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4 Psychological Biases You’ll Face During Startup

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The Startup Genome Report Extra on Premature Scaling is a project coauthored by Berkeley & Stanford faculty members with Steve Blank and 10 startup accelerators as contributors. They analyzed 3,200 high growth web/mobile startups and found that within 3 years, 92% of startups failed. Of those who failed, 74%, failed due to premature scaling. Premature scaling refers to spending money on marketing, hiring etc. either before you found a working business model or in general, spending too fast while failing to secure further financing.

Why would someone rush right into spending a bunch or money before they even had a product people really wanted? Because we believe our idea is something people would actually pay for. There is clearly a gap between what we think people want and what they really want. And this is the main issue…the gap between an idea and a valuable product. The problem is never coming up with a great idea, people have ideas all the time. The problem is completely understanding what it is people need as the basis of a product rather than an idea as the basis of the product; a great idea but a useless product.

Why do we have such arrogant thoughts? It might be easy to write this off to egotistical self-importance. But it’s more fundamental than ego; it is a function of cognitive errors in neurological information processing that blind us from seeing what customers really want. And ultimately whether our idea is of value. These are referred to as psychological biases. Different lenses that obscure or alter our view of the world. These aren’t just results of messing up facts or errors in logic but real deficiencies or limitations in our thinking.

There are dozens of cognitive biases known in psychology but the ones that typically affect startups include:

  • Confirmation Bias – We listen to or focus on information that tends to back-up our own beliefs about a topic or idea. Startups need to be careful of this blind-spot given all the analytical techniques involved in growth hacking. Vanity metrics could lead startups to think they are doing better than they are since they are not measuring customer adoption or satisfaction but simply page hits and sign-ups.
  • Attentional Bias – We tend to avoid data that is inconsistent with our thoughts…almost the reverse of the confirmation bias. This is a common mis-step undisciplined entrepreneurs and investors (or anyone for that matter) have towards avoiding information that may challenge their ideas. The person using this bias is so focused on success that they fail to pay attention to data that would have signaled they were on the wrong path. People and groups who experience this tend to have sensational blowout failures rather than small failures and pivots.
  • Dream Bias – Many startups fantasize about being purchased or going public making the founders rich. Dream bias is the extremely narrow view that makes startup exits extremely exciting because that is all we hear about online and in the media. We join with the dream and don’t attend to the 99 out of 100 that did not succeed.
  • Curse of Knowledge Bias – Many founders have creative ideas that are very forward looking and have immense potential. The Curse of Knowledge Bias is the narrow filter that inhibits these people from understanding an idea from someone with less information, education, or initiation about the idea. This is often the curse of people with gifted intelligence who make such rapid connections in their mind that they are dumbfounded why others cannot see it how they see it.
  • Group Think Bias – When the entire development group is so gung-ho that they all think the same way and avoid alternative points of view.

What these biases have in common is that they are related to a sense of clinging to one’s own idea of value rather than understanding customer’s needs. What’s interesting about modern startup approaches, like Eric Ries’ Lean Startup, is the conscious and explicit priority of the customer’s needs. Entire business models should be uprooted if they fail to meet with market expectations. It is difficult to say if this philosophy is the full antidote to failing businesses but it certainly is focusing our attention on the right habits.

Here are a couple simple strategies that startup leadership can build in to their processes that will help inoculate the group from troubling biases.

  • Employing Black Hat approaches to discussions at core decision junctures in development. Thinking Hats was coined by Edward De Bono who taught that there were a number of ways of thinking (i.e., the hat one is wearing) that influences the group or team. To avoid these biases the team focuses on strategizing about a problem in stages, including the Black Hat stage, which essentially forces the group to think about why it won’t work. A trick is to hire a “Black Hat” to do the work for you as we all have proclivities to one way of the thinking (We all know that special person who can find reasons why it won’t work).
  • At specific times of the project, bring on board a thoughtful consultant or external friend of the startup who can present research that may force the group to attend to information that is contrary to the hope the group has for success.
  • Have the group present their idea, its value, and its merit to a group of consumers and experienced, successful entrepreneurs who have been able to be rational in their business development success. Listen to their perspectives of what is wrong with the idea.
  • Try to avoid saying I, me, or mine as much as possible in any conversation. You’d be surprised how much this helps you think about other’s needs, particularly potential customers.

Biases in thinking, problem-solving, or information processing are simply part of being human.[1] We cannot magically remove them from our psyche. However, we can become aware of them thus reducing their effect on our business decisions, and more importantly actively work to moderate their impact, which is essentially what the lean approach to a startup is. That is, build something small, get feedback, assess, tweak or pivot. By constantly evaluating our product through the eyes of the consumer, startup leaders close the gap between a good idea and a valuable product.

This regular reflection shouldn’t just be done on products but on our own thoughts and assumptions that build our companies, products, and relationships. When we try our best to keep on top of these things, meeting customers’ needs isn’t so hard.

These biases in thinking not only pervade our business life but also our home life. They affect product development, relationships with staff, team functioning, and life at home. So you can use these techniques at work or at home with your loved ones as well. Like asking your customer for feedback about the startup, asking your wife if she is having her needs met by you is a powerful way to avoid thinking bias with often the most important people in our lives….those who love us. And, of course, those with whom we work.

written by Bob Acton, executive coach at Obair Leadership.

Entrepreneurship

Women on Top in Tech – Laina Raveendran Greene, Co-Founder at Angels of Impact

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(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Here is our interview with Laina Raveendran Greene, Founder of GETIT Inc. and Co-Founder of Angels of Impact, an impact network focused on women social entrepreneurs helping to alleviate poverty. She is an entrepreneur and social impact investor, whose passion is female empowerment, and enabling women to be key agents to help alleviate poverty in Asia.

What makes you do what you do?
As a minority female Singaporean from relatively humble beginnings, I have never taken anything for granted. I learnt early on that I have to work doubly hard to overcome the “glass ceilings” but if I persevere, I can succeed. That is why I chose to focus on helping women-led social enterprises as I know how hard things are for them and I hope to make things a little easier for them.

How did you rise in the industry you are in? 
I rose by being courageous enough to push against the “glass ceiling” and seizing opportunities open to me no matter where they were. Early on, I realized I would have better opportunities overseas, so I worked in many countries, including Switzerland, USA, and Indonesia and used these opportunities to learn and open new avenues for myself. I now come back to Singapore with many more networks and skill sets.

Why did you take on this role/start this startup especially since this is perhaps a stretch or challenge for you (or viewed as one since you are not the usual leadership demographics)?
Yes, as a minority Singaporean, it may appear that I am not the usual leadership demography in Singapore. In my own way, however, I think I have amassed my own international accolades and work experience such as serving as the first Secretary General for the Asia Pacific Internet Association, CEO of one of the first few tech startups in Singapore in the early 90s, being on the International Steering Committee of the Global Telecommunication Women Network, and most recently selected as one of the 2nd cohort of Edmond Hillary Fellows in New Zealand.

I am now moving to the next phase of using these networks and skills to help other women to social enterprises, which seem to be exactly what I want to do in my next phase of life (after more than 25 years of global work experience).

Do you have a mentor that you look up to in your industries or did you look for one or how did that work? 
It was harder in my younger days, as one of the few women in tech to find mentors but today I do.  Men were reluctant to mentor me for fear of rumors.

How did you make a match if you did, and how did you end up being mentored by him? 
I found my mentor when I was taking an executive program at Stanford. He was one of the keynote speakers and I went to talk to him. Intrigued by my background, when I asked if he would mentor me, he said yes. I meet with him at regular intervals and I always ensure I have put his ideas to test before reporting back to him. I feel that I value his time if I do actually listen and act on his advice.

Now as a leader how do you spot, develop, keep, grow and support your talent? 
The key qualities I look for is an eagerness to learn and humility to be open to new ideas. Also, when asked to be a mentor, I usually give homework and see how proactive they are. Only the ones who do their homework, take the advice and act on it, are the ones I actively mentor.

Do you consciously or unconsciously support diversity and why?
I consciously and unconsciously support diversity, as I see the importance of diversity on true innovation. You never get anything new, talking to like-minded people. It is always good to have different perspectives to create new ideas. I am also an active supporter having faced racial and gender discrimination in my life and want to ensure that others are given a better chance.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb? 
A great leader to me is one who has empathy and humility, and a genuine spirit of service. Today’s challenges such as climate change and social injustice, requires many players to apply their knowledge and skills to solve and have a sense of ownership in solving these issues

Advice for others?
The only advice I can think of is do what you are strongly passionate about. You need to persevere to succeed so it helps if you truly care about the endeavor you are working on.

If you’d like to get in touch with Laina Raveendran Greene, please feel free to reach out to her on LinkedIn: https://www.linkedin.com/in/laina/

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Callum Connects

Denise Morris Kipnis, Founder & Principal of ChangeFlow Consulting

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Denise Mossis Kipnis’ curiosity in people and the world, lead her to set up ChangeFlow Consulting.

What’s your story?
I’m driven by curiosity. Having been the only one in a room who looks like me for most of my life, I developed a curiosity about who stays, who leaves and who thrives in minority/majority situations including when and how connection and collaboration happen. I was a systems thinker long before I knew what that was, always asking why and so what; and seeing the pieces, the whole, and the places in between. So helping people and organisations move through the complexity of transformation feels natural to me.

What excites you most about your industry?
I see change and inclusion as two sides of the same thing; I don’t practice one without the other. Some people see change as death, as loss, as exhausting. And it can be. But I see in the work I do as an opportunity for something new or hidden to emerge. When an organisation understands that it is first a group of people, who themselves represent and belong to groups of people, and it begins to tackle what it would mean to understand and learn from all that talent, all that diversity, to have them all working for and not against the organisation, to truly unleash all that their people have to offer; that’s magic.

What’s your connection to Asia?
Change and inclusion are personal values as well as professional strengths. For me, living and working outside of the States was a bold experiment to see whether any of the stuff I’d learned about change and inclusion would work outside of the US. My husband and I targeted Asia specifically: it would be the greatest contrast, culturally speaking, for me; and a unique career springboard for him.

Favourite city in Asia for business and why?
Although I’ve practiced in other cities, I am biased towards Singapore. In some ways it’s what Los Angeles is to the rest of the United States, a microcosm of sorts. The regional/global nature of it means that so many different nationalities and cultures are represented. As a result of this mix, you never know what you might get. In some situations, cultural dynamics are obvious, sometimes subdued. The variability is compelling.

What’s the best piece of advice you ever received?
“Never ask anyone to do anything you wouldn’t do yourself.” Michael Rouan.

Who inspires you?
Often it’s a “what” not a “who.” I can get inspiration from a passage in a book or a situation in a movie, as well as a turn of a phrase or watching people interact. I often make the biggest connections between the various threads I’m working on when I’m sitting in someone else’s event.

What have you just learnt recently that blew you away?
I’m honestly not blown away by much. Instead, I’m struck how circular things can be: ideas often come back around with a slightly different twist and I watch the way it shakes things loose for people. I recently sat through a workshop on Self as Instrument, and despite being thoroughly versed already, I learned something. In preparing for a panel on design thinking, I unearthed a new language to describe things.

If you had your time again, what would you do differently?
You’ve caught me at a good time. I’m sitting in appreciation and gratitude for all my experiences, because I wouldn’t be who I was today if all that has happened, didn’t. And yet one thing comes to mind: It wasn’t until I redesigned my website two years ago (shout out to Brew Creative!) that I realised I hadn’t made explicit agreements with my past clients as to what I could share publicly about our engagement, or whether I could use their logos in my promotional materials. In my business, confidentiality is so important, and yet I need to be able to talk about the work as reputation and experience leads to the next success, and so on. It turned out a lot of the contacts I had known had left the organisations where the work was done, so they couldn’t help at that point. So the practice I’m carrying forward is to get those agreements up front, and to make sure my relationships in client systems are broad as well as deep.

How do you unwind?
Science fiction, puzzles, wine.

Favourite Asian destination for relaxation? Why?
Home. I don’t travel to relax, I travel to learn and explore.

Everyone in business should read this book:
Built to Change, by Ed Lawler and Chris Worley. To my knowledge, it’s the first pivot from advising organisations away from stability and toward dynamism, from strategic planning to strategizing as an action verb; to blow up the traditions and rigidity that impede organisations from developing change capability.

Shameless plug for your business:
We’re taught that there are two kinds of people: those who see forests, and those who see trees. There is a third type, my type, and we see the ecosystem. Worms, climate, birds, the spaces in between. This is the perspective organisations need to be successful in solving complex problems and thriving in change.
ChangeFlow uniquely blends four disciplines (two of which are multi-disciplinary in themselves): organisation development, culture and inclusion, change management and project management.

How can people connect with you?
Facebook: https://www.facebook.com/ChangeFlowConsulting/
LinkedIn: https://www.linkedin.com/in/dmorriskipnis/
LinkedIn Company page: https://www.linkedin.com/company/4862954/
Email: [email protected]
Website: http://www.changeflowconsulting.com

Twitter handle?
@ChangeFlow

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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