Data left and right. Entire businesses built on data (hello Bigdata!). In the age of uncertainty what can be better then driving decisions based on solid data?
Data driven decisions
Lean Startup or not you've likely come across many recommendations to base your business decisions on data and the results of experiments rather than your instinct.
I got this advice when I started out and I still do whenever I talk to my Lean friends about what I'm working on. And there's an undeniable appeal to it: why wouldn't you base important decisions on hard cold data coming back from your customers rather than some highly emotional eureka moment you had in the shower or over a beer with friends?
The thing is, data is often not hard and cold as people like to think
Scientific experiments? not so much
Lean Startup is often likened to the scientific method. Heck for years I've had a slide in my Lean presentations of a guy with a lab coat, and it's not by accident that my website is called SpikeLab and not SpikeArtStudio (even tho I painted and wrote screenplays for years).
While there's an obvious difference between data and opinions, what's often missed is that a lot of people have a lot of opinions about the same data set. You might have heard the expression let the data speak for itself, but last time I checked data can't speak. People can and do.
So what's really happening is that a human being, with his/her soft warm biases will look at hard cold data and derive some conclusions. And you are most likely better off doing that than not, but let's not kid ourselves into a position of objectivity.
The data is not speaking for itself.
And I've seen first hand this hurting founders. This association between startup methodologies and the scientific method (think even A/B testing) got to a point where now a lot of first time entrepreneurs will get into testing their ideas expecting binary outcomes. What's one of the most common questions I get? Hey Spike I ran this experiment and I got 3% conversion, is it good?, or Hey Spike, it seems like 50.00001% of people prefer version A, should I use that?.
Often times I feel we are attempting to offload the burden and responsibilities of making hard choices to the data. It's really just another way to cope with fear of failure:
It wasn't me, the data said that
We dream of A/B tests that come back with 80/20 sort of splits where the decision is obvious so that we don't have to take one, but that's wishful thinking.
Qualitative data. Oh dear.
But it gets worse. For early stages startups testing more often than not involves customer interviews. In that case the data gets even warmer and squishier. You don't even have numbers, just words. How is this science?! you ask. Well it still is, just not the kind of exact science you had in mind.
If I get a lot of questions about conversion rates another very common question has to do with how many people you should interview to test a value proposition. The pattern is obvious: people want a hard number they can use to decide in a binary fashion what to do. Like we said however it's not about numbers in this phase.
With customer interviews you're really looking for intensity and patterns, expressed by the words they use, their tone of voice or the position and movement of their body. There is science behind it if you care to learn it, but it's harder, and arguably pointless, to try and put it into a xls table and apply a formula to it.
Does this make it bad data? Of course not!
The gut column
I'm 100% focused on helping early stages startups so I talk to a lot of first and second time founders getting their startups off the ground and there is an obvious pattern amongst others:
- some of them follow the Church of (Steve) Jobs, believing that their gut for genius idea is the only thing that matters (which btw is not how Apple functioned under Jobs, there's much more to it)
- another chunk, likely after having failed before and finding out about about Lean and similar iterative methodologies, is more cautious and wants data to prove their idea is worth committing to
After having looked at this for a number of years I feel like both are misunderstanding gut and with that dooming their startups.
It's as usual all about the middle way.
The first camp is over-reliant on gut, assuming that a strong vision and perseverance is all that it takes and people don't know what they want until you show them. Some of them may be proven right with time, but it's the same as saying that it's worth playing the lottery because some people have made millions from it.
On the other hand the second camp is looking for yes/no confirmation at every step of the way and bail out when things turn out negative or more fashionably pivot. Over the course of a weekend. Five times maybe.
Moving away from the extremes you're left with a small chunk of people that actually try to mix the two and balance their gut with data. This is surprisingly harder to do than it sounds and why so few people do it. It's emotionally draining: You're running experiments that often times are hard to decode and you're still left with making decisions yourself, leaving you wondering why you bothered testing stuff in the first place instead than just going with your instinct. Other times the data tells you that you should stop, but it hurts so much that you don't want to and now you have to ignore your own advice and feel like an impostor. As someone that taught Lean for a number of years I've personally struggled with this and in fact I've got a surprise for you.
A special podcast episode
If you're into startups you've probably heard the name of Justin Wilcox before, he's the guy behind CustomerdevLabs and a ton of interesting startup stuff, highly recommend you check his work.
Justin happens to be a good friend and we've often got together to talk about the deeper side of startups. Most founders I've met got into startups for a higher calling, either that being personal freedom, fulfillment or working on something they deeply cared about.
We wanted to discuss that and connect the day by day grid with that deeper meaning and we wanted to open the conversation to others so we decided to start recording those chats.
That's when foundingfreedom.co was born.
It was, and still is, very much an experiment, after all we're Lean Startup guys so we ate our own dogwood and did a bunch of interviews and tests.
And guess what? it came back negative.
So after 4 episodes we shut it down. In that sense you have 4 episodes that in about 1hr take you through a, by the book I'd dare to say, lean experiment.
But you'll notice there's a 5th episode titled screw the data? . What gives? Like we discuss at the beginning of the recording my gut brought Justin and I back into the recording studio (aka his closet). But it wouldn't be Justin if he just went for that, so he's challenged me to show him the data if there had to be a 6th episode.
Was that the right thing to do? Should have we even had a 5th episode after what we said in the 4th? I'll let you be the judge, but it's a good opportunity to see this conflict between gut and data right in action.
A strong vision backed up with data
I don't think there's enough data in the startup world to support the argument that data alone should be the driver for decisions. And in fact if you ask any experienced investor they'll tell you one of the things they look at is passionate founders with a long term vision.
Startups are a work of love. It takes years to see a business through and bring it to scale. If you don't have passion and a long term vision you'll likely bail when things get tough and doors are shut on your face. At the same time sheers stubbornness isn't gonna get you there either.
As simple as it may sound you need to strive for a balance of gut instinct and data, but as usual it's easier said than done.
Don't take hard decisions alone. Let's talk
No matter how much data you have or how strong your gut instinct is, hard decisions will still be hard.
There's so much that comes into play in those moments, some of which depends on the specific point in time itself; we can get paralyzed by analysis or stuck into a sense of uncertainty and making the wrong decision.
Sometimes we are our own worst enemies.
That's why it makes so much sense to keep close a group of mentors, advisors and have the support of a community. Just being able to bounce ideas with others is often key to a change or perspective that can transform hard decisions into simple ones.
If you'd like to chat about some of the hard problems you're facing right now just pick a slot from the list below and we can hop on a call.