Letter from the CEO
We’ve all been around long enough to know that companies are great at lip service. Every business claims that they do things “differently” – that they treat their employees better or their customers better or that they are a better place to work. Most of us can smell bullshit a mile away.
My goal with Arising is not just to claim difference and put on some fancy window dressing – but to actually LIVE the principles that we claim. In the end, I don’t want to be different: I want heart- and values-centric companies to become the expectation, the standard, and the norm. I want work that lights people up with a sense of possibility and potential to become par for the course. I want managers who respect you and lift you up and guide you toward your growth and your goals to be table-stakes for any company worth its salt.
And, most importantly, I want to prove that high performance and heart are not contradictory. That not only do they belong in the same sentence, but are actually essential complements for one another over the long term horizon. They hold each other up and make the other sustainable.
When I was early in my career, I thought traditional business was by default cold and inhuman. So instead I immersed myself instead in nonprofit work, social enterprises, and small local businesses. Finding myself in profit-oriented business – and moreover in private equity – was not what I would have predicted for my life. Even more surprising is how much I actually love it.
What I’ve come to realize is that the money-making is almost incidental to the greater game. What drives me are the challenges — internally and externally — that the commitment to excellence brings. It’s not the job itself, it’s who we get to become in the process of the ups and downs of learning how to do our work in a way that we can be proud of. Of learning how to build a company well. Of learning how to manage well. Of learning how to integrate head and heart, empathy and outcome, pragmatism and possibility, integrity and the bottom line. It’s the messing up, the faltering, and the getting back up again — better than before.
It is my belief that humans need to be constantly progressing, or we stall out. In the absence of growth, a goal, a forward motion – we become stagnant, depressed, and lose our zest. We are built to be BUILDERS. We are either growing or we are dying.
I love startups because they are such a breeding ground for growth. Everywhere you look in a startup, you see possibility. Problems to be solved, opportunities to be explored, lessons to be learned, new horizons to aim for. Startups push us beyond our comfort zone and force us to learn new skills, new approaches, new ways of thinking. By challenging and stretching us, they breathe life into us.
At Arising, my goal is to unlock the potential of all the companies we shepherd by encouraging this life force to infuse our work. It is why the first Principle of our work is Energy is Everything – and why we are backing that with a pretty substantial promise. I believe in symbiosis, and I remain convinced our team members must be on-track to their highest potential for our companies to be on-track to their own.
High Performance with Heart means that we understand that it is possible to build exceptional companies in a way that also serves our souls. In a way that is joyful, authentic, respectful, and kind. But also in a way that compels us to rise above our own self-imposed limitations. I believe that holding high standards is an act of heart, calling forth the best in those around us. I believe that, as one of my mentors says, “love sets a high bar.”
If we succeed with what we’re doing at Arising, we will help reset the dominant narrative out there: that making great returns in business requires brutality. That its a zero-sum game. That winning is only achieved through selfish means, treating people like slaves, and getting ahead at any cost. If we succeed at Arising, we will be calling bullshit on that falsehood. In it’s place, we will be instilling the narrative that people and profits can coexist. That businesses can be symbiotic and greater-sum. That with intention and the right teams, our work lives can be a home for growth, belonging, and meaning. And maybe, just maybe, we can succeed at making the world a more healthy place.
Now of course, we have to be real about WHY this hasn’t been the dominant approach to business to date. I believe it’s for the following three reasons:
The first, and perhaps most important, is that it won’t work for everyone. This system – one that treats people with trust and respect, gives them room to grow, asks them to show up with their best energy and their best selves – requires a certain type of team mate. One who is self-motivated, committed to growth, and capable of executing within a heartful and high-performance team. We will be able to prove High Performance with Heart only to the extent that we insist on hiring, retaining, and creating teams that are not only capable, but also HUNGRY, to do both.
The second, and perhaps harder, is that it requires full leadership alignment. From bottom to top – but particularly starting from the top. It requires leadership that is not just spitting lip service, but is dedicated to the principles in its bones. Leadership that balances the hard-won practicality and insight of being forged in the fires of experience, with genuine caring about alignment to the principles of heart. That is ready to walk the walk. And that demonstrates, day in and out, being committed to the same path of growth, learning, and potential-seeking as everyone else. That is humble and yet strong. That is proudly human, still always striving to do better.
The third, and perhaps most exciting, is that the world has only just become ready for this shift in approach to work on a larger scale. People are growing in empowerment, in readiness, in demand. People are learning how to operate closer and closer to their hearts. They are realizing that when it comes to happiness, integrity, energy, and collaboration really are EVERYTHING. And people are starting to insist on surrounding themselves with others who feel the same.
At Arising, we want to be on the forefront of proving that a better way of doing business is not only possible – but becoming necessary. We are here to prove that we can produce massive returns for our shareholders AND do so in a way that is fulfilling, exciting, human, and kind. In so claiming, we open ourselves to possible failure. To the risk of being rejected, disbelieved, and laughed at. And to sometimes getting it wrong.
Like everything we do in startups, we proceed anyway because the risk is worth the reward. And we succeed to the extent that we surround ourselves with others who are both enthusiastic about and capable of achieving what we set out to prove. We will get it wrong sometimes, but we get back up again and do better the next time.
What follows below is a set of Principles. They are by no means exhaustive, or representative of everything we believe. They are, however, an attempt to distill the practices and attitudes that we think are most crucial to achieving our mission. Appropriately, they represent a balance of head and heart. The first five could be classified as the Character Principles of Heart, the second five the Execution Principles of High Performance. They are, like us, a blend of the two.
You’ll notice as you read them that they don’t just ask of you – they also give. Our Principles put our money where our mouth is. They represent the company taking clear, defined steps to build and uphold our beliefs with our actions.
To close, I just want to express: thank you for being on this journey with me. Taking on this role, stepping into these shoes, and working to grow to be worthy of your trust – has been the honor of a lifetime. I am so grateful to be working alongside each and every one of you. May we continue to grow – together – with humility, gumption, and grace.
May we Arise.
Arising Ventures CEO
Arising’s 10 Principles
Heart: The Character Principles
Principle #1: ENERGY IS EVERYTHING Principle #2: YOU GOTTA LOVE THE MESS Principle #3: THE BOTTOM LINE IS BOTTOM-UP Principle #4: 1% BETTER EVERY DAY Principle #5: WE NOT THEY
High Performance: The Execution Principles
Principle #6: RUTHLESSLY ROI Principle #7: OMM: THE ONE METRIC THAT MATTERS Principle #8: GREAT TESTS MAKE GREAT OUTCOMES Principle #9: SIMPLICITY SCALES
HEART: The Character Principles
Principle #1: Energy is Everything
At Arising, we believe it takes big energy to do big things. Therefore, we put a huge premium on making sure the work environment in our companies is positive, uplifting, and enjoyable – without creating a culture of avoidance, ignoring problems, or pretending that things are working when they aren’t. It’s the ultimate challenge – to keep our head and spirits about us in the midst of the chaos and the swirl. For those that can embrace it, work can become a great source of fun and fulfillment.
What does Energy is Everything mean to us? It means that we ALL are responsible for setting a tone and underlying pulse that allows us to keep our energy up for the challenges at hand. It means that we place a huge premium on not just what actions we do, but the spirit in how we do them. It means that we understand that we are all connected, and that how one person shows up will impact how others do as well. It means that we understand that every single day, we create the conditions in which we will fail or succeed. And perhaps even more importantly – what it feels like in the process. It means that we are all responsible to each other for creating the conditions we want to work in, to live in, and to thrive in.
Does this mean that we expect everyone to feel good all the time? Quite the contrary. It’s a strange twist of human emotions that suppressing and repressing our feelings just lodges them within us, turning them to resentment and blame. We do not expect you to be happy all the time, but we do expect you to have the emotional awareness to know when your energy is impacting you and your teammates and either take the steps to work through what you need to do to shift (Have that convo! Go for that walk!) or ask for help. When a team really starts to come together it can begin to regulate its individual members, which is a function of awareness, care, and maturity. This is what we strive for at Arising.
To put this into action, at Arising our standard is that everyone who works on our core teams has to love their job. This is a high bar, but one we believe is an essential element of the future of work.
Why? Because if you don’t love your job, that’s a problem in two ways:
1) For you – it will totally suck. If you don’t love your job, you don’t love your life. Let’s face it, the reality is most of us spend the majority of our time working. And if you don’t enjoy the majority of your day, you'll inevitably end up hating your life. The last thing we want as leaders is for our legacy to be that people gave up their lives for a paycheck. On the contrary, we want you thriving. If we can’t make Arising the right fit for you, we will support you in finding something that is, and where you are more likely to do your best work. We do not believe that this work is made for everyone, or that this team is made for everyone. We DO, however, believe that you can be doing something that lights you up and brings you joy. Or taking time off for yourself. Or anything other than giving your life to something that isn’t in your highest alignment.
2) For those that work with you – it will also suck. Your mood and mindset will bring them down. Discontent is contagious, and working with people that aren’t happy just drains everyone else. Even if you think you’re hiding it, it will find ways to seep through – either in your own energy or the energy you bring to your projects. Or both! Again, we’ll help you find something that is a better fit for you. With zero hard feelings.
Principle in Action:
No – this isn’t lip service! We take this principle very seriously, and to that end we commit to giving anyone that transitions because they don’t love their job a month’s worth of pay to allow them the flexibility to find their next thing, or to invest in themselves in whatever way they see fit. Change can be scary – but we promise that it will be best for you and for everyone in the long run. As managers we want to know that the people we work with are on their best path – this is one way we ensure we do so.
Of course, this commitment is risky! It holds us to a very high standard. While we don’t expect every part of every job to be fun (quite the opposite: It’s often the hardest parts of the job that grow us and we are grateful for most), we do seek to ensure that the job itself is a great fit with each person inhabiting it, and that the work environment on the whole is healthy, uplifting, and fulfilling. Should we be missing in those areas, this promise helps to keep us accountable to working with our people to co-create environments and roles they can thrive in. Our lives are too short for anything else.
(Note: this extension is an act of faith for those that need it. We ask that those who are transitioning into another role or leaving for other reasons and don’t need it, don’t take advantage of it so that we may preserve our ability to offer it to those who do).
Principle #2: You Gotta Love the Mess
In turnarounds, we are choosing to enter situations where we are guaranteed to find some mess. If we allowed that mess to get under our skin, bog us down, or otherwise deflate us – we’d be as good as dead. We’d lose all energy for what we need to do, at precisely the moment we need to do it.
Instead – what do we do? We insist on working with people who can thrive in the mess – those who aren’t afraid of digging deep and getting their hands dirty. Those who get excited when they identify the next mess, because it means we get the chance to do things better. From that point of view, every problem can be seen as an opportunity for improvement and growth. Those that love the mess want to make everything better – for our products, for our work environment, for our customers, and for our bottom line. In short, we look for people who can see the upside in the downside.
At Arising, we never forget that the mess is precisely what allows us to get the opportunities that we do and create the value that we do. Where other people cower or grumble, we roll up our sleeves. When we find a business that has a great underlying product but has been run messily, we see a diamond in the rough. Like a miner, our job is to chisel through the ugliness. We look for people that are committed to finding opportunity in chaos, who can roll with the punches, and who love the process of making the inefficient efficient.
Principle in Action:
In order to honor all the hard work we do living in the chaos and cleaning up occasional messes, we are creating a way to recognize those who take on the tough challenges and do so with vigor. As part of a larger effort to facilitate recognition throughout the companies, we want to allow everyone on our core teams to be able to recognize someone else for how they handled something challenging – either by staying solid and steady through it, or by diligently improving some part of it. We call these the Mess Master awards, and every teammate is given a certain number of them to distribute over the course of the year to those they see fit. We’ll make space for these in Friday meetings throughout the year. The company will then distribute a gift certificate to that person to honor their contribution.
Principle #3: The Bottom Line is Bottom-Up
At Arising, we believe that we are only maximally successful when everyone in the company takes responsibility for the ultimate results of the business. In mediocre companies, individuals are concerned about their own performance or the performance of their team – often to the detriment of seeing the bigger picture. In Arising companies, we know that exceptional performance only comes when everyone acts like a CEO – seeing the bigger picture of the business and working to optimize in even the smallest of ways.
“The bottom line is bottom up” means that we each are committed to the overall performance of the business. Rather than fighting for resources for our individual departments, we apply measured, ROI-oriented thinking to what our needs actually are and where our resources can stretch the furthest. In an almost old-fashioned way, we treat each dollar as sacred and valuable. As such, we seek out opportunities to save or conserve – especially ones that might not be as obvious to the teams above us. We know that cultures of spending or frugality are contagious, so we each do our part to hold the line for the bottom line. That extra $5/month Google Suite email might seem pointless to conserve, but small wastages across a business snowball and can make the difference between a good business and a bad one.
Similarly, we keep our eyes peeled for opportunities to grow what we take in – looking out for ways we can provide more value or optimize our pricing. In short, we know that exceptional businesses require all team members to be marching in the same direction, pursuing the same goals. We commit to each doing our part to further the team’s objective – proving that the bottom line is best built bottom-up.
Principle in Action:
In order to reflect the contributions that each one of us makes to the bottom line of the businesses, at Arising we’re committing to doing something quite rare. We are committed to creating a large profit sharing pool in each of our majority-owned companies, generally representing 10% of net income. This profit sharing pool – to be distributed to individual team members annually – is designed to reward each team member’s contributions to the bottom line. In awarding portions of profits, our goal isn’t to perfectly capture the exact percentage of results that each team member is responsible for – we believe that to be a fool’s errand. Rather, it is a statement, a demonstration of our devotion to teamship, that each member of the team is expected to both be responsible for and a beneficiary of the bottom line. As a team, we all win and lose together.
Principle #4: 1% Better Every Day
At Arising, we believe that there are two paths to success. The first is through massive, non-linear leaps – the kind you get by discovering a blue-ocean idea that opens up a whole new set of opportunities in your business. We love these, and that’s why we commit to continuous testing to open them up.
The second path, though, is equally important and often underrated. It is the magic that comes through consistent, small improvements compounded over time. They are the results generated from a constant commitment to improvement, even in the most incremental of ways.
Albert Einstein once said, “compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”
At Arising, we take the long view. While we believe in the massive leaps to carry us forward, we know that sustained excellence is only achieved through the incremental steps. Phenomenal companies are the results of the both/and, not the either/or.
“1% Better Every Day” is an encapsulation of our commitment to be constantly questioning, always improving, and on the right side of the compounding interest equation. A 1% better outcome makes a marginal difference on day 1, but by the laws of compounding interest magic results in being 37X better within a year. Small choices are trivial in the short term, yet add up to everything in the long term. Conversely, if you fall on the 1% worse side of the equation – you end up a year later with only 3% of the value you originally had.
By the laws of math, small, continuous gains are the necessary and often greater counterpart to large, non-linear leaps.
Principle in Action:
As a company, we are committed to the growth of our individual team members. We believe that investments in self pay extraordinary dividends, and we want YOU to be able to invest in YOU in the ways you see fit. As such, we are putting aside a pool of funds for each core team member to use each year *specifically for their own personal growth.* We believe that only the individual can know what area of growth is best for them – so this is to use as you see fit. Whether it be a meditation retreat, a hard skills course, a coaching program, or even plant medicine – our only requests are that a) at least half of it is spent on YOUR growth as a person rather than just you as a set of professional skills, and b) that it opens up something to you that you wouldn’t necessarily have done otherwise. Otherwise, the sky's the limit. Arising Ventures is all about exploring what is possible when potential is unlocked – that applies to each of us individually, to all of us collectively, and to the companies we shepherd.
Principle #5: We Not They
Dropbox has a core value of “We Not Me.” The thinking goes that we need to unite people to think for the sake of the team rather than just themselves. While at Arising we think that this is important, we don’t think that “I thinking” is nearly as insidious or dangerous as “They” thinking.
Humans are a tribal species. We evolved to attach our identity to a group. This urge is instinctual, survivalist, but also healthy – as long as it’s channeled toward the right definition of group. When applied at a company level, where we are all part of the same tribe working toward the same goals… it’s monumental. But when it’s applied to small factions, departments, or groups within the tribe, it can be hugely destructive. In our view, toxic cultures are less commonly the result of purely selfish behavior, and more commonly the result of myopically-defined “we’s” that draw lines between certain members of the group and others, pitting them against each other.
The most obvious indicator of this phenomenon in an organization is a preponderance of the term “they”. “They” meaning another department, or the bosses, the board, or even the customers. “They”, when used to delineate teammates from each other, is usually a toxic word. It’s often the first indicator of politics, positioning, in-fighting, and finger-pointing. Where you could have unity, you now have division.
At Arising, we are devoted to the concept of Team. Team means “We, not They”. The more we think in terms of being an organism dedicated to a single purpose, the more fluidly we are able to work together and the more likely we are to succeed. “We” builds trust, “they” breaks it down. We succeed when we see each other as allies not enemies.
Principle in Action:
This principle is a subtle one, felt internally well before its demonstrated externally. More than any other principle, it requires that we each hold each other to it – that we use our voice when we get off track, that we gently point out the instances where someone’s thinking could be more broadly defined. We live this principle every day as we decide whether or not to help someone in another department, whether to extend the benefit of the doubt to another department or management on a decision that we may not entirely agree with, or how we talk about the people around us. Suitably, this is a principle that WE put into action – not anybody else – and certainly not THEY – WE do this one as a team.
On a practical level to support this value, the management team is committed to creating as many avenues for openness and access as we reasonably can given the constraints of time. One practice we are launching as an experiment is a concept we’re calling Open Hours. Open Hours are slots that are blocked on our calendars for conversations with team members from anywhere in the organization that fall outside the normal flow of business – ie, they are not for a normal meeting that we’d otherwise schedule about pressing matters. Instead, they are a channel by which anyone in the organization can schedule a time to speak with the executive team about something you feel stuck with. This could be your career progression, a challenge you are struggling with that you could really use some guidance on, or some feedback or information you’d like to convey that doesn’t have another good channel. Of course, like everything in a startup, this practice may need to evolve over time as we grow. Still, we will work to provide other channels and opportunities to break down walls, interact as humans, and continue to grow – together.
HIGH PERFORMANCE: The Execution Principles
Principle #6: Ruthlessly ROI
At Arising, we work in resource-constrained environments – and we think that’s a great thing. We love the discipline, focus, and creative solution-seeking that constraints force – life is just more fun when you have efficiencies to solve for.
It does mean, however, there is never enough money, time, or energy to do everything that would be “nice to have”. In reality – everything in life involves constraints. The people who succeed are the ones that learn how to get the biggest bang (in growth, profit, customer satisfaction, personal happiness, or otherwise) for the smallest buck (be it dollars, time, emotional energy, or other input).
As Y Combinator puts it:
“Look for a way in which you can accomplish 90% of what you want with only 10% of the work/effort/time. If you search hard for it, there is almost always a 90/10 solution available. Most importantly, a 90% solution to a real customer problem which is available right away, is much better than a 100% solution that takes ages to build.” - Paul Bucheit
This Ruthless ROIing at its finest. Finding the 90/10 in decisions big and small ensures that all your energy goes to the highest-leverage places – allowing you to accomplish orders of magnitude more than an equivalent person working just as hard on things that don’t move the needle as far.
Ruthlessly ROIing is hard for two reasons. The first is because it requires some real first-principle thinking. How can you give them the most value possible, with as little cost? Could an additional unit of effort go to solving a different problem with higher leverage, thus making them happier than solving this one to the highest standards? What is “ideal” for your customers in the short term usually isn’t ideal for you – so you have to think hard to find the solution.
The second reason ROIing is hard is because it runs counter to a few of your core dispositions. If you are going to train yourself to become a better ROI-optimizer, you will need to understand the basic human tendencies you are working against so that you can actively work to overcome them. The most common ones that I see are:
1) The tendency to want to Fix Everyone’s Problems
great ROI optimizers know that they have to let certain problems go unresolved
2) The tendency to conflate Immediacy with Importance.
It is impossible to get great at ROIing if you can’t move beyond the immediacy paradigm
3) The tendency to Resist Saying No.
Working on the most leveraged things means saying no - sometimes uncomfortably - to the less leveraged things.
4) The tendency to want to complete things to perfection.
In the shift from inputs-based thinking to outcomes-based thinking requires you to think critically about how important perfection is to the result of any given task, and adjust accordingly.
While many of these can be hard patterns to shift, they payoff is tremendous. Becoming exceptional at ROI optimization is among the most important things you can do for your career and for our businesses. Due to the nature of the companies we take on at Arising, we only thrive if resource-discipline is embedded deeply into our culture.
Principle #7: OMM: The One Metric that Matters
So we’ve established that ROI thinking is critical in everything we do, but how do you know WHAT returns to optimize for? How do we compare, say, the advantages of increasing our revenue vs decreasing our costs vs improving our customer satisfaction score?
In order to simplify the process of determining your ROI-maximizing behavior, we believe in establishing for each team member a One Metric that Matters. This metric is intended to be the measurement that gets to the core purpose of each person’s job. It’s usually the number that represents the most fundamental challenge of the business, the thing that if we are successful at hitting means we have a growing company.
In the early stages of a company, there may be just one or a couple OMMs that everyone is contributing to in a different way. As a company grows, these OMMs may fractalize, so that you are contributing to a defined sub-OMM that rolls up to the larger company OMM(s). Regardless, your success at moving your OMM defines your success if your job.
OMMs are powerful because they provide extreme clarity. Extreme clarity allows you to very easily see the thing you are aiming for, and to make your ROI calculations to align with it. It provides the north star that your activities can center around.
Your OMM is not permanently fixed – it can change as the business evolves, our strategy evolves, or our understanding shifts. We do, however, like to lock them in for at least a quarter at a time, so that you can have enough time to experiment, try different things, and really move the needle.
As useful as your OMM is in telling you what to do, it's even more important in telling you what NOT to do. It allows you to laser focus, to get crystal clear, and to eliminate the noise. It allows you to hyper-simplify in ways that are invaluable to keeping a team marching along with efficiency and speed. And it gives you very clear feedback on how you and the rest of the team are doing at the things that matter most. When used correctly, your OMM acts like a beacon – guiding you forward and illuminating the path.
Principle in Action:
Every quarter, team members will work with their managers to determine their OMM for the quarter and their goal for how far they want to move it. These should be stretch goals, but not totally unrealistic either. Special circumstances notwithstanding, all of their actions for the quarter should be measured against the standard of their OMM. Each week at weekly review, team members will report out on their OMM and the activities they are doing to achieve it. Other team members are encouraged to ask questions, provide ideas for OMM optimization, and generally support each other’s progress to goal.
(Note: occasionally, certain team members may actually have two OMMs, if they are occupying multiple roles. To the extent possible, however, we aim for maximum clarity and simplicity).
Principle #8: Perfect Tests Make Perfect Outcomes
At Arising, we believe that great companies aren’t just built – they’re uncovered. The process of uncovering – of revealing the potential that lies dormant under the surface – is the process of designing and executing great tests. In the simplest sense, great tests make great companies. When a test is well-designed, there is no such thing as failure: everything is learning. This is why we like to say that Perfect Tests Make Perfect Outcomes.
So what is a perfect test, you ask? A perfect test is defined by the following criteria:
1) The test has high upside
2) The test has clearly defined and capped downside
3) “Success” and “Failure” are measurable and properly pre-defined
4) An end date for the test is set and a review meeting is scheduled before the test begins
5) A decision on how to proceed is made based on measurable outcomes
Let’s dive into each of these a little deeper:
1. The test has high upside potential.
“High upside” means that if the hypothesis of the test is proven to be true, the results for the company would be positive. The degree of upside required in order to proceed with the test, however, is relative to the cost of the test. If the test is easy and cheap to run, there is a lower bar for upside than if a test is costly and expensive to run. In product iteration, for example, it might take 20 minutes to set up an A/B test of different copy on a button in the onboarding flow. The cost is low, so the potential upside doesn’t need to be particularly high for the test to be worthwhile. In another scenario, say if someone needs to be hired and trained to fill a role in order for a test to be carried out, then the potential upside needs to be much higher.
In general, the rule of thumb I like to use is that the potential upside should be at least 5x the costs of running the test. Once it’s at 10x or more, the test becomes a no-brainer to run. Importantly, timeframe matters here: upside is measured on an annualized basis assuming the test succeeds, and downside (cost) is a fixed value based on the investment and timeframe required to get results.
2. The test has clearly defined and capped downside
The number one mistake that people make in designing tests is in not properly capping their downside – ie, the maximum amount of resources that the company will spend in order to get to the learning and conclusion. What begins as a “test” becomes an unquestioned, unexamined default that adds unjustified costs to the business. You’ll see this frequently with contractors being added to do things that on the surface make sense (ie - social media marketing, outbound email campaigns) but in reality, have never been properly examined for ROI.
A properly defined test by default has a limit to how much we are willing to spend (in money and time) to get to a result. Once this is known, the company can make a rational decision whether the potential upside justifies the capped downside. Is it smart to spend $10,000 (capped downside) to know if outbound email marketing can open a new line of referrals to the business? The answer is likely yes. But is it smart to commit to $10,000 a month in perpetuity, until someone decides otherwise? Not until you have data.
Capped downside is about being smart about the defaults and the checkpoints along the way. It’s about ensuring that by default the test will NOT continue, unless the data indicate that it should.
3. Success and Failure are measurable and pre-defined.
Poorly-executed tests also often fail to determine the criteria for success, and thus can easily lead to the default of the test continuing even if it’s not producing substantial value for the company. In a Perfect Test, the success criteria are laid out in advance so there is no tendency to justify continuing a poor outcome down the line. Remember – when running a company a lot of what we are up against is simply inertia. We tend to prefer continuance over change, especially if it involves humans and jobs. Therefore it’s extra careful to be extremely clear on what success looks like before beginning – the temptation to move the goalposts can be too great otherwise.
4. An end date for the test is set and a review meeting is scheduled before the test begins
So now we have well-defined success criteria, a timeline, and a budget. The only thing remaining is to ensure we actually review the data we collect in a structured manner! To ensure doing so, it’s important to set up your review meeting at the time of commencing the test. This makes sure that everyone is held accountable and doesn’t forget. It also more clearly delineates the “start” and “end” date of the test in a way that can be very helpful for getting everyone on board and moving forward.
5. The decision on how to proceed is made based on measurable outcomes
Congratulations! If your test meets the first four criteria, you are almost guaranteed to make a smart, evidence-based decision based on real data rather than intuition, instinct, or inertia. Once the decision is made, we highly encourage a culture of reporting back on test outcomes and decisions – this allows everyone to learn from our learning.
The great thing about the above criteria is that they take the risk out of running an experiment. They ensure that even if the test doesn’t produce results that warrant continuation (the null hypothesis is proven false), the outcome is still a successful one for the company: we took a shot on goal, we learned from it, and we can move on to the next one! A good rule of thumb is that about 1 in 3 tests should succeed, and each of those tests have a 5x or more return on investment, then the tests are inherently growing the business!
Principle in Action:
We strongly encourage tests in our companies and make dedicated space in our weekly review meetings to discuss possible tests and report back on tests in progress and completed. As long as all tests comply with the above criteria and are optimized to the owner’s OMM, we will enthusiastically greenlight the experiment.
Principle #9: Simplicity Scales
“That’s been one of my mantras—focus and simplicity. Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.” - Steve Jobs
In the process of deconstructing and building companies, we’ve learned one lesson many times, and often the hard way: that complexity is the enemy of scale. Complexity, by its very nature, makes everything slower and everything more difficult. It makes changes harder, decisions harder, communication harder, and alignmentment harder.
Simplicity, on the other hand, keeps us nimble and lively. By simplifying our processes, structures, pricing matrices, offerings, and more, we unhook ourselves from our chains and give ourselves the space to fly. Simplicity is the foundation for agility, speed, efficiency, and scale.
As an operating principle, Simplicity Scales means that we always default to looking for the solution that makes things clearer, that makes things more organized, and that makes things easier for anyone on the outside to understand. When applied well, this principle creates more structure in the business, more clarity around what it offers, and more clarity around what it charges for its offerings.
Complexity is tempting, because complexity allows for customized solutions to issues that seem pressing in the moment. Exceptions always make you feel better in the short term, but the long-run cost of adding that complexity to the business is often way greater than the savings of the short-term customization. Companies that insist on simplicity, on the other hand, can go so much farther, so much faster, and with significantly more synergy. Simplicity creates an alchemy that is at the base of most beautiful businesses.
In practice, what this means is that we work not to let our desire for exceptions overrule our need for structure, that we are dedicated to stopping scope creep for complexifying our offerings, and that we put in the extra effort to find the more elegant answers that will scale with the business. We resist the forces of entropy that seek to complexify our companies, and instead seek the simple, pared-down solutions that represent the business at its essence.
Principle in action:
This principle is lived in the daily decisions about how a product is designed, an offering is communicated, a pricing schema is determined, and a value proposition is conceived. It is moreover lived in the responses to the daily temptations to create exceptions or break with order. It refers to both process and product – as simple processes also allow speed and scale. We know we are doing this well when we can all understand – simply and clearly – what we do, how much it costs, and how we go about delivering it.
Principle #10: CODE IT
At the end of the day, business is about 10% vision and 90% execution. Even if we lost all inspiration, if we were phenomenal at executing speedily, reliably, and efficiently – we still win. In highly competitive environments, execution becomes the differentiator. We can move mountains if we know how to reliably and quickly turn ideas into actions and actions into outcomes.
To that end, we aim to make Arising companies bastions of Executional Excellence - which means that when we decide to take an action, that there is absolute alignment around the following things:
Clarity: exactly what they are supposed to do Ownership: exactly who is responsible for delivering Delivery Date: exactly when it should be completed by Enforcement: exactly how we will track it’s status and completion
The above items form the acronym CODE – and together that create a system that will allow us to follow up on every discussed action with a written CODE that ensures executional excellence.
Principles In Action: We aim to apply the CODE IT system to every action item discussed in our company, whether they be 1-on-1s or group meetings. Someone should always be designated the CODE leader, and be responsible for following up during or after each meeting with a message in writing (Slack or email) that outlines each CODE. Those CODES should then be inputted to Asana, Jira, or other accountability system to ensure the Enforcement element is complete.
Doing this reliably and religiously is how we win at execution.
And...there you have it. The first stab at a set of principles designed to carry us into the next decade of expansion while remaining true to our roots. These principles are only as good as our commitment to follow them, so that’s is where our energy will turn next.
We have a lot of work to do to get there, but may we succeed at proving that high performance and world-class results can be achieved with heart & humanity.