All posts in Mental Models

Most entrepreneurs believe that they’re good leaders because their team does what they ask them to do.

But that’s not leadership – that’s simply people working because you’re paying them money to work. There’s a big difference between compliance and commitment. Entrepreneurs often get compliance with their decisions, but they end up thinking they’re getting commitment.

Leadership is difficult because human nature is complex. Humans are capable of simultaneously admiring and despising people who have a higher status, more money or better prospects than them. This makes the job of a leader tricky because she has to focus on the quality of work and get the job done, despite who did it (an admirer or a hater). The leader has to somehow navigate people’s widely different emotions, desires, and personalities and make them work together to deliver an organization’s goals.  ...  Read the entire post →

Right from the start, an entrepreneur should constantly be thinking about what arrangement of people is most suitable for delivering the goals of the company and what arrangement may be required about a year after. No one else would do this thinking. No employee will come and say fire me and hire a specialist instead. Only an entrepreneur would need to take this call proactively.

Organization design is simply what roles should be there in the company and how those roles should be related to each other. Many entrepreneurs and CEOs follow industry norms in hiring, and so their organization chart takes a standard shape that’s indistinguishable from their competitors.  ...  Read the entire post →

Cults obsess about arcane stuff that nobody else cares about. Most of the time, they keep it to themselves and the rest of the world ignores them. But if they discover something valuable, the rest of the world benefits.

Most mainstream phenomena start as a cult. Veganism was once a cult, and so was the idea of the US as a country. Science began as a cult when the Royal Society of London adopted Nullius in verba as its motto. By asking its members to “take nobody’s word of it”, the Royal Society became attractive to certain people and extremely unattractive to other people. This cohesion of views is what laid the foundation of modern science’s growth from a startup to a major force in the world. ...  Read the entire post →

In the very early stages when there are few people in the organization, only a few projects are running at any point in time. The founder typically knows how such projects connect with and reinforce each other to produce an output that’s more than the sum of its parts.

As an extreme example of this, consider the organization when it is just one person: the founder. This person has the luxury of high bandwidth communication between different concepts sitting in his/her brain. The product manager, the marketer, the developer, the designer – all are sitting in the same brain of the founder, and hence alignment of their actions is a natural outcome. Whenever there’s an impulse in one part of the brain (like launching a new feature), another part of the brain immediately pitches in to prevent it from getting misaligned (like wondering – how will this feature sell?). ...  Read the entire post →

It’s a common way of saying that so and so has left a particular company to join another company. Actually, a company is an abstraction for the group of people who comprise it. So, often, what people exit from is not the company but their interactions with their team in the company.

Most people would stick around as long as they’re treated with respect, paid fairly, instructed clearly and given work that usually falls within their abilities but sometimes challenges it, giving them opportunities to grow. Good bosses ensure that they create such conditions for people. ...  Read the entire post →

It’s easy to hire people. You think of what’s the next bottleneck in your organization’s growth and hire a role to fill that bottleneck. Typically, this involves coming up with a job description (which is often copy-pasted from elsewhere), announcing the job opening, and then interviewing the candidates.

Sounds easy, isn’t it?

Hiring people is the easy bit – there are enough candidates waiting to be hired. But the challenge lies in hiring someone who emerges as a star performer, contributing significantly to your company’s growth. ...  Read the entire post →

Imagine you’re the founder of a startup project (it could be a company, a non-profit, a religion, or even a country). You have a weird habit: you like to come to the office by noon and stay late (say until 8 pm). You hire your first employee, and on the first day he arrives at the office at 9 am (just like he did in his previous job).

The empty office seems odd to him, and it becomes odder still when he sees you stroll by in the office during his lunchtime. In the evening, since it’s the first day of his job, he waits for you to leave but the entire time, you are happily busy on your laptop. You leave the office by 9 pm and a couple of minutes after you, the new hire leaves. Thinking of his first day as a fluke, the new employee comes in early again tomorrow but the same thing repeats. ...  Read the entire post →

Kodak, Toys R Us, and Blockbuster were market-leading companies with hundreds of millions of dollars in revenue at their peak. During their heydays, nobody could have predicted that they will one day go bankrupt. Yet, they did and, along with that, became a prime example of why revenue or profit is exactly the wrong metric when it comes to predicting the future of the company.

Financial metrics are, of course, important from an accounting point of view. But they are strictly backward-looking. They tell you how the company has performed in the past but have very little actionable information for the future. As an entrepreneur, you need to pay attention to where future growth will come from, not simply review the past growth. That’s the job of the accountants. ...  Read the entire post →

Setting product and business direction is actually really simple:

• Study your most successful customers in detail
• Know why are they more successful than other customers
• Take those lessons and tweak your product in a way that nudges all other customers to be a bit more like the most successful ones
• Use your knowledge of the most successful customers to refine your pitch to highlight aspects of your products that your most successful customers get value from.

Your most successful customers are the ones who have by themselves discovered the use cases of your products that give them an enormous benefit. When your customers are working so hard to derive value from your product, your job becomes easy. All you need to do then is to interview successful customers and figure out how to make their valued use cases explicit in your product to other less successful customers.

It is also possible that some customers discover a use case of your product that you never designed your product for. When you discover these accidental use cases, highlight them in your marketing pitch to tap into entirely new customer types. ...  Read the entire post →

A startup is like a hypothesis inside an entrepreneur’s head and the entire point of the startup journey is to know whether it’s true or false (besides being able to make money).

Entrepreneurs thrive on feedback from users. Every bit of feedback – even if it is negative – gives them an orientation. In fact, negative feedback is a clear indicator that the entrepreneur has identified the right problem, but perhaps the specific solution that she came up with is lacking.

As an entrepreneur, you should embrace negative feedback because it shows that customers are at least paying attention. What you should fear is silence. If no feedback is coming your way, prospects are not replying to emails, or users are dropping off from the product without telling you why then there’s simply no way for you to iterate. ...  Read the entire post →