything was to disrupt advertising altogether, their business would be in turmoil.
Yesterday, I was reading Zero to One by Peter Theil and he made a very pertinent point in there. If you had the opportunity to do something that you knew would not fail, would you put all of your efforts behind it or would you diversify and pursue multiple opportunities. Most successes are a result of determined people acting with belief and putting all of their efforts behind it to make it a success.
He defined the category of people as:
- Definitely Optimistic – Is certain of a great future and works towards it
- Definitely Pessimistic – Is certain of failure waiting around the corner and is always bracing for it
- Indefinitely Optimistic – Is unsure of the future but thinks it will all work out fine
- Indefinitely Pessimistic – Is unsure of the future but thinks there is a surprise waiting around the corner
Now using this categorisation when you look at the above graphs, the one thing that becomes clear is Facebook is Definitely Optimistic – They are certain about their plans and they think they know what is about to come and are ready for it.
At the same time Microsoft is a clear example of confusion. Given that it is an American company I would say that they are Indefinitely Optimistic. The graph is a clear representation of the fact that they do not know which segment is going to be their cash cow. They are doing everything and hoping something will go on to become big. At the same time they lack the conviction to say which one and focus more on it. If you make a graph for Microsoft of the early 2000’s, I am sure it would not resemble this. Windows and Office were the flag bearers for Microsoft and they put all of their efforts behind it.
Google and Amazon still have a high skew towards one of their revenue channels because they are Definite about it. Apple looks diversified but a large portion of their services revenue is all thanks to the iPhone that their users use every day. If you look at it from that perspective in all the three cases almost three quarters of their revenue comes from one thing that they do very well.
As a startup it is even more important not to diversify into too many revenue streams since it is very hard to be great at too many things. Be great at one thing and expand that revenue stream as rapidly as you can. You may undertake support activities but a majority of your income will come out of one or two things you do really well. This is also referred to as Pareto Principle – 80% of the effect comes from 20% of the cause. In business 80% of the income comes from 20% of the clients
Would you put all the wood behind one sharp arrow or many blunt ones?
Beats, the company that is famous for their headphones and who also have a fledgling music business recently got acquired by Apple. I have been absorbing all of the commentary surrounding this right from the time that the deal was still a rumour. I really do not know if this acquisition is a good thing for Apple or not. But I do have a few thought about Beats which might be useful for most people to keep in mind.
These thoughts came to me while I was having a recent conversation about career planning and job-hunting, but the same applies for any startup that is looking to develop themselves.
Be Focussed – First and foremost; the eventual goal that you wish to achieve through what you are doing is extremely important. Our performance is extremely dependent on the degree of focus that we maintain on the goal that we seek to achieve. If you are focussed on achieving a goal, all of your efforts, all of the connections that you make are towards ensuring the goal is achieved. Find the one goal that you wish to achieve and chase it.
Persevere – Success does not come easy to all. Also, you never know when success arrives at your door. If you believe in something and have the passion to pursue it, you need to persevere. It is important not to give up the moment challenges seem insurmountable. If you lack the knowledge, learn; if you lack the ability, prepare; keep cracking at the problem.
Keep seeking opportunity – While you focus and persevere, keep looking for opportunities. Keep seeking ways by which you can get in the track you want to drive on. If you wis to get into a particular industry or if you are seeking out a particular kind of partner, keep your eyes open at all times. Keep meeting people, keep asking for opinions, keep seeking.
Don’t stop doing what you are good at – While doing all this, it is very easy to think; ‘Let me finish learning and them I will get to work on this’. When it comes to focus, perseverance or seeking opportunity; there is no finish line. It is a life long job of an entrepreneurs to do these things. If you have a skill or a passion, pursue it even though you may be learning, preparing or seeking out opportunities. There is never a better time to do what you love, that time is now!
At the time that a project is conceived, there are certain expectations on how it is to be executed. This is most often the case with most startups; startups begin as mere projects. Based on the execution envisaged, people are assigned and teams are created.
I have often noticed that as the pace of things increase and changes come into play, as is often the case with startups, the teams are redistributed and resources are re-allocated. The entrepreneurs expect their teams to perform as per earlier expectations. But once such steps have been taken, it is unrealistic to expect the same standard of productivity.
The best analogy is the pit-stop in an Formula One race. 16 people are assigned to change 4 tyres in 2 seconds; if 2 people were assigned asked to do the same in 16 seconds, it probably would never happen.
The only thing that changes is ‘Focus’. While executing, teams need to be focused and when teams are reassigned, some amount of focus is lost. This loss of focus hinders productivity. Hence, it is important to make sure that focus is maintained, even at the cost of hiring some more people.