How to start a company with your best friend (and survive to tell about it)

Ten years ago, I started a business with my best friend. Naturally, I was told by many people that co-founding a company with a close friend was a bad idea.

The truth is that many companies start among friends. Former Harvard Business School professor Noam Wasserman (now at the University of Southern California) studied 10,000 tech startups and learned that 40% of founders were friends before they went into business. His research, summarized in his book The Founder’s Dilemmas, also revealed that when founders are friends, it increases the likelihood of startup failure—and each friend on the founding team increases the likelihood of founder turnover by almost 30%.

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How could China develop so many high-value software (Tencent, Alibaba, Baidu, Ant Financial) and Hardware (Huawei, Lenovo, Oppo, DJI) companies creating lots of high paying Jobs while India can’t?

Um you mean like Tata and Reliance?

It turns out that India is better at creating outsourcing enterprise IT companies than China is.

There are things that India is better at, and stuff that China is better at. China turns out to have gotten into hardware because of Indian laws on manufacturing that killed the industry there. As far as “pure software” I’d say that India is better than China, but the Chinese companies exist to fill a niche. In the case of Tencent and Baidu, it was because Chinese internet laws meant that Western companies couldn’t enter. Ant Financial was because you had a pre-existing P2P loan system that went onto the internet,

If you ask why did X happen, you’ll find lots of random events that happen to just put something in place X.

Also just like people have crazy and outdated ideas about China. People have crazy and outdated ideas about India.

Why Software is the Ultimate Business Model (and the data to prove it)

I often say that if Warren Buffett were 30 years old, he’d only invest in software. Here’s why…

1. The Demand for Software is very strong and stable — Spend on software has grown at ~9% for about a decade. Looking forward Gartner estimates show that the Software category is expected to grow 8–11% versus the U.S. economy at 2–3% and broader technology spending at 3–4%. Software is a GOOD neighborhood to live in.

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What are the biggest myths about owning a business?


As someone who has owned over 30 different businesses in speciality retail, fast food and hospitality, here are some of the biggest myths that I have discovered in relation to owning a small business, especially in the early stages:

Myth 1: That owning a business means that you can work whenever you like.

  • The truth is that you don’t own a business … it owns you. If it is right for the business to serve its customers 24/7, then it is up to you as the owner/manager to staff that need, even if it means staffing it yourself – which it usually does. It’s not uncommon for people that own their own business to commit 80–100 hours a week to its survival and success.

Myth 2: That you will make a fortune when you own your own business.

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Business Strategy Chapter 9 Diversification Matrices

More acceptable reasons for diversification these days are the potential for operational and strategic benefits.
(1) eliminating and preventing competition by subsidizing a price war,
(2) reducing rivalry through mutual forbearance, and
(3) raising rivals’ costs through vertical foreclosure.
Vertical foreclosure
Residue rights of control

Business Strategy Chapter 8 Strategy Maps

Broadly speaking, there are two types of competitive advantage a firm may pursue: low cost or uniqueness
Firms may choose to target a broader or narrower segment of the market. Most markets can be segmented into smaller product markets defined by geography, buyer characteristics (e.g., age, race, income, and gender), and other product line characteristics.
These two dimensions, broad versus narrow and low cost versus unique, define four generic strategies:
1. Broad-scope, low-cost players are referred to as cost leaders
2. Broad-scope, unique players are referred to as differentiated players
3. On the narrow side, we have both focused, low-cost players and differentiated niche players.
4. Some firms pursue generic strategies that cross these boundaries.

Business Strategy Chapter 7 Capabilities Analysis

major sets of activities, skills, and resources that drive value to customers.
 at the time of strategy formulation, when firms are assessing which strategic options are currently feasible—and may be included in a broader process of determining strengths, weaknesses, opportunities, and threats (SWOT).
 capabilities analysis can be used to determine which capabilities are perhaps non-core and therefore candidates for outsourcing or external partnering.
 Truly understanding a firm’s competitive strengths requires more than just an understanding of that organization’s tangible assets. Indeed, the key building blocks of competitive advantage are often more likely to involve the firm’s intangible assets.
Capabilities analysis is based on the resource-based view (RBV) of strategy that emphasizes the internal skills and resources of the firm.  The RBV asserts that resources and capabilities can be a source of competitive advantage when they are (a) valuable, (b) rare, (c) inimitable, and (d) non-substitutable.
Step 1. Determine the value chain for your business. (bargaining power, capabilities, partners, and defensibility.)
Step 2. Isolate the core set of capabilities.
     Step 2a. Processes.
     Step 2b. People. ( (a) most central to value creation and (b) unique and difficult to replace. )
     Step 2c. Systems. ( (a) operational, (b) relational, and (c) transformational.)
Step 3. Determine degree of alignment.
     Step 3a. Internal alignment.
     Step 3b. External alignment.
Step 4. Determine sustainability.
     Step 4a. Imitation.
     Step 4b. Durability

Business Strategy Chapter 5 Competitive Life Cycle

Growth results from scaling new products and services up the S-curve and also occurs from the continuous creation of new S-curves. So in one sense, the purpose of strategy is to create new S-curves
The CLC is split into three phases consistent with the S-curve: an emergent phase, a growth phase, and a mature phase.
Demarking each of the three phases associated with a single S-curve are transitory inflection points: disruption, annealing, and shakeout.
After a disruption occurs, the new S-curve begins and we enter the emergent phase. This period is often characterized by what others have referred to as the “era of ferment” as businesses experiment with various designs.
The emergent phase ends as customer adoption accelerates and the product concept solidifies around a core set of design features.
Annealing typically gives way to the growth phase. As uncertainty in the technology or design is reduced, more customers are willing to purchase, leading to significant growth in demand. Business focus typically shifts from development to scaling.
As the growth phase winds down, when marginal growth rates begin declining, a competitive shakeout often ensues. Marginally competitive firms exit the market and a handful of dominant players emerge. Shakeouts can vary in intensity.
After the shakeout, industries enter the mature phase. Growth is still possible, but it is likely to be less pronounced and often comes from stealing market share from competitors. When the market continues to support a number of rivals, competition can be particularly fierce with strong downward price pressure.
Total quality management and Six Sigma programs are common.

Business Strategy Chapter 4 Five Forces Analysis

(1) rivalry among current competitors,
(2) threat of new entrants,
      1. Entrant faces high sunk costs
          2. Incumbents have a competitive advantage.
          3. Entrant faces retaliation.
(3) substitutes and complements,
     1.  cross-price elasticity of a potential substitute
     2.  substantial switching costs between products
(4) power of suppliers, and
     1.  availability of reliable information on suppliers
     2.  well-known information on supplier prices
     3.  suppliers cannot easily segment the market and thus struggle to price-discriminate
(5) power of buyers.
But duopolies are far less competitive—and typically far more profitable—than the alternative of many firms competing. Two additional considerations include whether (1) the incentives to “fight” are low and (2) coordination between competitors is possible.
Coordination that helps reduce pressures to engage in aggressive price cutting may be possible between competitors. In the extreme, firms may explicitly coordinate pricing and/or output. OPEC is a moderately successful cartel of oil-producing nations that tries to control the price of oil. (reduce prod. increase price.)