There are some books that you read at a certain point in your life and realize that your past self would have benefited greatly if only, just only, you read it earlier. You could have avoided all of those miserable side steps and failures - miscues and wrong decisions.
923 Digital was a SaaS before it was an Agency, but the foundations laid forth in the book “Principles” by Ray Dalio surely would have made the 9 year journey smoother. Ray diligently explains his business (and personal) principles, which any organization or individual can adopt to help achieve their goals. It is a brilliant read and I recommend it to any startup founder. Well actually, any startup founder who has run a business for at least 5 years.
The most profound adjustment I have made in both my life and my business is explained simply by Ray as the 5 Step process. This process can be applied to absolutely anything - life, kids, sports, work, goals etc… The idea is not entirely new - we have all heard the phrase “you have to fall to get up” or Nelson Mandellas
“The greatest glory in living lies not in never falling, but in rising every time we fall.”
There is something relatively mesmerizing by this squiggly line.
Each squiggly line represents a five step process Ray Dalio tagged:
“the process for getting what you want out of life.”
Zooming in to each instance of the loops, you find these 5 steps:
Step 1 is to know your goals and to run after them.
Every startup has a goal to make money. It is, after all, the answer to Eliyahu Goldratt repeated question in The Goal and the simplest way to determine retrospectively if any companies decisions were, in fact, the right ones. At 923 Digital, we found that, as a SaaS company, the definitions of our goals were erroneous. While our sights were set on ultimate success, the lack of near term goals quickly led the team to solving customer problems and fire fighting. As an Agency, we have very clear goals and objectives. Every team member reads our onboarding process which explains procedures, company policies, and company objectives. Our goal is clear:
“we partner with great businesses and funded startups looking for a team of experts with a proven track record of delivering exceptional results on time, on budget and with full transparency.”
Step 2 Encounter the problems that stand in the way of getting to your goals.
The concept of accomplishing problems has become the rally cry for every startup and what I like to call the “mother effect” of a founder's psyche. Problems that face a startup or agency seem insurmountable for any 24 hour day. This monumental problem compounds itself to a week and eventually, god willingly, to a release. Of course, a simple google search could have warned the founder of the problem - and just like a mother, even if you knew the problem was 10 feet in front of your face, your mind defaults to “this will not happen to me or my awesome company.” Then it does. A quote I extracted from Ray’s teachings on this part of the process is
“To evolve you need to identify those problems and not tolerate them.”
I love the choice of words here. “To evolve” and “not tolerate them” demonstrates that the problem either has to be identified or occur and the result of either of those is either extinction or evolution. Brilliant.
Step 3 Diagnose the problems to get at their root causes.
Ray immediately states that no problem should result in an immediate solution. However, Patrick Collison has stated that he would rather make twice as many decisions with half the precision. Either way, discovering the root cause is foundationally the desired outcome. I do not believe it is possible for a startup under 3 years to truly know the root cause of many of their issues. There is just not enough time in the day, and too many demands on the front end to premonition about the past. The wordsmith Ray declared
“Distinguish the symptoms from the disease.”
Maybe great founders can do this in year 1, but this is a seasoned skill that takes many failures and guesses before you become Dr. root cause.
Step 4 Design a plan to eliminate the problems. Determine what you need to do to get around them.
Year 1 of a startup = “How quickly can we fix the problem”
Year 3 of a startup = “How long will it take our customers to know we have a problem”
Year 5 of a startup = “How many people do I need to call to help”
Year 8 of a startup = “Call the team together and come up with a solution please”
Personally, I think there should be a cartesian graph where the x-axis is years in business and the y-axis is the speed in minutes in which a company can design a plan to avoid problems. The graph would resemble a giant V as new startups take just as long as seasoned companies to diagnose a problem.
The underlying characteristic that predicts the number of years a business is operating is customer service. In year 1, everything is a scramble and your customer is your top priority, but the time it takes to figure out what is wrong is massive. In year 10, a company has so much weight of bureaucracy and decision makers that by the time the problem is approved for diagnosing, the time passed is very high. This brings us to year 5 - the sweet spot. If my prediction holds true, this is the year that a company has the right amount of history and procedures to quickly respond, diagnose, and design a plan to eliminate future problems.
Step 5. Execute the designs. Pushing what is needed to progress towards the goal.
Finally, we have arrived at the conclusion. The ability for a company to execute the designs of the plans to avoid problems. Like following a full-back through an A-gap the path is clear, the job of the person with the ball is easy, success is 10 yards away.
Principals are learned failures. Any successful person will remember the bad bosses and horrible teachers they had growing up because we all begin to formulate what does not work much quicker than what does. If an individual constantly succeeds in their endeavors without luck and without effort, that individual will eventually fail hard. However, the successful stories we see in the news are usually the result of many, many, failures.
This is why “Principals” the book is ONLY a great read for someone in their 5th year of business. It's a book that documents what decisions need to be made to keep the company great from what the decision makers learned does not work. Only when you fail, and start going down that loop do you realize that you need to redesign a plan to continue moving up and right.