How to Create a Strategy For Your Startup - Episode 195

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Why This Episode Exists:

Today’s episode is about strategy.

Nearly every startup I’ve ever met not only doesn’t have a strategy - they aren’t even sure what a “strategy” would look like.

A good strategy helps you identify and tackle the biggest challenge in a way that suits your unique skills. A great strategy ensures that everything you do pushes you forward and your competitors back simultaneously.

We leverage the framework introduced in Good Strategy/Bad Strategy (worth a read) to help you create your strategy.

We do this with a little help from a raunchy comic special with a brilliant strategy and GoPro. Then, we try to create a strategy to launch a successful Children’s book. Because why not.

Hope it’s helpful. Give a holler with thoughts and suggestions!

-Brian

The References

• Good Strategy / Bad Strategy

• Get On Your Knees (comedy special)

• Go the F*** to Sleep

Timestamps:

00:29 The Skeptical Startup
1:58 Strategies vs Goals
3:58 The Comedian Story
8:50 Smooth Jazz
9:30 Bad Strategy
11:38 Fluff
12:12 Failure to Face the Challenge
13:19 Mistaking Goals for Strategy
14:50 GoPro
17:16 The Kernel of a Successful Children’s Book
19:56 Guiding Policy
20:50 Coherent Action
21:24 The End + You

Transcript - Feel Free to Read it Like a Long-form Article:

Today, we’re going to help you build a strategy for your startup idea.

During our last episode, we talked about the Skeptical Startup - a framework that helps you build a business while you have a job. Based on downloads, people seemed to love it.

If you missed it, the goal for a Skeptical Startup is 8k per month in revenue in 10 hours per week of work. This is for founders with full-time jobs who are trying to ensure the idea they’re working on makes sense before they quit, and that their transition from day job to startup is at least smooth-ish.

The beauty of the Skeptical Startup Framework is that it’s a natural deterrent for bad ideas. It’s whisper idea bug spray.

For example, if you plan to charge $10 a month for your product, that seems reasonable until the framework shows you that you’d need 800 monthly customers paying 10 bucks a month before you quit your job, which suddenly seems ..completely unreasonable. For a bunch of reasons we got into last week.

The framework forces you to lean into problems that create serious value - problems that are urgent painful expensive growing and frequent for customers that are willing, eager, desperate to overpay you to solve them. Customers that can act as the foundation for your company.

But, even though I love it, 8k in 10 hours a week is a goal. Not a strategy.

And if you’re going to start a real business - one with a moat, one that’s hard to compete with, one with space above your head to grow - you need a strategy. People confuse strategies with goals all the time, but they’re not the same.

A goal is the place you want to end up. A strategy is how you get there, with the emphasis on you. Strategy is about your unique, differentiated value applied to the hardest problem you face.

Maybe 1 in 50 startups we meet with has a coherent strategy.

A big reason is that the word strategy has lost it’s teeth.

I’ve heard people refer to their growth strategy as social ads or influencer marketing and their product strategy as customer obsessed. The other day when I asked a founder I’d just met about their strategy they paused dramatically and said “my strategy is that I will never, ever, quit,” when I tried to prompt them to give me an answer that wasn’t total nonsense, they interrupted me to say “literally. Never. I’ll die before I quit.”

Cool?

Obviously, none of these are strategies. They’re just words. Which is the problem. A founder running a startup without a strategy is like a child wandering around in a field chasing butterflies.

So that’s what we’ll do today. Help you not chase butterflies.

We’ll put boundaries around what a strategy actually is, go through some examples of great and awful strategy, and help you come up with yours.

We’ll do this with help from my favorite book on the topic - Good Strategy / Bad Strategy - by Richard Rumelt. I’ll pop it in the show notes and couldn’t recommend it more highly.

Specifically, Rumelt’s framework for strategy will be helpful. It’s based around a logical structure he calls the kernel - like popcorn.

The kernel of a strategy contains three elements: a diagnosis, a guiding policy, and coherent action.

We’ll go through each, and, so that you can see it executed, we’ll create a strategy for me to write a bestselling children’s book in real-time. Because why not.

But before we get to that wholesome example, we’ve got to talk about a raunchy one. One of my favorite random examples of strategy I’ve seen this year.

—

Growing up, my sister had a friend who lived down the street. She was nice - I don’t remember her all that well, but I do remember she was a bit quirky.

Anyway, the other day my wife, Ruby and I popped open Netflix after the little guy finally went down and there she was - my sister’s quirky childhood friend, front and center. Somewhere in the back of my mind I’d known she was a comedian, but I didn’t realize it was like this - her standup special was number 4 on Netflix’s top 10 most watched shows.

The special is nearly an hour and a half long, and it’s about… a single sexual act. We’re a family program, so I won’t go into any more detail, but, literally, the entire show is about this one thing. Relentlessly about this one thing, broken down into ludicrous, painfully hilarious detail. There isn’t a single joke that’s off topic.

As we were watching, my wife asked if it was weird that I’d known this person when we were kids - her older brother used to babysit me - but it wasn’t at all. Mostly because I couldn’t get over how freaking brilliant her strategy was.

Strategy is about identifying the biggest challenge you’ve got to navigate to be successful, then building a unique plan to tackle it that leans into your strengths.

This gets into the reason most people don’t have a strategy - humans are built to avoid discomfort, not seek it out and strategize for it.

Which brings up the question - what’s the hardest thing about being a successful comedian? What’s the biggest challenge a comedian should build a strategy around?

I don’t think it’s writing funny jokes, and I don’t think it’s performing live or the travel schedule or booking gigs or social media posts or even sticking with it when times get rough. I don’t think excelling at those things get you a popular Netflix special.

I think the hardest part of being a comedian is being remembered.

For years on my birthday a group of friends and I would go to the Comedy Cellar below washington square park. We’d watch 9 comics tear the roof off for 90 minutes, then we’d grab a drink next door and talk about the show. What I remember most about those debriefs is how hard it was to remember… anything. We’d each be able to recite, maybe, one killer joke. We’d maybe remember one comedians name for a few minutes. But soon, everything blurred together. The comics performed, they killed, and then they disappeared from our minds forever.

Think about being a comedian in that environment? And you could say well they have social media, but that’s even harder because now you’re competing against all comedians and general entertainment for mindshare, not just the other 8 other comics that performed that night. How the heck do you stand out and grow?

You do what my sister’s friend jaqueline did. Although we always knew her as Jackie.

You build a strategy around the hardest thing - being remembered.

So, how can you ensure you’ll be remembered? Make a show that’s exceedingly easy to talk about.

If your show is about one thing, and that thing is taboo and rarely talked about, and it hits a soft spot for lots of people, it’s way more likely to be remembered than a collection of random jokes.

Jackie makes references that shoot out like octopus arms to different topics but they always come back to that core theme. By the end of the show, any time she starts a thread on something off topic you can almost feel the tension in the crowd - the excitement and anticipation as they all simultaneously think - how the heck is she going to bring this one back. And then she does, and the payoff is huge.

This takes enormous discipline.

What if she thought up a hilarious joke about Biden or Trump or the economy or Kim Kardashian? Unless she can tie it into that bigger theme, she leaves it out, no matter how funny. And, I’d bet it makes it easier to write the jokes, because she knows she has to tie them back. She has explicit boundaries to be creative within.

If you watched 10 standup comics, and one of them was jackie, she’s the one you’d remember. Not because she was objectively the funniest, but because she was the easiest to talk about and describe to a friend after the show. Which means, she’s the one that’ll grow. She’s the one that’ll get a netflix special. And her netflix special will outperform because when someone asks you the question we all ask every time we see each other - “seen anything good on tv lately?” The easiest thing to talk about is the comedy special about that one thing.

“You’ll never believe it, the whole show is about….”

I obviously have no idea if she did this on purpose or not. And, of course, she’s enormously talented and the work itself is great. But the strategy is why she’s on netflix.

In a week when you’re thinking about what to watch, you’ll probably remember this part of this episode and watch that special. I’ll put it in the show notes. But if I’d just referred to a comic that was quote hilariously funny, you’d forget about it 30 seconds later.

And now, let’s dive into the components of strategy so that you can create something just as effective for your startup idea. And, while we hit on diagnosis, guiding policy, and coherent action, we’re going to write a successful childrens book. Hopefully. I haven’t done it yet. Putting a lot of faith in the system.

We’ll see how it goes, after… a little smooth jazz

Bad Strategy

You and I are going to write a successful Children’s book today.

To start, we’ve got to define success. My answer is a book that sells. One that makes money.

Now, there’s absolutely no worse way to start any sort of business, book or not, than with that goal.

If your top goal is to make money you’ve all but ensured yourself that you won’t.

Money is a side effect of solving a problem that matters.

So, for this book to create value, it’ll need to solve a problem. That’s the other side of the value coin. Value is only derived from a problem, and the potential for value is commensurate to the painfulness of the problem. The more pain, the higher the potential for value.

So, we’ve gotta figure out a problem, too.

But why a children’s book?

In a roundabout way, because of my wife. Books are the most common present people get the little guy. He’s got mountains of them and he loves them. But we’ll get gifted 2, 3, 5 copies of the same book. And often, that book objectively stinks. And I can’t stop thinking about how the heck all these awful books landed in the gift rotation.

The other day the little man scooted over with one of his favorite books, a brutal book we have multiple copies of. As I slogged through it, my wife said “well if that book is so bad why don’t you write a better one.”

So, that’s one reason.

And the second reason is that it’s sometimes easier to see strategy clearly when it’s not in a startup. We do a lot of startup examples and we’ll get back to startup examples next week. But we’ll try something a little different today in hopes that it sparks something in you.

Back to strategy.

I like to follow the advice of Charlie Munger when I can. One of my favorites from the late, great investor is to avoid stupidity rather than seek brilliance. So before we build our strategy, we'll start by examining common examples of bad strategy to steer clear of.

Rumelt defines four common examples of bad strategy, and founders consistently fall for each.

The first bad strategy Rumelt calls fluff.

He uses the term “sunday” words, which I got a kick out of for some reason, to describe the ambiguous strategy descriptors most people come up with.

I hear these constantly. It’s the founder who will be customer-centric or data driven or empathetic or build a product that’s beautifully designed and think those are strategies. These are all objective and fluffy, and, more importantly, not a direct reaction to the critical problem you’ve got to face. Which is what a strategy is.

Which leads us to bad strategy number two - failure to face the challenge. This is an early-stage standby.

I see this with founders building a SaaS tool who think the challenge is tech or fundraising and spend their time working with a dev shop or tweaking their pitch deck, or founders who think the design of their website is the critical piece or their social media presence is the unlock.

Misdiagnosing what actually matters is a disaster.

Luckily, for early stage startups, it’s rarely rocket science. The biggest challenge is understanding the status quo. What, exactly, your best potential customer does now to solve the problem you’ve picked, and how you can get them to stop doing that and start working with you. Finding their job to be done, how they make decisions, who they look to for advice. A good strategy is built around an initial search - you uncovering an insight into a specific customer and then organizing your efforts around that insight. Something you’ve got an unfair advantage on because it’s overlooked or under appreciated.

Correctly calling out the challenge is a necessary step of a successful strategy, and it rarely happens.

The next bit of bad strategy is mistaking goals for strategy. We’ve touched on this. It’s saying your strategy is to get into y combinator or to get a quick mvp out then raise a seed round or to get to 10k in MRR. Lots of bad strategies are, as Rumelt says, just statements of desire rather than plans for overcoming obstacles.

The last one he highlights is called bad strategic objectives. Another classic.

Whenever I chat with new founders I always ask what they think their biggest challenge will be. Then, I ask what they did the past week. The answer is often something like “I think the biggest challenge will be finding customers, and last week I spent time getting our legal ducks in a row.”

It might seem like that’s not a tragic use of time - you need those legal ducks eventually, right?

The problem is there will always be some form of legal ducks that need to be rowed, and nearly every one of those “well we have to do this at some point” tasks are irrelevant if you can’t figure out how to navigate the big obstacle. You don’t have time or bandwidth to work on anything except identifying and then navigating that core obstacle. Everything else is a treacherous waste of time.

If I had to sum up bad strategy for early stage entrepreneurs in one word it’d be avoidance.

Avoiding thinking of strategy in the first place, avoiding finding the actual obstacle, and then avoiding work that navigates it.

All of that still feels a bit fluffy to me, so, I’ll try to pull it together for you with a quick example.

Gopro

About a year ago I was in a coffee shop with a friend. We got seats at the window and were watching the traffic when a skateboarder flew by, his body lurching back and forth as he zigged and zagged through cars like his feet were glued to the board. He had a gopro on his head, and we commented on how cool that video probably was before my friend said “how the heck is gopro still in business?”

The answer, is strategy.

When they were starting they realized that the most important part of their business wasn’t video quality. It was the mounts. If they wanted to grow, they had to navigate the hurdle of helping people capture incredible action footage. And that came down to securing the camera on all sorts of thing - a bike helmet or a surfboard or a long stick for a snowboarder.

They poured their resources into innovative, waterproof, crash proof mounts.

The camera components were stock - off the shelf. They didn’t matter - they were commodities. The mounts, though, did, because those were a differentiator for their customer.

This strategy - pick a customer - the adventure, extreme sports nut - recognize that getting them footage would give them a status level jump - and then tackling that challenge head on with innovative camera mounts - flowed through the company. The camera was designed with mounts in mind, as was the software, the video, the marketing.

Further, each step they took towards that customer pushed competitors in the opposite direction. Each custom mount made the strategy harder to compete with. Teams that organized around the best video quality couldn’t possibly spend the same amount time or resources on mounts as gopro.

And that’s what a strategy does. It finds something unique that matters and leans into it harder than any competitor. The alignment up and down your stack becomes impossible to copy. Every time you double down you take a step forward and push competitors a step back.

And, of course, a strategy makes it clear who you’re building for. And a brand is created as a result.

Great strategy leads to brand. Brand itself, isn’t a strategy.

Now, let’s write a book.

The Kernel

Our book strategy will start with the three parts of the kernel Rumelt describes:

Diagnosis

Guiding Policy

and Coherent Actions.

We start with diagnosis.

For startups, diagnosis is about understanding the current landscape. Evaluating the different types of potential customers, what problems they have, how they see the problem, how they solve it. You’re searching for behavior you can latch on to through tactics like customer interviews and ethnographic research.

For the book, this meant a little investigation. A search for problems being solved.

I started with the books I’d been gifted, the books I’d given as gifts, and a text to a bunch of parent friends. I did this after I realized we’d literally never - not once- bought our own book. We’d never had to.

I asked "What children's book have you gifted in the past year?"

The responses came in, and they were consistent. Parents gifted two types of books:

First, their kids favorite book. These were eclectic and had no pattern.

Second were the books with jobs, and these were eerily consistent.

The book that came up the most is called “go the F to sleep,” which is a cheeky nursery book about a kid that… won’t go to sleep. It has a bunch of curses and is hilarious. It’s secretly written for parents, but you can still read it to your 7 month old.

These people gifted this book at baby showers or whenever a friend said their kid was going through a rough sleeping patch. They gave the book frequently.

The other books that were consistently given were specific, too. One was for parents of twins and one was for when a kid was getting a baby brother or sister.

So, here’s my diagnosis - books that grow reliably have specific jobs. They exist for a specific moment in time that is important and recognizable and relatable for parents.

The hard thing about writing a successful children's book isn’t the writing or illustration or characters - it’s creating a trigger that reminds parents to gift it.

And, after a few conversations, I landed on a potential one.

When I asked parents about moments that stuck out over the first few years of their kids lives, a bunch mentioned the first day of pre-school. It was a moment full of mixed emotions - they were sad about their kid leaving for a part of the day, nostalgic for the younger days, and.. excited for a bit of freedom.

I think I can write a book around that. One that speaks to the parents, similar to the go the f to sleep book. One that’s in on the joke.

Now, guiding policy.

Once you diagnose the situation and realize what obstacle you need to tackle, the guiding policy is the how. Ideally, you’ve got an unfair advantage here.

But, just having a guiding policy at all will lead to an advantage.

GoPro diagnosed the need for mounts, and their guiding policy was to build those mounts. To focus on them and prioritize them over everything else.

For the book's guiding policy, my advantage is that I know how to run tests and get stuff in front of people quickly. I’ll treat it like a startup. I’ll test out potential moments with customers to see if they’ll buy and gift before I write a line of it.

This guiding policy ties to the final element of our strategy: coherent action.

The tactics.

I’d get a website up and out fast with a pre-order buttons, I’d assemble a group of parents to read drafts and give feedback and chat about their experience as kids left for pre-school, I’d find unique digital and physical channels to seed the early growth. I’d test out things like bulk to mimic the folks who keep 5 or 10 copies of a book on hand.

Once I had the moment that resonated, I’d hire an illustrator and figure out editing and publishing - the least important bits of the book strategy.

Ideally, this leads to a book that grows organically.

The End and You

Obviously the book is a bit of a silly example.

But, hopefully, it makes it easier to see the lessons.

If you’re writing a children’s book, you don’t want to just compete on having the best story or the best illustration or the best social media account. Those are games you’ll lose.

If you’re starting a business, you don’t want to compete with someone else’s strategy. You don’t want to do the comfortable things that make you feel good but don’t push on the actual pivot point of the business.

You want to choose where you’ve got an advantage and align everything you do behind that.

Your resources will be limited - your first product should be 95% off the shelf, white labelable, unimpressive, status quo. The last 5% is where you spend all the time. The camera is stock, the mount is custom. 95% of your time on the 5% that’ll differentiate you and help a specific customer be wildly successful.

That’s a strategy.

So, what’s this mean for you?

What is the critical obstacle you need to navigate?

How will you tackle it in a unique way?

And… is anyone an illustrator? I’ve kind of talked myself into this book idea?