The industrial revolution transformed the business landscape, just as the managerial revolution transformed how we manage large firms. Today, a third revolution, an entrepreneurial revolution, is underway, shaking the very foundations of what we believe about entrepreneurship. What does this mean for entrepreneurs? As an entrepreneur, Greg was doing everything right according to traditional wisdom and it was killing his business. Take the example of Greg Whisenant at CrimeReports.com. As an entrepreneur, Greg was doing everything right according to traditional wisdom and it was killing his business. It started several years earlier when Greg’s apartment building had been robbed. Frustrated and feeling a need to do something about it, he joined a neighborhood watch group and offered to map crimes happening in the area. As Greg continued, he came to believe that mapping the locations of crimes would align and empower the efforts of citizens and police to reduce overall crime in each neighborhood. So then he did everything right according to standard entrepreneurial wisdom: he had a big vision, built a product, landed a customer, raised venture financing and hired a team. But despite his best efforts, doing everything right was leading nowhere quickly. In fact, after several years, Greg had still landed only one customer. But once Greg changed his process, in the next three years he landed over 2,000 paying customers. So what was the difference? Several years ago, my co-author Paul Ahlstrom, a serial entrepreneur and experienced venture capitalist, set out to write a book, Nail It Then Scale It. Based on my research and his experience, we worked to describe a new entrepreneurial process. The process we articulated involved nailing your business and, for Greg and all entrepreneurs, the journey should begin by nailing a pain. …we argued to Greg that he needed to stop building, get into the field and uncover the Monetizable Market Pain—a pain so significant that customers will return your cold calls. Unfortunately, most entrepreneurs begin with their idea and build a product. Instead we argued to Greg that he needed to stop building, get into the field and uncover the Monetizable Market Pain—a pain so significant that customers will return your cold calls. If you don’t uncover a Monetizable Pain (and we measure that by 50% of your potential customers being willing to return your call), then you probably don’t have a sustainable business worth your blood, sweat and tears. So how did Greg do this? He stopped building and started talking to everyday people and police departments. He quickly discovered that everyday consumers wouldn’t pay for his service and that police departments hated his advertising-based business model. At this point, Greg and his fellow founders began to despair, but as they continued to listen (rather than sell), they discovered some crucial pieces of information. For one, police officers were fascinated by the data possibilities of the website and were excited about leveraging the Internet to increase the quality of their communication with citizens. Police chiefs and officers could now use a data “dashboard” to track trends and daily activity. As the enthusiasm built in each conversation, the CrimeReports founders learned that police would actually pay them to post their data ­— advertising wasn’t necessary. As they continued to learn and refine their prototype, the feedback from customers was astonishing. Their customers said things like: “This blows other choices out of the water.” “We’ve been trying to do this for years.” “It used to take us six months to get this kind of data. Now we can get it the next day.” The number of police departments purchasing the product went from one customer to over 2,000 paying customers in three years. And not only did customers clamor to sign up, but the CrimeReports website jumped in popularity with everyday citizens. Applying the process was nothing short of transformational.

The Innovator’s Paradox If you work for any type of business there is a good chance you may get trapped by the innovator’s paradox. At some point in the quest for growth, you will be forced to look at growing into new area or an incredible opportunity will come up. Your business will face the decision of whether to be leaders in a new market or let the competition pass you by. Most likely you will put together a cross-functional team of your best players, they will put together an ambitious plan that gets everyone excited, perhaps even some outside attention from the press about how your corporation is leading out, and then you will start executing. Most of Your Projects Will Fail Sadly, despite your best efforts, most likely you will fail. In fact, some research suggests that up to 85% of new initiatives fail. It will start slowly … a few press releases and consulting engagements later, the big new initiative slowly starts to lose steam and higher ups, whether they are the board or the CEO start to doubt whether the new initiative really makes sense. Usually the all-star team starts getting recruited into other projects and the initiative just seems to disappear. Without recognizing it, your team got caught in the innovator’s paradox. You believed in the new opportunity, you allocated resources, you put your best talent on the project, but somehow it didn’t seem to work out. How do I know? Because I’ve lived it and seen it happen inside some of the best businesses in the world. The paradox is that even though these companies believed in the idea, allocated resources, and planned for success, by doing these things they were actually increasing their chances of failure. Furthermore, most of what you’ve learned in business school won’t help you to manage real innovation and growth. Of course, if you are working on a minor product line extension or something familiar, you may succeed. But if you are trying to conquer a new market, a new product, a new customer, most of what you learned will actually trap you and the consulting companies you hire to help you won’t answer the real questions, instead they will mirror back to you what you already know. The Innovator’s Solution The solution to the innovator’s paradox is to use the right management techniques—the techniques to manage unknown problems rather than known problems. Below I highlight the contrast between these two types of management: If you asked me to say it in one sentence, it would be: identify your assumptions, rapidly test those assumptions, and iterate. When most managers see this list, they nod their heads and say “I already do that,” but in practice, most people don’t. Everything in our training and in our organizations runs counter to managing unknown problems! Why? Because the tactics for managing unknown problems are terrible for managing known problems and the bills today get paid by managing known problems. The Bills Tomorrow Get Paid When You Manage Unknown Problems Unfortunately, the bills tomorrow get paid when you manage for unknown problems. Therein lies the fundamental tension for businesses trying to grow.  And the tactics for managing unknown problems can be surprising different than those one might think at the outset. As one example, consider John Seely Brown’s recommendations for how to incorporate innovations into the corporation during a recent lecture at Stanford. [embed]https://youtu.be/Gdr_5GOg_64[/embed] I’ll write more about how to really use these tactics in your business. But for those of you who read my posts regularly, if this sounds familiar, it should. But notice I didn’t use the word entrepreneur. Why? Because managers and innovators, you face this problem every bit as much as, even more than, entrepreneurs because you have to fight uphill against the established way of doing things to really innovate. And I’ll help show you how. Lessons Learned: Innovators face a paradox: they wouldn’t act unless they believed in their idea but their belief leads them to failure because they use the wrong techniques to execute on a guess Success depends on recognizing that you face the unknown and applying the right management techniques Although you may believe you already understand these management techniques, they can be difficult to use correctly, particularly in a corporate environment that favors the opposite