Resources: Book Reviews
Every day at S3 we see the benefits of a thoughtful, well-articulated and validated business plan. In his book Disciplined Entrepreneurship, Bill Aulet gives excellent advice on how to step-wise organize a new business and its associated product or service. It is the most comprehensive book we have seen on the topic, and we believe following his 24 steps will prepare one optimally for Meeting One at S3. Bill’s thesis is that entrepreneurship can be taught. We agree wholeheartedly. Building a company is not about conjecture, but about a disciplined method for approaching a customer problem, designing a solution and validating that a profitable business can be built around it. Learning, listening and self-honesty with the process are keys we emphasize and Bill articulates throughout. The book covers topics like market segmentation, total available market assessment, life time value of a customer, customer acquisition cost, development of a persona that you will likely be selling to, identifying your core value proposition and business model, knowing how you are competitively positioned, pricing on value (which we think is excellent), and validating your assumptions via an iterative process. All of these are placed in a logical, step-wise order. Threaded throughout is the encouragement to be honest and accurate with all the data collected. Finally, Bill uses real world examples of start-ups that he was involved with, his students were implementing or well know industry examples to illuminate each point. We highly recommend Disciplined Entrepreneurship as a guide to developing your start-up business.
At S3, we want to work with game changing entrepreneurs. Andy’s book identifies what game changing entrepreneurs do each and every day. He has enumerated twelve helpful rules that we consider critical to successful startups. This book touches on how to make something from nothing, how to help the world be more productive and create wealth for the masses. Creation is at the foundation of entrepreneurship and, in our minds, imperative for improving the human condition. You will read rules like “If it doesn’t scale, it will get stale”, “Waste what’s abundant to make up for what’s scarce”, “Markets make better decisions than managers”, and “Use zero marginal cost to create a flood”. In these rules and others, we see that scale is what matters to build large enterprises. Time is not on anyone’s side, so using what is abundant to save time is highly prized. Markets are for price discovery, work with them and not against them. And finally, pricing on value rather than cost is critical to building a premium value enterprise. Andy has great insights for today’s entrepreneur and he writes in a no nonsense style.
The “Law of Unintended Consequences” typically refers to actions of people or the government that result in outcomes that were unanticipated, or, as the law states: unintended. Economists Steven Levitt and Stephen Dubner highlight various situations in which unintended consequences come into play in their book Freakonomics, which I recommend to all entrepreneurs. Levitt and Dubner argue that economics is essentially about incentives and how people respond to them. One entertaining example in the book that highlights incentives tries to the answer the question: “What do school teachers and sumo wrestlers have in common?”
At S3, we are constantly looking for underlying incentives both within our portfolio companies and also while evaluating new investments. How is the sales team incentivized? Why would a strategic buyer be incentivized to buy your company? Why is your customer incentivized to buy your product? As we dig into these questions and others, we sometimes find that incentives are misaligned, leading to some unintended consequences. Levitt and Dubner attempt to “discover the hidden side of everything” in this entertaining and thought provoking book that will surely have you rethinking some previous assumptions about your business.
The Five Dysfunctions of a Team by Patrick Lenceoni is a must read for startup executives. Told in the form of a story, it follows a new CEO as she works through issues with her executive team. She diagnoses that there are five dysfunctions she has observed: the absence of trust, fear of conflict, lack of commitment, avoidance of accountability, and inattention to results. These are all common problems which can cripple all team environments but are especially important in small start up environments in which everyone needs to be working towards the same goal and the key bottleneck to success is the team’s time.
At S3, we have seen this book help in many ways across multiple companies. Some teams have everyone in the company read the book while some teams run the team assessment quiz included in the book at executive off-sites. It helps them frame the discussion about what is working with the team and what is not. It also shows how valuable executive off-sites can be for fast growing companies (most of S3’s portfolio companies do annual or semi-annual off-sites). Overall, it is a great book and a quick read that every startup team should read.