How I Built This is a guide to starting a new business from one of the most successful podcasters in the world. Guy Raz draws from the experiences of influential business people and outlines what we can learn from these experiences. The result is a book that offers an unexpected path towards success that focuses less on finance and more on you.
About Guy Raz
Guy Raz is a journalist, correspondent, and radio host. He is currently working at National Public Radio (NPR). He has been described by The New York Times as “one of the most popular podcasters in history.” Raz’s podcasts have a combined monthly audience of 19.2 million downloads. He is the co-creator of three NPR programs: TED Radio Hour, How I Built This, and Wow in the World.
Do Your Research
While starting your business, potential opportunities will arise. Good ideas are the foundation of a successful business. You can have all the funding and work ethic in the world. However, without a good idea, you won’t get anywhere. The author highlights that good ideas are generally created when you are actively searching and doing your research. When you identify a potentially good idea, you have to decide whether you actually want to pursue this idea. Guy Raz recommends considering whether you would up-end your whole life to pursue this idea. If this is the case, then it is almost certainly a good idea.
As well as asking yourself this question, though, you should also be willing to do your own research. Raz provides the example of Jim Koch. In 1984, Koch was a high-flying management consultant. He was making huge amounts of money, but he was unhappy with his work. Instead of continuing in this career, Koch identified a gap in the market for European-style craft beers. Koch took a leap, but he didn’t do so without having done some research. His lineage had been within the beer industry for decades. Therefore, he was taking a leap of faith, but he was doing so with a parachute. Koch’s company, Boston Beer Company, is now worth over $1 Billion.
Find Your Co-Founder
Choice of Co-Founder
Your support network can be a crucial factor in determining your startup’s success. As we are social animals, we are generally less effective on our own. Better and more extensive ideas are created when we collaborate with others. Therefore, include your family and friends in your business pursuits. Plus, ensure you have a co-founder. Raz believes that creating a startup on your own is far too difficult. Although the giants of entrepreneurship are often highlighted as an individual success story, people like Zuckerberg, Musk, and Bezos all had co-founders.
Your choice of co-founder can play an important role in deciding whether your idea becomes a success. You want to choose an equally passionate co-founder so that you can push through the challenging early stages. Startups often take time to succeed. For example, the author explains how Eric Ryan and Adam Lowry founded Method cleaning products. These co-founders had to spend their first year living in the same room, staying up till late, and maxing out their credit cards. However, by the end of their first year, they finally had their product on the shelves of Target. This type of co-founder is what you want as a foundation for your business.
Investment From Loved Ones
Another key feature of ensuring you have a strong support network around your business is your need for money. Startups often require significant sums of money. However, Raz advises against immediately going to professional investors. Instead, start by looking to your loved ones. Suppose you learn how to effectively sell your company. In that case, you can convince friends and family to invest in your exciting project. The most significant benefit of this approach is that this money belongs to people you really don’t want to let down. Therefore, it is likely you will work twice as hard to stay true to their investments.
Creatively Position Your Business
One of the key skills required for your business to succeed is your ability to creatively position your business. Knocking on the doors of the public or big companies is not enough. Plus, being polite or persisting won’t bring success when you are starting a new business. Raz offers the example of Manoj Bhargava, the founder of 5-hour Energy Shots. Instead of trying to compete with the other big soda companies, Manoj decided to just sneak around the side. He avoided becoming a direct competitor. To sneak around the side, he decided to shrink his bottle size down. This change allowed stores to sell his product on countertops next to the lighters and papers. By creatively positioning his product, Manoj was selling 10,000 bottles per week only six months after starting the business.
Engineering Word of Mouth
The best way to start selling large quantities of your product is by creating a buzz through word of mouth. People are most influenced by a recommendation from a trusted friend. Recommendation after recommendation will create a buzz that pushes people to pick up their phones and tell more people to try your product. Your most viable way of creating this buzz is simply by building a fantastic product. Your product needs to be so impressive that people cannot help themselves but recommend it.
When Catastrophe Strikes
“A hero has a crazy idea; people doubt her; she leaves the village to pursue her vision, faces untold obstacles, falls into an abyss, barely escapes death, but manages to come out the other side with whatever she was looking for and continues on her journey to an eventual triumphant return.” – Guy Raz
All companies will have experienced their own form of catastrophe. As companies grow, so do the risk levels associated with decisions made by the co-founders. As a co-founder, you are the one who must deal with the repercussions of a catastrophe. It does not matter if this catastrophe could have been avoided or not, you need to be the primary problem solver. How I Built This explains how Johnson & Johnson’s CEO, James Burke, was able to overcome a catastrophe. In the early 1980s, Tylenol accounted for approximately 20% of the company’s profits. However, in 1982, somebody tampered with Tylenol bottles and poisoned seven people with cyanide. Of course, this became a business catastrophe. People stopped buying Tylenol. Despite the severity of this catastrophe, the FDA and FBI were against Burke’s idea of recalling all 31 million bottles of Tylenol. Burke stayed true to his beliefs. This was the first time any product, other than cars, had been recalled in the US.
Despite others’ opinions, Burke understood he had to be the problem solver during this catastrophe. After recalling all these bottles, he managed to regain the trust of the American people by re-releasing Tylenol with tamper-proof packaging. This decision cost the company over $100 million. Still, it allowed Johnson & Johnson’s stock price to return to its pre-catastrophe high. This was all achieved within just two months. Subsequently, Tylenol continued to have a monopoly over the pain-relief market. The moral of this story is that you have to take action when catastrophe strikes.
It Can’t Be All About the Money
Entrepreneurship can leave you in a ‘trough of sorrow’ when you are struggling. Giving up can seem the easier option during periods where you are not being contacted by investors and sales are plummeting. However, Raz recommends zooming out from your problems and looking at the bigger picture. You are more likely to fall into the trough of sorrow if you view investment as the endgame. The reality is that you know your company better than a VC. Therefore, having or not having VC money should hold little weight. Instead, focus on building a great product and selling it to customers. If you persevere with this, the money will eventually come.
Raz is clear in highlighting that ‘focusing on your product’ does not mean you should be avoiding all other opportunities. He provides the example of Stacy Madison to showcase this point. Stacy previously operated a successful sandwich shop business with her then-boyfriend Mark Andrus. Although they were running a sandwich shop, the main attraction was their pita chips. As their customers were going crazy for these chips, they pivoted to focus on these instead of sandwiches. By 2006, she was creating $65 million in revenue, and her business was then acquired by PepsiCo. This is an example of a co-founder acquiring success by being willing to pivot and change her original product idea.
“Failing is scary. Wasting your life is dangerous.”– Guy Raz
Dealing With Success
The author explains that the most challenging part of running a business is success rather than failure. If you are stagnant or failing, you still have a vision ahead of you of what you want to achieve. You worry less about long-term decisions as you are more worried about survival. However, once you are successful, you have to know yourself. You have to understand the legacy you want to leave. Therefore, Raz explains that success within the business world depends on prioritizing purpose and profit.
Prioritize Your Purpose
Companies that prioritize their purpose do better during both lean times and periods of success. The reasoning behind this broader success is that the employees are motivated by more than money. Therefore, they are less likely to quit when things get a bit tougher. Raz provides the example of Jenn Hyman. He explains that she had plenty of reasoning to quit her startup, Rent the Runway, if she was purely focused on profit. Rent the Runway is an online designer clothes rental service. Despite the misogyny she experienced and her struggles to receive investment, Jenn did not create this business to get rich. Instead, she believed in the purpose of her company. This purpose was to make women feel great. This focus allowed Jenn’s company to reach a $1 Billion valuation in 2019.
Identify a purpose for your company so you can persevere when you are struggling financially.
Comment below and let others know what you have learned or if you have any other thoughts.
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