Faith-Based versus Fact-Based Decision Making

I’ve screwed up a lot of startups on faith.

One of the key tenets of entrepreneurship is that you start your company with insufficient resources and knowledge.

Faith-based Entrepreneurship
At first, entrepreneurship is a Faith-based initiative.  There is no certainty about a startup on day-one.  You make several first order approximations about your business model, distribution channels, demand creation, and customer acceptance. You leave the comfort of your existing job, convince a few partners to join you and you jump off the bridge together.

At each startup I couldn’t wait to do this.  No building, no money, no customers, no market?  Great, sign me up.  We’ll build something from scratch.

You start a company on a vision; on a series of Faith-based hypotheses.

Fact-based Execution
However, successfully executing a startup requires the company to become Fact-based as soon as it can.

Think about all the assumptions you’ve made to get your business off the ground.  Who are the customers?  What problems do they have?  What are their most important problems?  How much would they pay to solve them?  What’s the best way to tell them about our product?…

Ad infinitum. These customer and market risks need to be translated into facts as soon as possible.

You can blindly continue to execute on faith that your hypothesis are correct.  You’ll ship your product and you’ll find out if you were wrong when you run out of money

Or you can quickly get out of the building and test whether your hypothesis were correct and turn them into facts.

In hindsight, when I was young, this where I went wrong.  It’s a lot more comfortable to hang on to your own beliefs than to get (or face) the facts.  Because at times facts may create cognitive dissonance with the beliefs that got you started and funded.

Customer Development
This strategy of starting on faith, and quickly turning them into facts is the core of the Customer Development process.


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11 Responses

  1. An(other) excellent post that resonates with Fred’s recent “The Leap Of Faith” ( http://www.avc.com/a_vc/2009/06/the-leap-of-faith.html ), but more systematic and scientific, hence a much more useful and valuable piece of advice.

  2. Great article. Good point that “It’s a lot more comfortable to hang on to your own beliefs than to get (or face) the facts.” It’s especially hard to change your mind/course when you have to abandon the idea that got you excited about the startup in the first place. The person who can quickly re-channel that excitement to a different idea (one based on fact, not faith) will have much more success.

  3. I found this post through a comment on Fred Wilson’s blog. I don’t think it’s fair to “compare” the two related posts — they definitely compliment each other. This is incisive and powerful and I hope many entrepreneurs or would-be entrepreneurs “get” this eloquently stated point. It’s powerful. Thanks.

  4. [...] the next day, Steve Blank posted on the startup transition from faith to facts. It might seem hard to argue with his view that startups begin on faith and must quickly move to [...]

  5. [...] Steve Blank: Faith-Based versus Fact-Based Decision Making — 1:57pm via Google [...]

  6. I think the best businesses start with facts from the get go. Put faith in facts!

  7. [...] just read Steve Blank’s blog on Faith-Based versus Fact-Based Decision Making, and it resonated really well with my experiences at prior startups.  As he points out, starting [...]

  8. [...]  You simply cannot afford to waste your valuable time, energy, passion and money building on faith for years at a time.  Employ customer development.  Iterate your product until you get bankable [...]

  9. [...] a lesson here and it is that you can only afford to act on faith in a startup for so long.  From the beginning of the idea stage, you need to spend as much time [...]

  10. What does one do when some key facts related to your business are not established in history?

    Common answers are: (a) talk to the customer to establish the facts, and/or (b) particularly in the Consumer Digital space, ship the first version of the product to see customer response.

    But.. (a) does the customer always know she needs something. Did we know that we needed twitter.. or google?, and (b) if the first version fails to receive good response, is that fact enough that the product need not exist? Are there times when the first version was rejected through-and-through, but later versions succeeded, either because the later versions were built much better or because the customer grew or both?

    In this light, can we always trust facts, particularly for new-market products?

    Please respond with insights from your entrepreneurial experiences. The last thing I want is for new entrepreneurs to read my comment and get dismayed about the importance of facts.

    • Avinash,
      One of the subtle issues about startup success is the notion of “market type.” Is there an existing market or not? You do different things as an entrepreneur when you are creating a new market..

      You process your customer data differently depending on market type.

      I talk about this in my book and there is always a discussion at the Lean Startup Group at http://groups.google.com/group/lean-startup-circle.

      steve

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