Business Development

"Marketing is about providing a product that people want, at a price they can afford to buy it, and a price you can afford to sell it." - Catherine McDole Rao

This is just about getting started. Running an organization in which stakeholders are empowered to grow and contribute in their own way is a different story.

Business development is not selling a product. It's predicting what people will want, and then figuring out a way to deliver it. Success requires more than technology, and I look at development as applied game theory, because for an idea to catch on, it has to be in everyone's best interests. As with any game worth playing, you start from a losing position. If you started in a winning position, someone else would have already done it, right? So, as with any game (in the Von Neumann-Morganstern sense), you can change the rules, change the facts, or change the players.

Most of the players aren't trying to manipulate the game, so all you have to do is let them know they're playing, and they'll find the Nash equilibrium on their own.

Why do it? Strictly speaking, we don't need moveable type, internal combustion engines, or weather forecasting. People got along just fine for hundreds of thousands of years in agricultural societies. And yet few people seem to want to revert. So I try to imagine the world the way it could be, and figure out what needs to come together to make it happen.

It's tempting to say, "only invent one thing at a time." But let's go back to moveable type. Gutenberg invented tripartate alloys, the paper, the ink, and some other stuff to make moveable type into a viable product. If only he'd had the corporate financial structures we have today, he could even have done well for himself.

Which gets us to one of the dangers of business development game: it takes place in a gray area. You need to tell all the players what they need to hear before they can recognize that they want to talk to each other. This is like hiking in a blinding snowstorm (which I've only done a couple of times). Staying where you are is an option, but not a particularly good one. You could have stayed at home where it's warm and safe, but that wouldn't be as interesting. So you keep moving, and since there's a sheer cliff nearby, every step is both tactical and strategic. Stopping too long to consider your options just isn't an option, so you'd better be thinking while walking.

What is the game?

Management (that's you) is playing an iterated game with 3 other groups of optimizing individuals: investors (capital), employees (team), and customers (market). There are strong external influences on the game: disruptive innovations, demographics, wars, weather, politics, and people are weird. Technology and communication are your tools to change the landscape of the game.

In Vegas, they like to say, "you can't win if you don't play." You'll recognize that as the crass, spurious logic of a casino owner, who is running not just a zero-sum game, but a negative-sum game, so of course, if you want better odds, you keep on driving to Bryce and Zion. But developing a new industry isn't a zero-sum game. There often don't have to be losers, if the pie can grow to be big enough for everyone to have a slice. Everyone who plays, that is. So a good cap table has room for players to enter the game at a time commensurate with their own risk tolerance -- and desire for returns.

Many of the players will fixate on a single insurmountable obstacle and refuse to play at all. There may be 3 additional obstacles that they don't even consider, but it's just that one stops them from trying. Of course the whole point of technology development is to do 4 impossible things at the same time, thereby disrupting all the players who were afraid to try. So if you can motivate enough smart people to look at the overall problem, maybe they'll figure out a path toward success.

So, how do you play the game?

The game tokens are: Information, team, market, capital, technology, goodwill, risk, greed, and fear.

Risk uncertainty is the signal-to-noise ratio in the game. Think about that -- game theory doesn't really work if the scores have error bars. So you do what physicists always do and propagate the uncertainties through the game, and then do your best to constrain those risks until the expectation values start to look like Gaussian distributions. You're probably thinking, "huh?"

Just keep reading.

Information is your primary asset. You have better information than the other players so you make yourself the person that everyone calls when they need help: meet people, find out what they need, and tell them who can deliver. Like Santa from Miracle of 34th street. This helps create the goodwill that gives you access to more information. What do the players need? The rules of the game, value propositions, risk quantification, allies, and technology.

Team: have a vision and communicate it. Remember what Margaret Mead said:

"Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has."

The founding team isn't the same as the management team, because you'll rely on it for information, and we all know what happens when managers only talk to each other. So you need people who trust you and each other throughout the game. Empower this team to make decisions. Owning the uncertainty yourself gives the team freedom to not break break its OODA loops. From a Zen standpoint, this team includes employees, customers, and suppliers.

Risk: The founding team is special. They isolate the rest of the company from risk. Founders have to know that they can take a short-term hit and it'll work out in the end. Just as friends use balance-forward accounting of their social credit whereas acquaintances play tit-for-tat, the founders issue credit so the other players -- managers, engineers, investors, customers -- don't have to.

The founding team runs on accrual. For everybody else, principles schminciples, it's all short-term self-interest.

Market: A project can't succeed unless it advances all the stakeholders' interests -- at least as they foresee it in the short-term -- regardless of the written approval criteria. Network to understand what game you're playing. Give the people what they want. Try to pick early adopters who have the fortitude to come along for the ride, because business requirements are bullshit.

Try not to take any success or failure personally. Sometimes successes are just delayed failures, and sometimes failures are really learning experiences.

Capital: Greed is good. Risk is fear. The people who can help you already have enough money. They don't need greed.

Greed: So greed is really just more fear -- the fear of falling behind or being left out.

Stay away from venture capital. VCs use the terms "balanced portfolio" and "deal flow" to obfuscate that their strategy is to place many random bets, rather than to make choices and nurture ideas to fruition. Which isn't much of a strategy, is it? You don't have that much cash, so you have to be judicious in your bets.

Technology: What do you have that everyone else doesn't? Value doesn't come from technology, but how technology is used. So find an underutilized set of technologies, and invent whatever is missing to put them together to create value.

Goodwill: "The good stuff isn't on the web site". Build relationships and work the network to get real specs, test data, advance notice of what will become possible, and what the market wants.

Fear: "You can't win if you don't play." Fear can be overcome by showing a pathway to success, honestly assessing the obstacles, and systematically crushing them. Maurice Sendak says, "People never fear truth -- only ambiguity." Yet, you'll still have to roll the dice, so to speak, and make decisions with incomplete information. So it's important that your team and your capital understand what they're getting into and have the intestinal fortitude to see you through.