

Lessons from a decade of research on how tech startups succeed long term - jasonshen
http://www.jasonshen.com/2011/great-by-choice-surprising-lessons-of-how-tech-startups-succeed-over-the-long-term/

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jacobolus
There are great insights that can be learned through these kinds of analyses,
but they can also be problematical, suffering from a severe selection
(“survivorship”) bias and confusing correlation with causality. To do a
scientific study would require picking some attributes thought to lead to
“greatness”, rating a random selection of companies along those attributes,
and then tracking their outcomes going forward. Feynman had a great essay
about these kinds of problems, “Cargo Cult Science”, which you should go read
right now if you never have <http://www.lhup.edu/~DSIMANEK/cargocul.htm>

For example, the companies featured in Jim Collins’s books haven’t fared
especially well in the years after those books were written. Cf.
[http://www.boston.com/bostonglobe/ideas/articles/2009/04/12/...](http://www.boston.com/bostonglobe/ideas/articles/2009/04/12/luck_inc/?page=full)
[http://thehaloeffect.typepad.com/authors_blog/2007/02/jim_co...](http://thehaloeffect.typepad.com/authors_blog/2007/02/jim_collinss_fr.html)
[http://bobsutton.typepad.com/my_weblog/2009/04/a-wellcrafted...](http://bobsutton.typepad.com/my_weblog/2009/04/a-wellcrafted-
critique-of-business-success-books-and-my-ambivalence-about-good-to-
great-.html) <http://hbr.org/2009/04/are-great-companies-just-lucky/ar/1>

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jasonshen
The other important thing to note is that:

They didn't just study success, they studied success AGAINST mediocrity

These findings aren't just what the 10x companies did. It's what the 10x
companies did that the mediocre ones - which were very similar in size,
product, team, market - did NOT do or vice versa. They also only selected
practices that were done for nearly the entire time studied, in the majority
of the companies studied, and that look to be reasonable explanations for the
different outcomes. We're not just injecting data into an algorithm.

And to respond to jaylevitt - thanks for mentioning Halo Effect. I really
should find the time to review it as well.

~~~
jacobolus
Yes, but “pick a smallish set of successful companies and then try to find one
other vaguely similar company to each for comparison” is not enough of a
control to guard against these kinds of biases. I understand that experiment
design is really hard when dealing with something as big and complex as public
companies, and Collins does much better than most business books (just by
trying at all). But this kind of experiment design would never fly in any hard
science.

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ryanlchan
Great (and extremely thorough) summary of Great By Choice - a book I think
everyone building sustainable businesses should read. While a lot of the
points Collins makes will be familiar to those familiar with the Lean Startup,
GBC provides some awesome, real-world examples of how to translate those "lean
principles" into action.

However, I think you gave one of the most valuable and counter-intuitive
points in the book too light a treatment: That successful 10X'ers not only
consistently hit their goals, but actively tried not to exceed them.

Living in the start up echo chamber you'd think that "speed" was everything;
we do "agile" development, we take venture rounds to "supercharge growth".
Hockey stick graphs are treated like the tech world's pornography, depicting
circumstances just a tad too good to be real. The mantra is that if a little
growth is good, a lot of growth is really good.

GBC turns that on its head. Growth is good, but only a little bit. Only as
much as you can handle. Explosive growth can quickly become uncontained growth
can quickly become webvan. Facebook limited itself to college campuses, taking
years to go public. Southwest started with 3 planes and didn't expand their
routes until they had to. Zipcar stayed in Boston until it was absolutely sure
it was ready to go to NYC.

The 20 mile march is as much about having discipline in self-restraint as it
is about pushing forward.

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jasonshen
That's a great point Ryan and I'm glad you brought it up. Everyone chases
after "hockey stick growth" but it's important to note the cost of such
growth: challenges with scale, whether that's with the codebase, server
infrastructure, hiring, increased spending, etc. Example: Twitter. The fail
whales almost brought them down.

I think this is partially driven by investors funding things that have that
hockey stick so hopefully some of them also read GBC and adjust their approach
accordingly.

I won't hold my breath on that one though =)

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aymeric
Jason, do you find the MoodThingy useful? and if yes, in what way?

You are the only one I know who uses it so I am curious to hear your
experience.

~~~
jasonshen
Hey aymeric - I do like MoodyThing. Feedback is always valuable to a writer
and I adjust my posts based on the comments and emails I get, so this is
great, low-friction way for me to understand what people get out of my
writing.

Not sure how much it slows down my site though - and whether that trade off is
worth it. =)

