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About the Author: Prof. Andy Wu
Associate Professor of Business Administration in the Strategy Unit of the Harvard Business School. Teaches in master’s and executive training programs and researches strategies of technology entrepreneurs organizing and mobilizing resources to gain a competitive advantage
Professor Andy Woo and doctoral student Atticus Peterson from Harvard Business School followed 314 entrepreneurs who launched some technology hardware products on the crowdfunding platform Kickstarter from September 2010 to June 2019. As founders completed more projects, the margin for exceeding the target market date increased. Conclusion: More experienced entrepreneurs have bigger deadline problems.
Professor Wu, explain your research.
“Entrepreneurs are notorious for not being able to meet the delivery dates they set for themselves, and indeed those in our sample were not exceptional. Less than a quarter of their projects were completed on time. “And do things faster, in practice the exact opposite has happened. And we are not talking about small failures. We have seen delays of an additional six weeks on average for each project.”
this is so strange! Why did they not learn from experience?
“To create accurate forecasts, you need to correctly predict the complexity of a project: the number of tasks or components that depend on each other. The more projects a developer does, the better they get at it. But they also discover how to improve their products. Which tends to be dominant.the two types of learning are important.but they intersect in a way that causes experienced founders to present increasingly unrealistic predictions and miss their deadline.
Why do they not take a safety margin?
“They are. All the developers we interviewed tried to give themselves more time than they thought they should. We found that they gave themselves about eight more days, on average, per project. But that’s not enough. One change in the product can create a cascade of component changes that now require much more work. And time.On a large scale, the complexity increased geometrically.When setting their deadlines, our study participants appeared to have performed a linear assessment.They failed to see how many more things could go wrong from just one small change.
“Here’s an example. One developer built a computerized brick, which allows customers to control engines and lights in their Lego works. After launching his initial product, he found it useful to add sensors to allow the car to detect darkness and turn on its lights. It’s a cumulative change – otherwise, it’s him Product – and he gave himself more time to launch it than he needed for the original version. Still, he did not appreciate how much work would make one new feature. He needed more sophisticated tools, and the original manufacturer did not meet the task. He went through seven others before finding a company Who can do that, and of course, he missed his due date. “
Why focus on technological hardware projects?
“These products – for example wearable devices, 3D printers, educational gadgets and robots – are among the most sophisticated that an entrepreneur can bring to market. And we only looked at people who complete several products of the same type so that past experience is relevant.
We have collected data from the comments and updates on the Kickstarter pages of the developers, where they discuss issues that arise. We found that in each follow-up project, unforeseen problems increased by an average of 21%.
Entrepreneurs are known for excessive self-confidence, and initial success may increase this feeling. Do the research findings reflect this?
“Excessive self-confidence is certainly part of it, but complexity is a concept that is difficult for anyone to grasp and address in full. Yes, these entrepreneurs may be more confident than most people about their ability in future performance. But the main thing is their inability to understand how difficult the future will be. A challenge that we all face. “
If they missed deadlines in the past and nothing terrible happened, maybe they just did not make such an effort next time?
“It’s unlikely. Research has shown that past delays can hurt future fundraising ability. And our interviews have shown that founders are pretty disappointed in themselves when they miss their deadline. Worse, angry customers criticize them on social media. They hate it.”
These entrepreneurs turned to crowdfunding to fund their work. Do you think you will see the same tendencies in founders who get their money from traditional investors? Maybe you researched a subgroup that is a little less diligent or skilled?
“Those who rely on Kickstarter are almost certainly early-stage entrepreneurs, although some also raise venture capital. Indeed, other sources of funding have been one of our review factors, so the effects we found are probably strongest for founders who are relatively early in their careers. There is reason to believe That when you are very experienced, you can overcome some of the prediction challenges.
“We are now investigating whether this is a problem even for venture capitalists and how investors might solve it. When these projects are delayed, venture capital firms are often forced to bail them out through bridging loans. We try to understand how venture capitalists can avoid this by Making better timeline forecasts themselves. “
Did the amount of money raised have any effect on meeting product launch deadlines?
“Yes. In fact, we found that when developers exceeded their target amount the delays got worse, because that means more people ordered the product than expected. When that happens, it usually requires a change in production and distribution. If you plan for a hundred customers, you need a certain type of supply chain. People want your product, it adds a lot of load to the system. ”
“We also looked at regular entrepreneurial qualities like natural talent, intelligence and work ethic and whether anyone has embarked on an unsuccessful fundraising campaign in the past. Trauma from past failure and worry that it may not be possible to raise enough money to complete the next project “He should look more attractive to potential customers. However, we did not find any evidence of that.”
Do you think you will find the same pattern if you look at more experienced entrepreneurs working in large companies?
“We would expect the same effect in a large company that launched a series of innovations in a new product category. In fact, we would expect the delays to be greater because there is more organizational complexity.
Do you have any advice for entrepreneurs who want to avoid this trap?
“The first thing I would advise is to develop an awareness of the nature of complexity. A lot of unknown things will arise. It should be recognized that every small correction in a product can increase complexity dramatically and quickly. Think geometric, not linear.
“The second thing is to try to better anticipate the specific problems that may be addressed. This can be done by experimenting with new components within a low stakes – through cumulative stress testing, small production and repetitive processes for flexibility and lightness – to identify potential problems early, Before setting the timeline. “
Remember, time is money, and these delays are not trivial. They can download companies. So try to plan your time to the best of your ability.
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