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March 14, 2012

Signal to Noise - How to Cut Through the Clutter

There's a principal in signal processing regarding measuring the quality of information coming through a channel called the signal to noise ratio.  It is a measure of how much valuable information (signal) is included in a stream of data relative to the amount of useless information (noise).  The formula looks like this - the power of the signal as compared to the power of the noise:

 \mathrm{SNR} = \frac{P_\mathrm{signal}}{P_\mathrm{noise}},

My father was a PhD in information theory and has a theorem named after him (the Bussgang Theorem), so I've always found this area of study interesting.  I would observe that the start-up universe is a particularly noisy world to operate in professionally - in other words, there's a very low signal to noise ratio.

The SXSW conference is emblematic of this issue.  I wasn't able to attend, but when I ask my colleagues who are there, the first thing they talk about is the overwhelming amount of noise, or sheer volume of new start-ups, that are being worked on by entrepreneurs.  Online media blog DigiDay mused that SXSW has gotten so noisy that no one can stand out any more.  We are living in the "NewCo Era", where the combination of the plummeting in the cost to experiment and the explosion of entrepreneurship and disrupting technologies is causing a proliferation of new companies to be formed.  Rather than wring our collective hands about the dire implications of this trend in the start-up world, I'd simply observe that from the perspective of the entrepreneur, it is getting harder and harder to rise above the noise.

So how do the best entrepreneurs cut through the clutter and distinguish themselves and their companies?  How can they grab the attention of customers, partners and investors in an era of overwhelming, defocusing flow?  Here are the top five behaviors I have observed in entrepreneurs who seem to be unaffected by the amount of static around them and are able to stand out amidst the noise:

  1. Put on your blinders.  I've noticed that many great entrepreneurs have the ability to ignore the inputs around them, even (gasp) to ignore their inbox.  Some of their friends may brag about achieving "zero inbox" nirvana (i.e., having read and processed every email that comes in), but the great entrepreneurs I work with actually actively strive to avoid having 
    a "zero inbox".  Instead, they consciously block out reacting to inputs and focus their proactive energy on their priorities.  Speaking of priorities...
  2. Focus relentlessly on the customer value proposition.  The entrepreneurs I love working with wake up every morning thinking about their customer.  There are so many distractions when you are building a start-up, but if you solely focus on your customer and addressing their pain point every day, you will be in a strong position.  One of my portfolio company CEOs sometimes looks bored during our board meetings when we cover topics like finances, operating metrics and recruiting.  But when we get to the portion of the meeting where we talk about his customer, he totally lights up and is full of war stories and compelling ideas.  You obviously can't solely focus on the customer value proposition, because you also can't run out of cash, ignore competition and neglect to build a world-class team.  But that leads to the next characteristic...
  3. Focus on very few things.  Great entrepreneurs are brilliant at keeping things very simple and focusing only on a few of the highest-priority, highest-impact items.  I learned this lesson from a mentor early in my professional career.  There is something to the "power of three" (keep your mind focused on only three goals at any given time) or even the "power of one".  I try to maintain the discipline of writing down my three summary goals for the year on one-page and keep it in my folder at all times, pulling it out every few weeks and reminding myself of them.  The priorities may change, but the discipline of focusing on very few things should never change.
  4. Avoid bright, shiny objects.  A corollary to focusing on very few things is that you should actively avoid "bright shiny object syndrome".  This is the well-known start-up disease of entrepreneurs getting distracted by the latest interesting new idea or opportunity.  One of entrepreneur friend of mine is susceptible to this - his last three meetings were the most important ones in shaping his thinking and setting his priorities and he finds it hard to ignore the inevitable distractions that comes out of a positive partner conversation.
  5. Be a contrarian.  Contrarian thinkers stand out from the crowd, plain and simple.  The start-up world tends to encourage a form of groupthink.  There emerges a conventional wisdom in the blogosphere that is propogated and validated thruogh the various social channels.  But great entrepreneurs relish the opportunity to challenge the status quo and conventional wisdom and go against the grain. The best ones develop that contrarian point of view so fully that, over time, it wins out and itself becomes the new conventional wisdom.

The Economist had an article this week called "Slaves to the Smartphone" that bemoaned the "horrors of hyperconnectivity".  Similarly, being a slave to your inbox isn't going to help you build a great company.  So don't be afraid to ignore it.

 

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I often find myself spending too much time solving complicated problems when I should be concentrating on the simple things. I guess it's easier to spend time on complicated matters than just focusing on the simple ones. You think you're doing a great job tackling a million things at once when in fact you could be adding real value by just focusing on solving one.

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Yea - it's a hard trade-off. Sometimes I allocate my time mentally between "short twitch" muscle work (eg, quick email filtering and responses) and "long twitch" (eg, writing a blog post). It's hard to be in interrupt-mode when working on the latter...

Awesome blog. As a recruiter, the "signals vs. noise" problem is huge. I'll never forget a professor of mine in college that used to run Signals Intelligence at the NSA. He highlighted the signals vs. noise problem as one of the most relevant in our age of technology and constant input. Per your first piece of advice - 1. Put on your blinders - I'll never forget starting our firm and a seasoned head hunter called me after looking at our site and told me "Avoid vanilla. It's ok to say no to clients. Don't do more vanilla - regardless of the cash - but focus on your sweet spot." 2. Focus on your Customers - One of the things several Stryker executives have told me over and over again is "Spend more time with your customers." Achieving 20% growth consistently, their advice continues to shape everything they do in their organization - it's all about the customer. Stryker: There for you. Also, if you follow your first piece of advice - #1 - you're ensuring you spend time with "the right customers" (those invested, committed and in your sweet spot). 3. Love the keep it simple reminder. So true. #4 is probably my favorite piece of advice you gave. I think it reminds us to focus on what Simon Sinek calls "Why!" One of our proudest moments was hosting a happy hour not in a top, shiny, fancy hotel but in our favorite dive bar where we could interact with all our candidates, dress casual, have a beer and meet their families, friends. Chase what matters, not what's shiny. Love this piece of advice! 5. Besides adding a new vocab word, I find this advice refreshing. In the recruiting world, it is more relevant than ever as we see what distinguishes "the best candidates" from the rest. The best way we've kept ourselves on our feet: interns. I love an intern that keeps asking, "Why do we do this?" OR "Have you thought about this?" Interns continue to keep us on our toes and challenge our thinking. THANKS for sharing.


Thanks, Addison.  I love that addition: focus on the RIGHT customers.

I really like the Rule of 3 point of view. I've discovered similarly that when I concentrate on a couple of items a day I am able to put my full energy to bear on it. I once had an Entrepreneurship Professor who told me that he started each day with only a handful of nails. By the end of each day, his goal was to have drilled and hammered each nail with full precision and force. Thanks for the post!

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Thank you, Sinjin.  I’ve never heard the nail analogy but I like it!   

'"horrors of hyperconnectivity". Similarly, being a slave to your inbox isn't going to help you build a great company. So don't be afraid to ignore it.'
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Or, citing Taleb: "Information is overrated."

What do you guys think of this "effectuation.org" stuff?


Don't know much about it. You?

I've written a bit about it on my blog. But, still pondering.

Basically "entrepreneurship can be analyzed and taught."

e.g.,

"Expert entrepreneurs start with what they have and who they are. Instead of big goals, expert entrepreneurs look around them and act. Even if they’re wrong, the movement attracts others who help carry the load.

Expert entrepreneurs limit risk by understanding what they can afford to lose at each step. Instead of seeking large opportunities, expert entrepreneurs set tangible losses they are willing to incur, then if things don’t turn out, they can stomach the failure, learn from their experience, and try something new.

Expert entrepreneurs create their own market opportunity. Opportunities are not plucked from trees. Some of the greatest businesses are created where no market yet existed. By focusing on creating rather than finding, expert entrepreneurs can find unique opportunities that neither they nor their customers or partners foresaw.

Expert entrepreneurs trust people. Instead of holding on tight to their ideas, expert entrepreneurs share them with people that they think could commit to help them. Along the way, they get feedback quickly and build trust with people who help them create the venture. They know they can’t do it alone and try to build with others almost immediately.

Effectual thinking can be taught. Since entrepreneurship isn’t a personality trait, it can be taught. This gives us hope that anyone can be taught successful principles to improve their entrepreneurial methods.

Failure increases the odds of individual success. Every failure is a learning experience. At least, that’s what expert entrepreneurs believe. There are no real failures. And if you can “fail” cheaply, you can be back to fight again another day with the knowledge of the mistakes you made (or great decisions that just didn’t pan out) lodged in your mind."

http://www.effectuation.org/effectuation-introduction-for-entrepreneurs
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Intriguing. Particularly now in the context of having read your online book samples (which I will also be citing, apropos of the topic).

Parodying medical economist JD Kleinke, regarding his DC policy wonk days -- on "If I ever run for office":

"Yes, I committed entrepreneurship once. But, I was very young and naive at the time. I only did it once, and I regret it very much. It will not happen again"

;)

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