The Exchanges

Q days for your business? Are there any, like, kind of best principles or rules that either EOS defines or that you follow for setting effective ninety-day goals in terms of, is there an owner of these goals? Are they done at the company level? Are they done at the individual, uh, person level? Um, what makes a goal a good goal? Elaborate on what a good ninety-day rock looks like.

A Yeah, so EOS has rules for everything, and I follow, like, 95% of them. Sometimes. So I'm very, I'm very entrepreneurial. So then it's just like, okay, well, we're not gonna do that, but I believe in the way they do. I believe in the way they do their goals. And, um, so the EOS rule is every goal that's written, which they call rocks for no good reason whatsoever, other than to make you feel like you're part of a cult, but the, um, the, they have an acronym to describe them that they're smart goals. They're specific, measurable, achievable, relevant, and time bound. So You know, if you look at goals, it's like, okay, we will create a marketing program that will generate a thousand leads by the end of the year. Okay. Does it pass specific, measurable, achievable, relevant, and time bound? Absolutely. In the end, that's the way EOS defines how you should build these goals. They have other rules around goals as well. I think you hinted about Alex, which is great. A lot of companies will just say like, here's our goal. And then like, nobody's actually responsible for it or two people are responsible for it, which when you apply, you know, you assign a goal to multiple people, then that means nobody's responsible for it. So, like, they will say, like, one person has to take ownership of this particular goal and go for it that way. So, um, I think those are most of the goals. The oth…

AI assessment note: “one person has to take ownership of this particular goal and go for it”

Q And if I, I can't remember off the top of my head, but isn't there a way to basically evaluate if someone is the right person for the right seat? Isn't it like, uh, has it, wants it, uh, there's like basically three things to determine if someone's in the right seat.

A Yeah. So it's a, it's a framework exactly as you're talking about to evaluate fit. Um, it's called GWC or GCW. Um, I'll start backwards. C stands for can do it. Like, can they do the job? Um, so that's pretty straightforward. Like, do you have the skills, the ability, like physical ability, mental ability, all that kind of stuff. Want it. Like, do they want to do the job? Like, is this something they're passionate about? Like, put me in accounting. I will not want to do the job. Sounds terrible. And then gets it is like the other stuff. Like, it's like the cultural fit. Like, do they understand the broader context of why they're doing what they're doing? Um, and so those three things together, you want to have everyone in your organization to have a hundred percent GWC. And sometimes you'll see people that can't do it, but they want it and they get like the culture and they're a great fit and everybody loves them, but they're in the wrong seat, right? Or they're potentially on the wrong bus with you. So those are things where like you can use that framework to go through and evaluate your whole team and see like, okay, do we have the right people on the bus and, and are they in the right seat?

AI assessment note: “it's called GWC... C stands for can do it... Want it... gets it”

Q is understanding problems that exist for people is important. So you're not just building ideas that are in search of a problem, but it sounds like to you, you want to marry that with the things you're really good at, and then there's enough ambition to the idea as well. So what is your process for doing this? And even feel free to use examples of businesses that you've built.

A Yeah. So I think it's exactly right. You can't, you know, Paul Graham's correct. Like you can't build things people don't want. Businesses are built on repeatedly solving people's problems. So, you know, for example, um, earlier this year, we used the effectuation process to go build a, um, a CEO peer network. It's called, uh, it's called Scale Path. Doing very well. Six months old now. Um, and I have a co-founder in it. He runs the business, and I'm like the, sometimes the talent, and then we've brought another talent. So the talent level is increasing. And, you know, the idea of Scale Path was we first looked at the things that we had as strengths for us. And then married that with observations about the world. And so like I built an audience on social media, like I know a lot about, um, how to run businesses, especially small businesses and how to grow them. Like I've done all that. Like I've studied it. I'm a nerd about it. So we had that kind of strength about it. And then we married that with realizing that we kept hearing these things and these hints, and this is one of the things that happens a lot in the effectuation process is you take your strength and you kind of hear these hints that there might be something interesting to go look at. And we would see these hints like post COVID everybody was much more comfortable with online communities, right? Which you and I are…

AI assessment note: “we used the effectuation process to go build a, um, a CEO peer network”

Q Love that. I feel like that's a perfect segue into accountability, which I think you were going to talk about before. Uh, What does that look like within the EOS framework?

A Yeah, so most companies end up having an org chart, which is like, you're the CFO, and you're this, and you're that, and like, that's fine. That's like who reports to who, and you need to know those things, but EOS takes it a bit further, and EOS does this thing called an accountability chart, and the idea is it's a map where every major area of responsibility inside of your company is mapped back to an owner, and that means it's a bit different than an org chart because Your grouping of responsibilities, like as a founder, for example, if you're just starting, you are the CFO, the CEO, head of sales, all that kind of stuff. Well, you're in all those buckets, but as people's jobs come in and they, the responsibility starts to get divvied up, you can see where, you know, those, those things get filled up by other names and those boxes there are there. But ultimately, like what it does is it creates a very powerful situation as you think about your organization, where there is an accountable person who is responsible for every function of that organization. And everybody knows what it is because there's this map called an accountability chart. And, uh, it ends up being much more powerful than having like a classical organization chart.

AI assessment note: “EOS does this thing called an accountability chart, and the idea is it's a map”

Q scaling the business from, let's call it like 20 employees up to, uh, 300 employees. And so, My question for you is, I know you're really passionate about EOS. I want to start by understanding Why is it that you've kind of taken this, this love to EOS when there are a lot of other frameworks out there, like scaling up OKRs? What do you love so much about it?

A Yeah, I think that EOS and well, basically every one of these like entrepreneurial operating systems or business operating systems, they all kind of have the same ideas. And so it's different flavors of the same thing. It's kind of like picking a CRM, like which CRM do you want to pick? And okay, HubSpot has its thing and Salesforce has its thing and other people have their thing. You know, I think there's a level of choosing there, and I tell people actually, if you're going to be trying to run your business better, like, 70% of it is just picking one of the frameworks and using them. Personally, like, you compare it to scaling up, EOS, um, uh, OKRs and other stuff. I don't like OKRs, we can talk about that later, but, um, you know, I think EOS tends to be the one that is, like, the eighty-twenty rule of the stuff that you really need to do business planning, strategy, vision, Meetings, problem solving, and all that stuff really well, and it's probably the one that's the most, uh, easy to self-implement and get up to speed and start using immediately, which I really like, um, and there's a trade-off there. There's stuff that scaling up, for example, does that is bigger and badder than what's in EOS, but a lot of times when you're, like, under 50 people, like, that stuff doesn't really matter much, so that's why I spend a lot of time talking about EOS.

AI assessment note: “EOS tends to be the one that is, like, the eighty-twenty rule”

Q that 80% of businesses taste like chicken, that there's these repeatable processes for setting vision, having meetings, goal setting, et cetera. What does that actually look like with EOS? Like if I was to crack open a book or a one pager that lays out All of kind of like the, the recipe or the, uh, the ingredients and like the step-by-step of implementing EOS, what would I be reading?

A Well, so first full disclaimer, like I make no money from this. Uh, we did a previous episode on effectuation. I've also figured out not how to get paid by that as well. So like, this is all like public service. I just want you to be, you know, as a, as a business operator to, to do better. Um, and really EOS, if you look at it, they have a pie chart that describes that there's six, six parts to it. Uh, there's a planning part, and you know, I'll just list them all real fast, and I'll come back to each other. The planning part, there's meetings, uh, there's a process part, uh, where you define what all your processes are. There's, uh, numbers where you take and define what your KPI, KPIs are going to be. There's an organizational chart part where you determine who's accountable for what, and then there's a meeting pulse where you're, like, deciding, like, where you're having, like, a regular cadence of meetings. And so in practice, what it really looks like is, um, starting with the first thing, which is like the vision part and the strategy is part of the process is it forces you to sit down and put together what's basically a one page business plan. And this is a pretty common idea where you force yourself as a company to define exactly where you're going to be 10 years from now, to the best of your knowledge, where you're going to be three years from now, where you're going …

AI assessment note: “EOS, if you look at it, they have a pie chart that describes that there's six, six parts”

Q No, I, I, I've probably read the book like three times. It feels like you've read it 30 times. Um, I have two more questions before we go. The first is, you said earlier in the conversation you don't like OKRs, and I'm just curious, what, what is it about OKRs that you don't like?

A Uh, I wrote a whole thread about OKRs, um, So two things I didn't really like about OKRs. They, um, they tend to have a lack of clarity, in my opinion, where it's like, like, why do we need, like, objectives, key results, and all this stuff? Like, just like, I would rather just say the goal. Um, the other thing I really dislike about OKRs, and this is my biggest concern with it, is it's very much, um, very much a system that tries to be bottom-up and very kumbaya, And like, great organizations don't work that way. Great organizations set a vision and head in a direction, and everybody aligns to make that happen. And like, yeah, there's some people that take OKRs and then do them better than that, but like every time, like I read John Doerr's book about it, and I was like, this is freaking chaos. Like, this is terrible. Like, why are teams telling the, telling people upwards, like, what their goals are going to be? It's like, no, no, your job as a team is to support the mission of the company. And, ah, and go that way. So, you know, anyway, my two major complaints are it's, it's unnecessarily complex, and then secondarily, like, like, I think the best way for organizations to work is a top-down alignment, like, Like, just do that. And I mean, if you look at it proof in the pudding, like, who are the big success stories you know from OKR? Like, John Doerr's book totally talks abo…

AI assessment note: “So two things I didn't really like about OKRs. They tend to have a lack of clarity”

Q Love it. There's a few other principles that I've seen you talk about and I feel free to just choose any of them. So I've seen affordable loss principle pilot in the plane and the backwards cycle. Uh, talk about another one that you think is really important. I'm sure all of them are, but what, what do you want to start with?

A Yeah, sure. Well, in our story next, like we launched quickly, like I think you've seen with a lot of these businesses, like, you don't need a million dollars or five million dollars to, like, launch the business. Like, yeah, you could spend that if you were stupid, but, like, you choose not to be stupid. Um, and you can take a hundred, a 100,000 or 200,000 dollars and get an MVP out in the market and launch very quickly. And that ties back to this idea of affordable loss, right? And affordable loss basically says, as you build a business, the way you do it under effectuation is, you know, you don't go raise twenty million in VC, right? You raise You, you raise enough, you generate some revenue, you raise, and then you, what happens is you as the owner, you as the entrepreneur, you're able to make incrementally bigger bets into the business as your conviction rises. And why does your conviction rise? It's because you're running all these experiments, you're learning, and you're getting more proof points both for yourself and for the outside market to then increase your conviction. And sometimes it means you go raise money from somebody else, but then sometimes it means, like, you just, like, spend more of your time on it, or you, You invest more in the business or you put more of your own capital into it. And so, you know, that's this idea of affordable loss. Like, I think ever…

AI assessment note: “And that ties back to this idea of affordable loss, right?”

Q an audience, having an audience, content creation, as well as knowing how to effectively scale businesses, especially small businesses. So then, was kind of the way you thought about it, we should do something that helps small businesses scale, and we should use me as distribution for this business? Was like that the thought you had, and then you were like, okay, let's go talk to small business owners now?

A Yeah. And then exactly that. And the first thing we went to, we went and did like problem interviews with small business owners to get inside their head. And like Sam and I went and talked to like, 50 of them. And we'd have like call after call and understand what their problems were and all that stuff. We didn't really talk about what our hypothesized solution was at that point, because we wanted them to actually, we wanted to understand their perspective and be able to empathize with that. And we kept hearing the same things over and over again. Like I'm stuck in my business. I'm not ready for EO or YPO, but I want to be in one someday. I want to grow. So we started to then, based on, okay, we picked the space that we're going to dig into based on what we're really good at, then we went to go do customer discovery at that point, and we did problem interviews with them.

AI assessment note: “Yeah. And then exactly that. And the first thing we went to”

Q Uh, what is, so the next one that you've talked about is the lemonade principle. Can you talk about that?

A Yeah. So the idea there is like, I think the best companies are all these amazing learning machines. Like where you're out running experiments, you're trying to try things and see what works, and then you're like iterating on them very quickly. And what accelerates that process is when you come in with a mindset that mistakes and errors and failures are not a bad thing, they're actually a good thing. And, you know, that's the inverse of the way most people are taught in school, right? What you're taught in school is you make a mistake, okay, your grade is lower. But you make a mistake, you go learn something very quickly, and you iterate, and you grow around that. Uh, the idea in effectuation is the eliminate principle. You see that as a gift. You see things going wrong as a gift. You grew. You learned. You got better. The company got better. The people got better. The customers are happier. Everybody wins. Um, and so that's what we, we, you know, it ties back to that principle of like launch fast, learn, see what's not gonna work. You know, don't, don't pussyfoot around it. Like, go do it. And the eliminate principle came into effect very quickly for us, which is, You know, we skipped a step where we went next to go interview customers and talk about and do solution style interviews and be like, we're going to do this. Like, would you pay for it? And like, some of them signed …

AI assessment note: “You see that as a gift. You see things going wrong as a gift.”