February 28, 2008

The Trap of Past Success - By Sanjay Anandaram

Everyone around the serial entrepreneur was telling him that they couldn’t see anything unique about the startup’s offering. Everyone was pointing out the various similar offerings already available in the market. They were pointing out technical, marketing, and business model problems but the serial entrepreneur was not listening. After all, hadn’t he sold his first company very profitably when all seemed lost? Of course, that his first company was acquired rather fortuitously, something that occurred through a chance meeting with a potential partner- not something that was consciously engineered.

One of the important traits of an entrepreneur is humility. But a humility that’s coupled with confidence. Humility allows the entrepreneur to learn from others while confidence permits him to go around meeting players in the network, weed out “noise” to distil the essence of the learnings, and make appropriate course-corrections but without compromising on the fundamental vision of the company.

While many entrepreneurs have perfected the art of interacting with “confident humility”, an unfortunately great number are trapped inside cages of their own making. These are the entrepreneurs who are convinced that their technology product or service offering is destined to change the world only because they think so. Their personality is stamped all over the startup. These entrepreneurs have blinkers on that impede the flow of market signals, limited understanding of the industry, market, customer needs and competitive positions. They are the ones spoilt by earlier success either in an earlier startup or in corporate life. Never mind what their specific contribution to that success was.

Taking a cue from their earlier experience, they think that lightning can indeed strike twice at the same place. They start believing that their PR releases are gospel and start discarding the cloak of humility. They start thinking they are invincible, that their companies are indeed making a huge difference to the world and are creating enormous value. Over time, they stop listening. They don’t read about what’s going on in their industry or meet people who are knowledgeable about their world. They rationalize their ignorance by saying that the world doesn’t yet understand their company. Over time, people around these entrepreneurs stop providing feedback since they don’t see anyone listening.

The entrepreneur now displays one of two behaviours: behaviour style one is to ignore or even dismiss all the signals from the outside world, work only with people who listen, use the halo of the success of the earlier startup to blind others into submission. Behaviour style two occurs where the entrepreneur’s demeanour changes to incorporate a studied intellectual indifference or nonchalance and indeed, sartorial tastes also change to showcase expensive branded accoutrements. They now go out only to conferences (including of course, press conferences), meet only people of “stature”, are unwilling to travel to rural and semi-urban areas of the market, and have their underlings meet the various industry players.

In both cases, the entrepreneur enters the twilight zone of “living in denial”. Arrogance replaces confidence. Discarding of humility results in ignorance. Increased ignorance results in a continued life of denial. Increased denial results in increased or continued arrogance. A dangerous cycle, “Arrogance of Ignorance”, therefore comes into play. This feeds on the insecurities and the anxieties of the entrepreneur and those around him. It is not surprising therefore to expect such an entrepreneurial company to start imploding. Unfortunately, the implosion doesn’t occur in one grand finale. It is a process that’s painful as it drags on for several months as the entrepreneur clutches at fewer and fewer straws while still refusing to see the writing on the wall. This is emotionally draining for all concerned especially for those around the entrepreneur. For the entrepreneur himself, the learning from a failure is more than from a success. Failure forces introspection and encourages humility. If nothing else, there’s no arrogance of ignorance.

What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.