They grow revenue first, and then optimize processes as they’re moving. This is not a linear process, like first we are going to become a unicorn, then we’ll have so much money that we’ll start optimizing our core processes. No, these two facets are parallel lines, where the revenue line is slightly ahead of the optimization line. Continuously growing revenue is important; then following the revenue line closely is the line of improvements, standardization — which I think is the most interesting component — and finally, optimization.
Startups have such a glamorous reputation. Companies like Facebook, Instagram, Youtube, Uber, and Airbnb once started as scrappy startups with huge dreams and huge obstacles.
Yet we of course know that most startups don’t end up as success stories. What does a founder or a founding team need to know to create a highly successful startup?
In this series, called “Five Things You Need To Create A Highly Successful Startup” we are talking to experienced and successful founders and business leaders who can share stories from their experience about what it takes to create a highly successful startup.
I had the pleasure of interviewing Bruno Pešec.
Bruno Pešec helps business leaders innovate profitably, leveraging his broad experience from different industries — including defence, manufacturing, education, and financial services.
He is an active member in the global startup community, and has cofounded Norwegian Lean Startup Circle and Founder Institute Norway.
Bruno is co-creator of Playing Lean, an award winning board game for teaching entrepreneurship and innovation.
Thank you so much for joining us in this interview series! Before we dive in, our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
Absolutely. My name is Bruno Pešec, and I help business leaders innovate profitably. I have over a decade of experience succeeding and failing with innovation in different industries like defense, manufacturing, financial services, and education.
All my life, I have been fascinated with systems. From a very young age machines and their operations interested me. On my kindergarten admissions test I drew a robot, explaining its purpose and how it worked. In school, I focused on electrotechnics, robotics and computer science, then on aeronautical engineering in high school after developing an interest of unmanned aerial vehicles. Still, I felt unsatisfied with limiting myself to engineering; something was missing from the big picture.
It wasn’t until taking a course in industrial engineering that I understood. What most interested me was the management of elaborate systems. The study of how we humans interact with the systems that surround us is amazing. I switched my course of studies to industrial management and never looked back. I paid my dues with other companies, learning everything they could teach me, and then struck out on my own.
Now I travel the world to help large businesses improve their innovation efforts and profitability. I solve systems issues in cases where the solution involves multiple participants at all levels of employment, or even entire communities. I also take great pleasure in advising in the startup space. I am happy be your guest, and to share my experience with your readers.
What was the “Aha Moment” that led to the idea for your current company? Can you share that story with us?
Something I noticed while working as an independent expert, helping companies with innovation and strategy, is that many innovation efforts are wasted. Nothing comes from them in the end. That didn’t make sense to me. Innovation is about value creation, and this value must flow both ways. There must be some value for recipients, and there must be some value for those creating and innovating. As I went deeper into that question, I realized that I really ought to be talking about profitable innovation. That is where I started. I began focusing on that in my research, putting it into practice both with my clients and in my network. Ultimately, the idea of profitable innovation made my consulting practice what it is today.
Was there somebody in your life who inspired or helped you to start your journey with your business? Can you share a story with us?
I moved to Norway in early 2016, though not with the goal of being a consultant. It happened rather organically. I was an engineer, so was looking for an engineering job. Two hundred job applications later, the search was going nowhere.
One day, I received a call from an executive at a Swedish financial institution. We talked at length about Lean, continuous improvement, quality, innovation, and strategy. Finally, he asked me, in Norwegian, “Bruno, do you speak Norwegian?” And I responded in Norwegian, “I speak it…a little bit.” He told me, “We’re highly interested in your skills. But we really need someone who speaks the language.”
Most people in Norway speak English fluently, yet still, a fair percentage is not comfortable with it. Their company was about to do a country-wide Lean implementation. In such a large-scale transformation, you do not want to risk losing productivity based on language. And I agreed with him.
Soon after, I shared this story with a Norwegian acquaintance of mine. He told me, “Bruno, it’s easy to start a business in Norway! You just need to register a company and you can start charging for your skills.”
So, on Monday, I registered a company. On Wednesday, I received my paperwork. By the next Monday, I was a consultant, selling my know-how to clients who wanted to work with me, and with whom I wanted to work too.
What do you think makes your company stand out? Can you share a story?
I’ve been getting that question relatively often. Honestly, I never think of myself as a company. I enjoy being an independent expert. That is the core difference for me. Many innovation agencies or consultancies are in the business of commoditizing and standardizing advice. That might be relevant to some, but I don’t thrive on it, or even enjoy working that way.
What’s unique to my approach? Even though I apply many different methodologies, I try not to be a slave to any of them. They are means to reach specific ends. I stay vigilant about maintaining this pragmatic approach.
Quite early in my career, I decided that I would only work with companies and people who are serious about making a difference, about doing work differently, about achieving results, and moving toward the outcomes they desire. When they are serious about that, then we can do whatever is necessary.
How have you used your success to bring goodness to the world?
What was most important for my success and my practice was being part of a community, especially an entrepreneurial community. I was always a part of different startup groups. Now, I make sure to find time for other startup and business founders, to pay it forward for all those who helped me.
I took over Norwegian Lean Startup Circle, which is the biggest community in Norway for innovators, entrepreneurs and Lean Startup practitioners. I also co-founded the Founders Institute Norway, one of the leading early-stage accelerators. When it comes to practicing different methods of innovation, you need a group of people going through something similar. With them, you can discuss not just the methodologies but also the psychological and emotional effects of the work. These things are much easier to discuss that with someone who has been or is going through similar experiences than with someone who only understands on a conceptual level.
I participate in different accelerators and incubators as an advisor or as a judge. For example, in 2020, when so much was in chaos due to the pandemic, I participated in African Innovation Week. I was also a part of Hack the Crisis, basically a series of events looking into how local startups could contribute to the economy and wrestle with the global pandemic. I was happy to contribute my time and expertise.
Additionally, every year, I select one to three non-profits to which I can contribute my expertise to help with their agendas.
You are a successful business leader. Which three character traits do you think were most instrumental to your success? Can you please share a story or example for each?
These three traits contribute to my success and my enjoyment of the work.
- Curiosity. Since I was a kid, I’ve been extremely curious to discover how things work. A mandatory part of that is breaking things apart and then reassembling them. Usually when you reassemble them, you end up with something different, so again, you need to figure out what went wrong and try to reassemble. Once I started paying attention to us humans, our interactions, emotions, how this creation happened, then disassembly and reassembly took on significantly different forms. The concepts moved from something physical and tangible to something contextual at best, and abstract. We must always ask questions. “Why is this so? Why does it have to be that way? What led us to this point? What might happen next?” I believe this curiosity is extremely important, both for my personal satisfaction, but also for challenging the status quo.
- Tenacity. Asking all these questions requires tenacity because questions aren’t always welcome. Answers are sometimes even less welcome. Furthermore, being an independent expert requires specific fortitude and tenacity to move on despite whatever might be happening. Sometimes I might feel that I don’t have enough time, or there’s a lot of pressure to perform something in a specific way, while I might believe that it should be done a different way. I’ve found that my tenacity is essential for moving forward.
- Humility. I might not always sound humble, but I would say that’s just because I sound confident. I trust in myself, in my skills. But humility is critical. Curiosity without humility can easily turn into arrogance. Without humility, sometimes asking questions isn’t really asking questions to learn, but asking questions to get what you want. For example, asking leading questions is nothing but a way of getting what you want. Without humility, it’s very difficult to learn and grow.
Often leaders are asked to share the best advice they received. But let’s reverse the question. Can you share a story about advice you’ve received that you now wish you never followed?
Funny that you should ask! Sometimes bad advice can serve a good purpose. Early in my career as an engineer, I received some questionable advice from a senior colleague that helped me realize my own priorities. Roughly translated, he told me, “Son, don’t try to set the mountain straight.” I didn’t get it at the time. I thought, “What?”
Reflecting on it, I understood what he was trying to tell me. Fresh from the university, I was full of ideas. I wanted to make processes better, and the product better and the service better, and I was just unfiltered in my proposals. His advice was fine, if all I wanted was to avoid pain or judgment, just do the work, take the salary, check in, check out, and go home. But that’s absolutely not what I wanted. I didn’t want to just check in and check out. I wanted to be pushed to the limits, to have my creativity tested and my good work recognized. I wanted to set the mountain straight if that’s what the mountain needed.
Can you tell us a story about the hard times that you faced when you first started your journey?
Because I am a Croatian who made Norway my home office and headquarters, in the beginning, and sometimes even today, I still find there is this issue of being a foreigner. I wouldn’t say that it hindered me extremely, but I can notice it when approaching people, when starting things up. Usually once the ice is broken, things run smoothly, but I think it’s just part of human nature to relate more easily things that are more familiar. Whenever you encounter someone, after visual contact, language is usually the next immediate contact. If you and I share the same language, it’s easier to build rapport.
I’ve also observed that people behave differently in different languages. I speak several languages, but I work almost exclusively in English. I’m working on my Norwegian, getting better all the time, and I notice that when I speak Norwegian, I am much less serious than when I speak English. When I speak Croatian, again, I speak and behave differently. That’s a personal observation and, I believe, something that we all need to be aware of. Building rapport is always important. It’s difficult to move things forward if we don’t see eye to eye.
Where did you get the drive to continue even though things were so hard? What strategies or techniques did you use to help overcome those challenges?
I have this slightly masochistic tendency to enjoy challenges. Simply being challenged by itself is a driver for me.
Additionally, I’ve been practicing martial arts ever since I was six, which means I now have more than 25 years of martial arts practice. I’ve found that discipline applying to many facets of life. In the dojo, you cannot learn how to throw without learning how to fall, or in other words, it is difficult to become the best in something unless you slip up, unless you make mistakes and screw up from time to time.
These are opportunities to reflect. “Okay, I thought that ‘A’ would happen, but ‘B’ actually happened. Can I understand why? Can I understand how? Could I prevent that in the future?” Your opponent has thrown you to the ground. Now you have a countermeasure to try the next time. The loop repeats. What happens then? How can you adjust? And move forward. That’s how I always deal with setbacks. And I have no trouble sleeping at all.
The journey of an entrepreneur is never easy, and is filled with challenges, failures, setbacks, as well as joys, thrills and celebrations. Can you share a few ideas or stories from your experience about how to successfully ride the emotional highs & lows of being a founder”?
There are truly self-sufficient people who derive their drive, passion, and sustenance from within. So, they can generally go forward with that inner motivation alone, for long stretches of time. Then, there are those who need a great deal of external motivation, interaction, and communication, to stoke their drive to continue. It’s important to recognize which of the two you are, and to what extent.
As we have already discussed, communities are very important. Regardless of which category you would put yourself into, sooner or later, finding a community of peers is valuable and powerful motivation. Finding a group where there is trust and mutual respect may be all you need to keep your goals in sight. Just hearing from someone who recognizes your struggle, recognizes your pain, is valuable
I recommend to everyone to look for a group of peers. There are usually organizations, associations, trade unions, and groups along those lines already functioning. But if you cannot find a group, you can always start a small group in your community. There are plenty of materials on that online, but you don’t need to purchase a set of blueprints. You need only to bring a group of peers into a room and create safe space for the connection to happen.
Let’s imagine that a young founder comes to you and asks your advice about whether venture capital or bootstrapping is best for them? What would you advise them? Can you kindly share a few things a founder should look at to determine if fundraising or bootstrapping is the right choice?
In my opinion, this is a simple question. If you have no traction, you have no reason to take venture capital. The role of venture capital is to speed up your scaling and growth. If you haven’t reached product market fit with your product service offering, you don’t need venture capital. You will only get into more trouble if you take venture capital too early. This is an easy heuristic to check. Do you have product market fit? If yes, would you benefit from additional capital to grow? Yes? Okay, then start looking into venture capital. If you get two “no’s,” in answer to those questions, avoid venture capital.
Ok super. Here is the main question of our interview. Many startups are not successful, and some are very successful. From your experience or perspective, what are the main factors that distinguish successful startups from unsuccessful ones? What are your “Five Things You Need To Create A Highly Successful Startup”? If you can, please share a story or an example for each.
These are the five things I have observed as characteristics of highly successful startups:
- They have relentless focus on their value flow. They usually start with the intended customer in mind, and really try to understand. What does value mean to this customer? What do they respect? Respond to? What will they spend money on? What will they invest in? What is annoying them, what frustrates them? A successful startup has an intuitive understanding of what value is for the customer. Then, they follow that flow of value to themselves. Even if you identify an opportunity that the customer is willing to pay for, if you cannot find an effective way to profit from it, it’s very difficult to build a successful startup, and impossible to build a unicorn. The successful startup asks itself: how will we set up the revenue structure? What’s our pricing model? How are we going to charge? Is our service a subscription? Will we have recurring revenue? Will we have transactional fees, or setup fees? After those many considerations, they continue to follow that flow of value into operations. How is the cost set up? How is the cost structured? Every part of the value flow is considered. That is critical for success.
- They grow revenue first, and then optimize processes as they’re moving. This is not a linear process, like first we are going to become a unicorn, then we’ll have so much money that we’ll start optimizing our core processes. No, these two facets are parallel lines, where the revenue line is slightly ahead of the optimization line. Continuously growing revenue is important; then following the revenue line closely is the line of improvements, standardization — which I think is the most interesting component — and finally, optimization. So as things are going, you standardize what works, and inspect, inquire, question things that aren’t working as well and find better ways to do it.
- They understand the key drivers of their growth. The last question you asked me was, “When should you take venture capital?” Venture capital is perfectly fine after you have identified your levers of growth. You take then take that capital to really crank those levers up, and really drive their growth. We usually talk about three engines of growth: viral, sticky, and paid engines of growth. These are each a little bit different. A viral engine of growth is based off word-of-mouth or referrals. It is when you bring one customer, and they bring more than one customer together with them during their lifetime. A sticky engine of growth is when you have high retention. People that come stick with you. The average customer lifetime value is increased because they spend more money on your products and services while they are with you. A paid engine of growth usually refers to using advertisements and other different channels that you pay for, for people to come and use, buy, or procure whatever your product or service might be. A successful startup company understands the key levers of growth for their business and use them to their full potential.
- Their founders can cope with uncertainty. The startup’s founder must have the capability to really search for evidence to focus on value, grow revenue, standardize, and understand the engines of growth. There is continuous experimenting, researching, evaluating, and learning. However, there will always be some uncertainty. It’s impossible to reduce uncertainty to zero in any innovative or entrepreneurial undertaking. That means there is a point where they must decide, even though they don’t have sufficient evidence for perfect decision. At some point the founder must say, “Okay, this is all the evidence that we have. Now we are making a leap of faith.” Going to extremes either way doesn’t work. If the founders always require more evidence, they become stuck in analysis paralysis. But, if they are always ready to dive in headfirst without any analysis, they’re taking outrageous leaps of faith, then eventually they will jump into a hole that is too deep for the startup to climb out.
- The founders are aware that they may not be the best people for management. As a company grows, it may become true that the founder is not always the best CEO. Right? The co-founder is not always the best COO or CFO, or fill-in-the-blank. At this point, the founders must deliberately work out what will their role be in the future of this business. There are many options available. There are many different executive functions, so it’s possible to become chief product officer, chief strategy officer, or chief operations officer. They might move to the Board. They have the option to simply exit and start another thing if that is where their real passion lies. Truly successful startups understand that their founders may eventually need to mature and evolve in a different role.
What are the most common mistakes you have seen CEOs & founders make when they start a business? What can be done to avoid those errors?
Recently I published a short, concise ebook called 9 Big Don’ts of Corporate Innovation. In it, I address nine specific mistakes. Your readers can find the ebook for free on my website, www.pesec.no.
Now, however, I will focus on the error of starting a business around a skill that you feel you’re quite gifted with. For example, an excellent home cook decides to start a restaurant, or perhaps a catering business. Unfortunately, home cooking doesn’t have a lot to do with industrial cooking; the scale and organization are completely different.
Or, maybe in your company, you are the expert at a certain activity. You think, “Maybe I could start a consulting company.” Yet starting an agency or a consultancy isn’t just performing a specific activity. It involves many different activities, including selling yourself and your services, which isn’t necessarily a core skill that you might have.
What I suggest instead is to pick some sort of a problem or issue that you are passionate about, and say, “I really want to do something that’s related to this.” Or pick a specific customer segment. For example, “I’m passionate about assisting retirees that feel alone and isolated.” That’s a good start. Build from there. What could you offer?
These two starting points are much more valuable and easier to work with, and they allow you more flexibility if you learn that what you plan to offer isn’t going to work. Because even if one idea falters, you still have a North Star to guide you: these customers that you want to serve, and the problems you want to solve for them. You can find another solution. This is far better than spending years of time and thousands of dollars to learn that you cannot run a successful business based on one skill.
Startup founders often work extremely long hours and it’s easy to burn the candle at both ends. What would you recommend to founders about how to best take care of their physical and mental wellness when starting a company?
I read an interesting report that during the pandemic, on average, people worked three hours longer every single day! To me, that is simply crazy. Especially for startup founders, it is very easy to get pulled into overworking, because they usually start businesses that they’re very passionate about. But twelve-hour workdays are a bad idea.
First, our brain isn’t made for such a grueling pace. If you’re always in execution, implement, delivery, over and over, you’re not giving yourself enough time to stop, think, reflect, decide, learn, and change direction if necessary.
Second, limiting your hours per week (i.e., a 40-hour work week) creates a framing device that forces you to prioritize. You can do the things that you need to do within those hours. You must have a strong sense and a clear definition of the outcomes you want to achieve. Then, it’s easy to be energized and work and deliver these specific objectives.
Startup founders should perceive their time outside work hours as sacred. This isn’t selfishness. I am quite a workaholic. I like working. But I told myself that I must maintain a reasonable schedule. For example, I stopped working weekends, even though I like working weekends. I told myself I needed time to relax, to spend time with my partner, to enjoy hobbies. The brain must recharge to be efficient.
I stay flexible, too. If I work longer than usual one day longer, then I’ll just work less on another day, and I keep track of my energy level. If you work yourself constantly, what was the point of starting your own business? Then you really need to create a unicorn that was worth all your sacrifice. And unfortunately, entrepreneurial unicorns are extremely rare.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
We discussed the importance of communities, so I’d be happy if someone reading this interview would feel that he or she would like to join such a community. In fact, I encourage anybody who reads this interview and finds the ideas here resonating to just reach out to me. We might start a discussion. We might start a community where entrepreneurs, business founders and other ambitious people could simply be there, to hear each other out and offer a sympathetic ear, to act as a sounding board, and offer back their own experience. Community is a simple but elegant solution to so many of the issues that confront innovators.
We are blessed that some very prominent names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US with whom you would love to have a private breakfast or lunch, and why? He or she might just see this if we tag them.
I think it would be cool to share lunch with Arnold Schwarzenegger. Beyond his being a world-famous actor, politician, philanthropist, and entrepreneur, he demonstrates the traits I admire and emulate: tenacity, curiosity, and even a special form of humility. I’d be thrilled to have lunch with Mr. Schwarzenegger! Although, if he surprised me with any of his great one-liners while we were eating, I might choke myself laughing.
How can our readers further follow your work online?
The easiest way is to visit my website, www.pesec.no, where I often write on topics like innovation, strategy, and lean experimentation. I share several resources, including my free ebook, 9 Big Don’ts of Corporate Innovation. If you have trouble finding anything, you can always reach out directly to me.
This was very inspiring. Thank you so much for the time you spent with this. We wish you continued success and good health!
Thank you very much for great questions and a great conversation. I hope that your readers find this valuable. If I can leave you with one final thought, the most important thing is to act, whether it’s reaching out to a community, applying some of my advice about startups, or practicing new traits. If you just read this, nod, and save it in a file somewhere, you might feel good for a day. But if you don’t do something different tomorrow, results will probably not follow. All the best!