THE BLOG

Smart Entrepreneurs Use Resource Constraints to Win

02/13/2015 07:21 pm ET | Updated Apr 15, 2015

Most entrepreneur that fail are quick to offer a litany of constraints that caused their demise -- not enough money, time, customers, or support from the right players. Ironically, as a startup investor and mentor, I have seen too many failures caused by just the opposite -- too much money spent too soon, taking time to get product perfection, and assuming customers will wait.

In reality, resource constraints should be seen by startups a competitive advantage, by forcing them to develop new markets, and to think differently and act differently than existing players. The result, called resourcefulness, allows entrepreneurs to create opportunities in the face of scarcity. It allows them turn resource constraints into stunning new businesses.

In this context, constraints might more reasonably be seen as beautiful by entrepreneurs, just as they are described in a new book, "A Beautiful Constraint," by renowned marketing consultants Adam Morgan and Mark Barden. I like the way the authors outline how to see and turn constraints from punitive to liberators of new possibilities and opportunities, as follows:

  1. Look for ways to improve productivity. Every startup needs to think hard daily about what problem or challenge is holding back progress, what really matters today, and what entirely new possibilities exist. How many times have you actually made up work to keep an idle person busy? Startups funded by rich uncles rarely think about productivity.
  2. Rethink or reframe the challenge. Constraints are the best motivators for finding new approaches to solving a problem, building a product, or crafting an effective marketing campaign. Perhaps success itself needs to be redefined or reframed. Every entrepreneur needs to avoid locked-in ways of thinking. Let your constraints drive innovation.
  3. Find the benefit in subtraction. Isn't it amazing how often all the necessary work gets done, even when resources are removed or the budget is reduced in an ongoing project? The benefit of working harder and more efficiently is success despite constraints. Subtraction leads to simplicity, better usability, and easier education of your customers.
  4. Find new ways to augment. The fastest way to grow your business is to find partners who can amplify or sell what you already have, and you can sell what they have. That's a win-win relationship, which almost always takes less time and money than building something new. Adding priced services is another way to augment a product business.
  5. Create new kinds of solutions. Using the solution technology that you already have, in new ways, takes fewer resources than inventing or sourcing new technologies. That's why computer makers offer desktops, laptops, notepads, and now even smartphones. Without constraints at the forefront, computers tend to get complex and more expensive.
  6. Build entirely new business models and systems. Pricing constraints and the need to attract consumers drove the invention by startups of the freemium model, subscription model, razor-blade model, and others. Today we see whole new ecosystems and opportunities driven by environmental constraints, safety concerns, and social issues.

Some entrepreneurs never get past the victim stage for constraints. They see every constraint as an inhibitor to their ability to realize their ambition, and an excuse for not persevering. Others proceed to the neutralizing stage, which means they tackle problems as they are encountered, and get some satisfaction by finding a way around each one. It's still a hard road to success.

The smarter entrepreneurs jump quickly to the transformer stage, where constraints are proactively or responsively used to prompt wholly different and potentially breakthrough new approaches and solutions. They even impose constraints on themselves and their team to stimulate better thinking and new possibilities. Then they size the potential in the constraint.

We live in a world of over-abundance of choices, yet seemingly ever-increasing constraints, driven by a scarcity of time, expertise, and money. How entrepreneurs respond to these will become a larger and larger determinant of startup growth, competitive position, and success. What is your resource constraint mindset and action plan today?