Paul Singh (500 Startups) – the 85% Theory

by | Tuesday, May 1st, 2012

Paul Singh, an esteemed partner at 500 startups, has a great blog. He tweets prolifically. We’re sure he’s a good guy (though we’ve never met him). Who doesn’t like someone who boldly declares, “I can rock your business” in his bio? Still….we’re troubled (tossing, turning, up all night taxed) by the following 85% theory proposed on Singh’s provocative website home page:

“85% of every business is exactly the same. At their core, businesses have customers, hire people, create a product or service, pay bills, and collect invoices. It is the remaining 15% that makes each business different and unique.”

Hmm. Is 85% of EVERY business really the same? Just 15% unique? We can’t seem to make Singh’s math work. Let’s start from the false assumption that 100% of all companies are the same….

  • All businesses have customers, yes. But not all customers are the same. Too narrow a niche = fail. Wrong customers = fail. Lack of customer insights = fail. Low customer engagement = fail.
    – Deduct 10% for the variance
  • All companies hire people, yes. But most companies lack best-practice employee selection procedures, an inspirational on-boarding process, a continuing education program, even an Intranet.
    – Deduct 10% for the variance
  • All companies create a product or service, but some “me too” products are simply crappy. Besides, the secret to success is execution not ideation. Brilliant strategies put you on the map; smart execution keeps you there. Sadly, most companies don’t execute well.
    – Deduct 10% for the variance
  • All companies pay bills and collect invoices, sure. But most don’t manage cash flow. And many don’t automate their billing process.
    – Deduct 10% for the variance

Beyond those “basic requirements” — some companies are exceptional. They solve big magnitude problems. They declare world-changing missions. They deliver remarkable customer service. They employ a disciplined, systematic innovation process that allows them to iterate variations quickly. They obsessively embrace design and brand messaging. They put employees and customers in equal first place. 
– How much should we deduct to account for “big time thinkers?” Another 10%?

85% of every business is exactly the same? We don’t buy it. 50% at best (once you discount for disparities). Possibly, probably even less.

So what do you think? Is 85% of every business exactly the same?

2 comments
Kena Yannucci
Kena Yannucci

I do like the way you have framed this problem plus it really does offer me personally some fodder for consideration. All the same, thank you for this outstanding piece.

hiit
hiit

I love your fantastic web site, I was searching for this all over. Best regards, Ron

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