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Repitition is important to leadership because of cognitive bias and more...

Repitition is important to leadership because of cognitive bias

Cognitive biases are a great tool for understanding human behaviour, particularly our more irrational behaviours, and although the meme is in danger of getting overdone I continue to find new value in the concept.

Today it is in the bias ‘cognitive ease’ and how it explains why repetition is important for leadership. Jack Welch, the legendary CEO of GE in the 1980s and 1990s is famously a big advocate of repeating key messages. In an interview with Alastair Campbell he said “You have to talk about vision constantly, basically to the point of gagging. There were times I talked about the company’s direction so many times in one day that I was completely sick of hearing it myself.”.

Aside from the observation that effective constant repetition is a rare talent (although learnable) the interesting question here is ‘why is it so important?’.

I had assumed that repetition works because it cements memories. The more times someone hears something the more likely they are to remember it and the more likely it is to subconsciously help with decision making.

I’m sure that’s true, but there’s something else too, and that is the concept of ‘cognitive ease’. We are drawn towards and believe more in things that are more familiar because they are less taxing on the mind. Conversely we shy away from that which is hard to understand.

Strategies which are constantly repeated become more familiar and hence more believed and accepted.


From survival to excellence

Much of this week I’ve been thinking about how the life of successful startups falls into two phases: survival and excellence.

In the early life of a company success is all about getting to the next milestone. The team is small, everybody has to turn their hands to multiple tasks, cash is short,  and time is short. In this environment survival is the name of the game. There’s no time to build systems or perfect process, rather everything should be done so that it’s good enough. For sure there should be half an eye on the future and ‘good enough’ means ‘good enough for now’ and ‘won’t cause us problems down the line’, but the emphasis is very much on getting things done.

When Reid Hoffman advises that if the first version of your product isn’t embarrassing you’ve shipped too late, he’s making this point.

When Paul Graham and YC say ‘do things that don’t scale’ they’re making this point.

When Eric Reis talks about minimum viable products he’s making this point.

However, when companies go from being early stage to growth stage then the emphasis changes. The team is bigger, there are specialists for every task, there’s more cash, and whilst speed is still critical the constant need to get stuff done fast to avoid failing has passed. The challenges now are to keep growing really fast and maybe (hopefully) to start making progress towards profitability. In this environment excellence is the name of the game. Success becomes about getting all the little things right and at scale that requires great systems and processes.

The transition from survival to excellence doesn’t happen overnight, but happens piece by piece across the company. For most companies it starts somewhere between the seed round and the Series A and then never really finishes, at least not for the very best businesses.


The second problem with bubbles: overfunding

The first problem with bubbles is well known. Valuations crash, lots of companies aren’t able to raise money and go bust, and most of the good ones are only able to raise smaller amounts of money and have to layoff staff. Bubbles are brilliant for companies that exit before the burst, but for the rest they bring a lot of pain.

There’s a second problem though, and that is overfunding of whole industries. As Bill Gurley said in a recent interview, “Once your competitor raises $400 million, you don’t get to choose whether you’re in that game or not.” and the result is that whole industries get overfunded. They then spend all their money competing to grow and margins for everyone disappear. Strong companies are still built but exit valuations aren’t what they could have been because cashflows aren’t healthy and acquirers have choice.

There’s a good chance that’s happening in the home delivery market where large numbers of startups are well funded – Doordash, Postmates, Deliveroo and Instacart are the first ones that spring to mind, and then there are others which bundle product with delivery, usually food, e.g. HelloFresh, Munchery, and Blue Apron. Back in July CBInights reported that food delivery startups raised $1bn in 2014 and $750m in H1 2015.

My former partner at DFJ Andreas Stavropoulos describes this as ‘venture fratricide’.


Update on Clayton Christensen’s theory of disruption

Clayton Christensen’s book The Innovators Dilemma, originally published in 1997, changed my understanding of innovation, the evolution of value chains and gave me a theory of disruption that has served me very well over the years. His theory of disruption states that large companies are most often disrupted by small competitors who release products which are cheaper and initially inferior but good enough to take the low end of the market, after which quality improves to the point where they take the whole market. Incumbents initially ignore the threat because they are happy to cede the low end of the market and because they make the mistake of thinking that inferior products can ever be a threat.

For startups the beauty of this theory is the simple instruction: targeting the low end of the market with a much cheaper product is a winning strategy. Successes with this strategy over the year have been numerous – Skype, MySQL (and nearly every open source company), and Salesforce spring to mind.

So when I saw that Vivek Wadwha had written a post titled Tech successes are disrupting disruption theory I clicked straight through.

His argument is that disruption no longer starts at the low end of the market. He cites Tesla and Uber as examples of a disruptive business that started at the high end and worked down and he makes the bigger point that for many incumbents the threat is not so much from startups attacking the low end as from other industries. Apple is disrupting the entertainment business, Uber’s UberEats and UberFresh are disrupting the takeaway food and grocery markets, and Tesla’s PowerWall battery technology will disrupt the home energy market. Meanwhile Google and Apple are both moving into healthcare and payments.

Wadwha is right. I’m still holding onto the idea that disrupting from the low end is a great strategy, but the key point for startups is that exponential improvements in technology are creating opportunities for 10x better products at the high end as well. Our portfolio companies Spoke (great fitting mens clothes) and Lost My Name (amazing personalised children’s books) are good examples.


Disney’s new streaming service is the way of the future

I’ve long thought that producers of TV and movie content should build direct relationships with their customers over the web. It’s been slow to happen though, largely because the content producers were wary of retribution from their cable, satellite and IPTV partners if they launched properties that competed with them. So instead of content owners moving to the web we got new web companies stepping into the void – largely Netflix, Amazon and Hulu. To start with they were aggregators in the same way as cable companies were aggregators and they competed with traditional TV companies for content – a happy world for content producers like Disney.

But then Netflix and Amazon started commissioning their own content and it started to look like the traditional TV content companies had missed a trick and left the door open for new players.

But now Disney is pushing back. They’ve just launched a direct to consumer streaming service, DisneyLife, for their content here in the UK. HBOGo is similarly a direct to consumer streaming service from a major content creator, albeit in the US.

You might be wondering, where does this all go?

I think we will see more TV content companies build direct to consumer propositions. That seems pretty certain.

The more interesting question is what happens to the consumer proposition. At the moment most people buy a subscription service from a cable or satellite provider which includes connectivity and a menu of options, maybe have a Netflix or Hulu subscription on top, and probably buy the odd movie from iTunes or Google Play.

Going forward the number of places where consumers can go to buy TV content is going to increase. There’s really value to subscription services which allow for a low effort, lean back TV experience where nobody has to think about whether it’s worth paying for the next show, but there’s a limit to the number of services anyone is going to subscribe to. That points to a significant part of the market going on a pay-per-view model. Maybe that will continue to be aggregated on iTunes and Google Play, but maybe new aggregators will arise which take the show from the content owners site and charge a lower margin. Maybe they will also offer superior browse and discovery.

Finally – this is a cord-cutters vision of the future where access is unbundled from content.


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