Startup analogies v.2 — startups & sports
The secret of change is to focus all of your energy, not on fighting the old, but on building the new
Socrates
Both in sports and business at some point you will hit a wall. If your approach is not working, you will have to change tactics, startegies and sometimes you need to change your whole game.
Sports Pivots — Sometimes you have to change strategies to win
Leicester City — rose from verge of relegation and 5000–1 shot underdogs to football’s Premier League champion during the 2014–2015 season. The team started by hiring Claudio Ranieri as the head coach. Ranieri believed in trusting his team, rather than forcing his style on them. He put players in positions to which they were best suited, and let them excell what they were good at. He also fought the urge to micromanage with his coaching staff, allowing his chief scout Steve Walsh to do his thing and signed off on the addition of an unknown Riyad Mahrez to the team for about £500K (in 2018 signed by Manchester City for £60M) together with a few other unknown role players. Ranieri knew that Leicester was going to be at the bottom of the league in passing and possession. So he tailored his game strategies to the talents that he had, installing a simplified zone defense that funnelled the ball to capitalise on fast break-aways. As a result the team achieved the league-high 357 interceptions, went from last to first and won the title — all with the 4th lowest salary budget in the league.
Oakland Athletics — story of how one of the poorest teams in Major League Baseball — was made famous in Michael Lewis book Moneyball, the Art of Winning an Unfair Game.
In 2002 Billy Beane went from Oakland A’s talent scout to General Manager. Billy’s assistant Paul DePodesta believed that other teams were unduly swayed by human sympathies of scouts, selective player videos and personal interviews. He thought that analyzing statistics about a player’s walks, on-base average, and other mathematical data would give a much more accurate picture of player’s potential. Billy alienated much of his organization by recruiting a team of unglamorous players, whom other organizations largely ignored, all based on a mathematical formula. During the 2002 season Oakland had a twenty game winning streak (league record), had a top 5 record in the NBL and qualified for the playoffs. They were able to do so with one of the lowest salary budgets in the league — $44M (compared to the $125 million that the New York Yankees spent).
Sports Pivots — Sometimes you have to change the game to win
Sometimes athletes start playing one sport, but realising their limitations end up switching to an entirely new field and excelling there. They can often apply the skills and conditioning from their first sport to successfully dominate in their subsequent career.
Examples of successful pivots in sports:
Graham Hill — started his athletic career in competitive rowing (crew), in 1954 joining the London Rowing Club (one of the largest and most successful clubs in Great Britain). He did not acquire a driver’s license until he was 24, but went on to become a legendary racer, and is to date the only person in the world to win the Indianapolis 500, the 24 Hours of Le Mans, and a Formula One drivers championship. Hill has stated in his autobiography that experience gained in rowing helped him in his motor-racing: “It really taught me a lot about myself, and I also think it is a great character-building sport…The self discipline required for rowing and the ‘never say die’ attitude obviously helped me through the difficult years that lay ahead.”
Hakeem Olajuwon — was a soccer goalie in Lagos Nigeria and did not pick up a basketball until age 15. He attributes his success in basketball to lesson learned in football — “footwork and agility to balance his size and strength and … his shot-blocking ability.” From 1984 to 2002, he played center in the NBA for the Houston Rockets and eventually the Toronto Raptors. Today he is widely considered to be one of the greatest basketball players of all time.
Dwayne ‘The Rock’ Johnson — was a high-school football star, played at the University of Miami, and was drafted by the NFL, but spent most of his career as a professional WWF (now WWE) wrestler retiring in 2019 with 10 world wrestling champion belts. In addition to the physical conditioning Johnson believed that football provided the “structure and discipline his life otherwise lacked.”
Rebecca Romero — she began rowing at age 17 and won a silver medal at the Athens 2004 Olympics in quadruple sculls, but in 2005 she switched to cycling to go for the gold. Rowing gave her the tenacious training and conditioning required for success in cycling, but she preferred the individuality of pursuit cycling, and additional support in coaching and training available in cycling. In 2007 she won a silver medal in the Cycling World Championships in the 3km pursuit, and won the gold medal in the 2008 Summer Olympics.
Business Pivots — Sometimes you have to change strategies to win
The reason why investing in pre-seed and seed stage startups is tremendously interesting and exciting is the same reason it is so difficult — these founders and companies are still learning and evolving. Early stage startups are in hypothesis testing stage — still in search of the right product features and business models to best solve their customer’s needs (seeking product-market fit).
Netflix — founded in 1997 by Marc Randolph and Reed Hastings as a DVD-by post rental business (at one point, Netflix was the top client of the US Postal Service) to compete (and later decimate) with the industry leader Blockbuster. In 2007 Netflix rolled out its online streaming business model, but quickly realized that to compete with Apple and Amazon’s streaming service, they would have to have the best content, while the big studios were blocking Netflix from getting the movies and shows. To grow Netflix CEO Ted Sarandos channeled company resources to producing their own content (first Lillehammer and then the hugely successful House of Cards). Today Netflix content has won 60 Emmys, 12 Golden Globes and 16 Oscars just to name a few of the biggest awards, and has 220 million viewers. Netflix is now facing a lot of competition from Disney+ and others — it will be interesting to see how they will react to these new threats.
International Business Machines (IBM) — founded in 1911 it grew to become a tech giant, along the way inventing the ATM, magnetic cards, floppy discs, hard disk drives, UPC bar codes, DRAM memory and much more. The company was very successful with its mainframe, PC and chip business until the 1990s, when computer hardware was becoming a commodity through success of PC clone makers. In 1993 IBM was in trouble posting a record $8 billion yearly loss.
CEO John Akers was replaced with Louis Gerstner who streamlined operations and boldly focused resources on enterprise clients (ceding the consumer market) and on software services (largely ceding the hardware market). IBM bolstered its enterprise software service offerings through multiple acquisitions such as Redhat, PwC Consulting, Mainspring, Coreo and others. Over his 9 year tenure he laid off 100,000 people, but was able to turn around this 100 year old giant from brink of collapse, and raise the IBM market cap nearly 500%.
Business Pivots — Sometimes you have to change the game to win
Startups often dramatically pivot their offerings and strategies as they learn more about what their customers really want and are actually willing to pay for. Successful pivots take advantage of the failures by applying the lessons learned and adjusting to market conditions and customer demand to scale successful businesses in new markets and niches. Examples of some successful pivots for startups include some very big names:
Slack was a pivot from a failed MMO game Glitch.
Twitter was a pivot from a failed podcast finder Odeo.
Tencent started as OICQ instant messaging for pagers.
Groupon was a pivot from a failed consumer activist site The Point for solving problems as social causes.
Facebook was a pivot from Facemash where men ranked which women they considered “hottest” based on their Harvard student ID pics.
YouTube was a pivot from a dating site where the founders paid single women $20 to upload videos of themselves.
If the initial hypotheses turn out to not work for your startup business it is probably time to pivot and try out new strategies, or change to a new game altogether.
