Ideas, Knowledge, Skill, and Cash
How to solve your startup dilemma using: ideas, knowledge, skill and cash.
I provide pro-bono tech consulting about once a week. I've been doing it since 2013 and it's been one of the most rewarding things ever. For starters, I get to meet awesome new inventors, inventors, entrepreneurs, marketers, etc. on a regular basis and two, the problems are always interesting.
For the past few years, I've been observing my thought process and trying to create a few "battle tested frameworks". A battle tested framework is a process that has been proven to work more often than not. Like all mental architectures, the framework often requires some tailoring but overall, it's useful to new entrepreneurs.
"Ideas, Knowledge, Skill, or Cash".
Here's how the framework goes:
At the end of the day, every individual, group, and or manager should ask themselves these four questions: * Are you idea rich or idea poor? * Are you knowledge rich or knowledge poor? * Are you skill / talent rich or talent poor? * Are you cash rich or cash poor?
Idea Rich vs. Idea Poor
Have you ever met someone who just has tons of creative ideas and no sign of shortage? These people are called "idea guys" and oftentimes the phrase is used pejoratively. This is unfortunate because for many other people, ideas are hard to create and re-create.
If you are "Idea Rich", then your challenge is knowing how to execute. This then leads us to knowledge.
Knowledge Rich vs. Knowledge Poor
Knowledge-rich people are often experienced professionals who "know a business" or "know an industry". They are sometimes also described as "subject matter experts" and their pitch is that they've gained certain insights on a specific industry, culture, business or problem through their experiences or even just time.
Although knowledge-rich have value, the information age –driven by public repositories such as Wikipedia, private repositories such as JSTOR, crowd sourced platforms such as Udemy, and activist movements– have helped make knowledge more accessible –therefore less valuable.
When I am providing some consulting, I will oftentimes meet people who are experts in their industry and as I begin to hear their idea, what I often realize is that they do not have the skills apply their knowledge online or through an app. This leads to our next question.
Skill/Talent Rich vs. Skill/Talent Poor?
Engineers, Doctors, Lawyers, Carpenters are all examples of skilled laborers. They thrive on being able to take information, process it into knowledge, then use their skills to create value. This value often comes in the form of a product, service or experience but it oftentimes requires practice and a sense of self-mastery.
I believe skilled people are at the top of the food chain because they are oftentimes makers. The challenge with gaining skill is that it takes time and practice. Many people neither have time to practice or motivation to build skills.
Cash Rich or Cash Poor?
Cash is oftentimes the easiest thing to talk about because it's the most transparent. For example, cash can help you buy ideas, buy knowledge, and rent skill (through employment). Cash can also help you buy multiple examples of the same thing. For example, you can hire 3 consultants and build 3 different teams to tackle the same question. What this provides you is a way to hedge your bet by aggregating knowledge and experience. When you convert uncertainty into cash-based problems, what you get is clarity. Therefore, cash is a helpful tool, but it needs to be used wisely.
Evaluating the Archetypes
After consulting over 100 startups, here are 4 archetypal problems I regularly see.
Not For Profits
Nonprofits are oftentimes idea rich and cash poor. This is most frustrating to me because they have good ideas and lots of knowledge but no clear way to execute on their plan.
90% of the time, when I see this situation, I provide them with two things:
- A costing worksheet on how much it will cost to develop their digital product. The idea here is to help them go back and figure out how to finance their project.
- Suggestions of where they can find in-kind skilled labor. Most of the time I suggest they contact Taproot or hire interns .
Young entrepreneurs are often idea rich but knowledge poor. I see this especially within the music industry where a startup may have a great idea on how to help artists earn more income but have no familiarity with how the system works.
In situations like these, I often try to provide them with a curated list of resources of where they can gain more knowledge. Using the music industry example above, I often direct them to topics such as: DMCA, Artist Pros, Statutory Licences, Performance Compliment, Publishers, Record Labels, etc.
I often suggest every entrepreneur first gain knowledge of their industry before they spend cash.
Experienced entrepreneurs are oftentimes idea rich and knowledge rich. All they really need is skill. These are the people whom I try to help create a pitch deck or a costing worksheet to help them identify how much cash they need over a 6mo or 12 mo. timespan.
Investors are often cash rich but idea, knowledge or skill poor. Hopefully not all three!
Most of the time, these people are both cash rich and knowledge rich and they're looking for either a good idea or someone with talent. I usually try to provide them with LinkedIn connections or introductions to entrepreneurs.
Why does this matter?
When it comes to helping people solve their problems, the secret to my success has been in asking smart, probing questions. After asking these 4 questions about 100 times, I realized that the start-up game isn't very scary or confusing at all. This framework has also helped me understand when I should hire an outside agency to make something vs developing something internally. For example, suppose I have to build a new app and I'm unsure whether I should build the app internally or hire an agency to help. My first questions become:
- Do I, my team or my organization have any ideas on how to solve this problem?
- If Yes: Consider in-house.
- If No: Consider an agency to help brainstorm.
- Do I have any knowledge on this problem?
- If Yes: Consider the agency. I feel comfortable having other people do the work if I already understand what needs to be done.
- If No: Consider building it in-house. I would rather learn the difficulty of this problem before I source it to someone else. It will help me calculate effort.
- Do I or my team have the right skills to solve this problem?
- If Yes: Consider an agency.
- If No: Consider building it in-house. This is an opportunity for your full-time employees to gain new skills. Never miss out on an opportunity to build new skills.
- Do I have cash to sustainable hire full-time employees?
- If Yes: Consider in-house because all software projects need maintenance and iterations.
- If No: Consider an agency because they will be able to get you get to Phase I with limited liability and risk and you can later calculate how much it will cost to maintain a project.