The Physics of Startups
00:29:14 · Rob Snyder, RC
[00:29:14] S1: Yeah, so so um what that what that would look like is um you are having 20 sales calls a week and no nobody is buying, or like very few people of those are actually turning into customers and they're dropping off for a variety of reasons. And so what you can see there is like, okay, cool. Um if I make my product better in that situation, it's not gonna matter because I'm having 19 sales calls per week that are not converting into customers. If I increase the number of, if I double the amount of sales calls I have per week, my life just gets double as bad, like twice as bad. So there is if I like improve that, the pipeline step here, it's not going to change things. Really. It's like it's not gonna improve the number of case studies that I produce um at the at the end of this factory. [00:30:09] S0: Um and especially for uh like for a software or for an AI solution where delivery is basically unconstrained frequently there. It's like, you know, there's probably some setup, but that frequent but that is probably not the constraint, or it might not, it's you know, you can infinitely focus on improving your your products, or you know, but but as long as sales is the uh is the constraint, and you mentioned like they're either not converting, it can also take the form of it takes six months to sell to them, or you know, it's uh it it involves.
00:30:42 · Rob Snyder
[00:30:42] S1: It takes all of my effort to close these deals. Everyone is magical. Like it could be, it could be a variety of things like that to where we say, okay, cool, let's right. Improving pipeline is not going to change things. Improving delivery is not going to change the kind of production of case studies, the like throughput, the the amount of output of case studies here. Yeah. And and so we're like, okay, cool. The constraint on growth is the sales process. Then we can also we can import a bunch of other men, like manufacturing people have thought about this a lot. They have a concept called five whys, which is you just try to figure out, okay, why is our conversion rate so low? Why is it doing and then we just get down to the root cause of that, attack whatever that thing is, and then your constraint will move. So let's say it's, oh, it turns out, this is very common. Uh it turns out that our sales problem, the reason we're converting one out of 20 customers when we're having 20 calls per week, is that we are targeting the wrong kind of person. We're targeting a person who doesn't have pull. Right? That's an example. Okay, cool. So what do we do? We change targeting for the pipeline step. And then we see, okay, cool. Now we have 20 meetings a week and 10 of them convert or something like that. It's like, okay, cool. Now there's probably another constraint in the factory. There's like maybe it's still the sales step, because when we look at the number of people, you have 20 sales calls per week, 18 of them have pull, but only 10 of them close. Then the question is, okay, what uh what's going on with those other eight? And you go and root cause analyze that and say, okay, this is if we can solve this, we're gonna go from 10 to 18 case studies produced per week, or whatever it winds up being. But just illustrative, but this is the kind of the and and the kind of the interesting thing here is this is you you just ask the same question every single day. What's the constraint? What do we and and therefore what do we need to dig into, get to the root cause, ship a fix, and then move to the next one?
00:32:51 · RC, Rob Snyder
[00:32:51] S0: Yeah. So that's actually a good exercise if any unfortunate founder has made it this, you know, 32 minutes into our conversation. Um the like just ask yourself, like, where where is the constraint? And if um Rob, let's say that they do founders you work with dozens, hundreds of founders at this point. Do they all know where the constraint is in their business? [00:33:12] S1: No, no, just add as a add AI Rob or whatever, like uh-huh. I've designed AI Rob so you can plug it into your data and it will tell you what your constraint is. And so um, feel free to give that a try. Or, you know, I'm happy, right. In a in a 10 minute 10 minutes of me grilling you, we can figure out what your constraint is. Um the questions I'm asking are at the end here. It's like, okay, um, what is pull? What is your case study? And then like, okay, how many meetings are you having per week? How many of those convert? How many of those, how many of those turn into actual customers? Is it's pretty straightforward. I'm just like, I'm just speccing out the factory in my head.
00:33:50 · RC
[00:33:50] S0: Yeah. Um, you know, there's one other thing that you write, Rob, here that I I wanna I want to pull in, um, because seems obvious, is actually not super intuitive, and is different, meaningfully different from what a lot of startup theory out there, or you know, what a lot of you know, popular whatever that everybody has heard um uh tells you you should be focused on. And what you're focus what you're saying is think of your startup as a uh as of a case study factory, focus on the constraint. Here are some other things. If you could just like rip rip into these real quick, um you're right. Importantly, you do not get this intuition from any other way of looking at your startup. You're either building a product or selling it, gets you none of this. Neither does thinking about the company as a quote unquote software factory or a vehicle for your vision, nor does optimizing for revenue, thinking about marketing as a funnel, et cetera, et cetera, et cetera. Um yeah, you mentioned uh the software factory. When I hear that, I'm like, okay, that's actually the the delivery machine is like it's like a part of that. Yes. Um thinking of the marketing as a funnel, like why are these the wrong way to be conceptualizing uh and making decisions about where to spend your time as a founder?
00:35:08 · Rob Snyder, RC
[00:35:08] S1: Yeah. So one is like if you think about marketing as a funnel and sales as something else, you're gonna be using different way, different things to analyze these different parts of the same factory. And so um uh, but also thinking of marketing as a funnel, you're not gonna like apply the theory of constraints to a funnel. It's just like, oh, here's the number of leads we get, and here's da-da-da, right? And you and this is just not how it's so so you don't you don't get to apply manufacturing thinking to that. And so you don't get all the benefit of a hundred years of manufacturing thinking about how to make things go faster and work better and eliminate waste if you don't use a factory kind of concept. [00:35:50] S0: Yeah, yeah. Well, um, Rob, let's uh we're gonna need to wrap here in a moment. Um you basically kind of gave the gave the takeaway a moment ago, but uh just to reinforce it, founder who is listening at this point, what should they do? Um, what would you tell them if you were looking at that right now? Like, what should they do as a result of starting to think about their case study as as a factory or excuse me, is their startup as a case study factory?
00:35:50 · RC, Rob Snyder
[00:35:50] S0: Yeah, yeah. Well, um, Rob, let's uh we're gonna need to wrap here in a moment. Um you basically kind of gave the gave the takeaway a moment ago, but uh just to reinforce it, founder who is listening at this point, what should they do? Um, what would you tell them if you were looking at that right now? Like, what should they do as a result of starting to think about their case study as as a factory or excuse me, is their startup as a case study factory? [00:36:18] S1: Um yeah, so uh there are basically two things, two things I want to beam into your brain. Uh thing one is pull and all the implications of pull. Thing two is the case study factory and tells you exactly where to focus right now. If you just do those two things and let those tell you what to do, then uh then you're by default gonna do the stuff to grow the fastest. And that's what I want you to do because I want you to break every damn record there is in growth. And so uh go do that.