Boring Systems Build Badass Businesses

Let me tell you a story about systems do's and don'ts and how they relate to business success. Of all the mistakes I see businesses make, this is one of the most common. It's a critical failing that cripples or kills many businesses that could have otherwise been successful.

Background

Alice and Zola were rivals who both had dreams of building their own restaurant empires.

They each applied for and won $1 millon grants to open their restaurants - yay!

Alice's Build

Alice spent $500K to build a large restaurant and hired a handyman named Albert to lead the effort.

Albert was one of the most creative and smartest handymen in the world. Alice quized him directly from the manuals of all the top plumbing and electrician books and he passed with flying colors!

So, when designing the plumbing and electrical systems for the restaurant, Albert chose all the most exciting and cutting edge technologies!

He put a different brand of plumbing system in each section of the restaurant because each area had slightly different needs. One system went in the bathrooms, the second went in the kitchen, the third went in the lobby, and the fourth went outside.

He was even more innovative with the electrical systems - and put in a total of 10 different systems throughout the restaurant.

They were now 6 months behind schedule, but Alice now had the restaurant with the most innovative plumbing and electrical systems in the whole country. So, naturally Alice and Albert busted open the champaigne to celebrate!

Zola's Build

Zola's path to launch was a bit different.

She also spent $500K to build a large restaurant but hired a handyman named Zip to lead the effort.

Zip had a reputation for building simple systems that required little maintenance and just worked. Zola hired him based on his track record and they got to building.

When choosing the electrical and plumbing systems, Zip just chose the industry standard systems that had been around for years. These systems had great manuals and great companies backing them with plentiful support and spare parts.

Since they chose simple standard systems, they got done 2 months early and even had money left over to create a gorgeous atrium they knew the customers would love.

Alice's Run

When Alice's restaurant finally opened everything went great! Well, until the lunch rush. Then the power went out.

Albert spent the next 2 days without sleep trying to track down the problem. It turned out that the fancy electric toilets were used too frequently during the rush and burned out the relays in 4 of the 10 electrical systems.

Over the next 3 months the restaurant would open for a few days, then close to deal with some technical problem. Albert would heroically work nights and weekends to solve the problem so that the restaurant could stay open at least some of the time.

Alice was sooo grateful she had hired Albert since he was super smart and could always eventually figure out and fix even the toughest problems with the systems. In Alice's eyes, Albert was a real hero to work overtime to fix the problems.

However, Albert eventually got burned out and bored with Alice's restaurant, so he left. He figured all the problems were just bad luck - maybe next time he'd be luckier!

Alice now had to try to hire a replacement for Albert. The reputation of her restaurant was very poor now, so it was difficult to find applicants. Finally she found someone willing to take the job. Unfortunately he couldn't figure out the complex interactions between the systems since Albert hadn't left any notes. Alice hired more and more technicians to try and figure out the systems. Eventually after hiring 10 full-time technicians, they were able to figure out the systems and get them working again after a few months.

During that time, they discovered that 2 of the electrical systems and 1 of the plumbing systems had been abandoned by their creators and there was no longer support or parts for those systems. So, Alice had to hire 2 more technicians to support these now defunct systems.

All these technicians ate up the remaining money she had and made it impossible for her to ever get cash-flow positive.

The restaurant went bust and Alice decided to apply to grad school.

Zola's Run

Since the plumbing and electrical systems just worked, Zola was able to put all her focus into hiring great chefs, great entertainers, and great serving staff. She was able to innovate and come up with new exciting events and dishes for her dining guests.

Zip was rarely needed. He once fixed a cracked pipe, but it only took him 5 minutes. After a couple months he got another job and moved out of state.

Zola quickly found Zed as a replacement. He was eager to work there because of Zola's reputation and because he was very familiar with the standard systems they used.

Her restaurant's reputation grew every day and so did the demand to eat there. Soon there was nearly always an hour's wait to get in.

She still had $400K left from the grant and had earned another $1.2 million over the last year. With all that cash, she was able to start her true restaurant empire by opening another 2 restaurants.

Extreme?

This may seem like an extreme story - but I've seen much more drastic outcomes in the tech space.

I had a front-row seat to watch a company spend $14+ million on a system that was so complex and buggy it was eventually abandoned as a complete loss. In contrast, I was there when a startup scaled to over 100 million users with just a couple good engineers with simple standard systems.

If you follow tech news, you'll have heard of even more extreme scenarios - where the losses or wins were in the billions.

Common Objections

This makes sense for the underlying systems, but what about development of the actual products?

Build the most minimal solution you possibly can. See if customer's like it, use it, and will pay enough for it. Only then build it into a full solution. Simplicity, great test coverage, and great documentation will ensure what you build retains its value long-term. You'll save a ton of time and money going this route which you can then use to create even more profitable products for your customers. Always be asking "How can I do this faster, simpler, cheaper?"

But don't you want your developers to be engaged and working on interesting projects?

If your developers are desperate to play with novel technologies - just give them more time off work to play with their own projects. Google, 37Signals, and GitHub have all done this to great benefit. There are many ways to achieve developer happiness, but making your core business products a playground for developers seeking novelty is the path to hell.

But [some new unproven system] is really cool! Even [some big company] uses it!

Great! Then play with it to your heart's delight. However, do it on your own time. Don't jeopardize your business with it. Do you care more about playing with novel technologies than spending your energy and innovation on the products your customers actually care about? Remember, you're a business, not a college R&D lab.

But [some company] I know used a ton of crazy cool new tech and still got acquired for millions!

I've certainly seen this happen. However, often those companies are acquired for much less than they could have been and frequently dissolve once they've been bought. I worked for a startup that made these mistakes and lost a ~$2 million due to it (buying $1M of cool hardware they didn't need, hiring awesome data warehousing engineers when there were no data warehousing needs, etc). They still got acquired, but for probably 1/3 of what they could have been if they had spent that lost money on marketing and a better product. Within a year, the acquirer realized it had purchased a huge mess and dissolved the acquired company. Tens of millions of dollars down the drain.

Avoid the Pitfalls

In my contracting career, I've seen the inner workings of many different companies. Here are a couple rules to avoid the most common mistakes I see:

In the end, your business exists to create business value, not be a plumbing showcase.




Original: 22 Aug 2013

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