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Chasing the Wrong Metric


A couple weeks back while listening to a podcast I've come to enjoy, "Masters of Scale", an ad for another startup-themed show, "The Pitch", was run between segments. The teaser about it is, "a show where real entrepreneurs pitch to real investors—for real money. In each episode, we take you behind closed doors to the critical moment...". While it sounds basically like Shark Tank as a podcast, the point in ad I found frustrating was when a contestant said in a brief clip, "I want to build a billion dollar company".

While there are many types of companies to build and each entrepreneur must ultimately decide their own - hopefully with counsel from many people experienced in the process - I personally believe the outlook above misses the point. While a billion defines the valuation the entrepreneur wants to achieve, my first question to him would be, "Why a billion?" Why not 2 billion? Why not 73 or 371 million? Does the goal of creating a billion dollar company have anything to do with putting something valuable into the world or just figuring out how to gain significant traction/revenue so you can join the 3 Commas Club to stroke your own ego?

The other day I sat in on a meeting for my employer's innovation committee and one of the things we discussed, which I see running counter to the billion dollar narrative above, was how to became very micro around a particular customer segment, current or future, of the bank. Our level of fixation on creating value in a unique way for a specified niche is where creativity now takes place in my mind. That level of focus requires constraints. Its not about a "killer app" for everyone. Its about creating something that solves a problem for a group that no one has before.

I learned recently that across the country 2/3 of all B2B sales opportunities end in no decision. The study concluded the reason is the sale became all about why the customer should buy the company's product rather than taking the time to understand build a message for the customer of why they should change (PDF) their current behavior for another.

I certainly understand investors have either personal or business obligations to make returns on their money and a certain return is required to make that worthwhile. But I think when the narrative becomes poisoned to focusing on a company's valuation rather than value for the customer, we have lost sight of what it means to be in business.

Go Forth Boldly


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