Why Jack Welch Is Wrong About How To Start A Business

In: Advice By: Brian Armstrong

13 Jun 2007

I have to respectfully disagree with Jack and Suzy Welch in their recent Business Week article about what’s required to start a company.

His message essentially boils down to this: you need a good idea.

He goes on to talk about the horrors of starting a business, including disappearing time, money, freedom, etc, and says that it’s all for nothing if you don’t have a good idea.

This advice is wrong, and heres why:

First off, saying “you need a good idea” is about as helpful as saying “you need to work hard”. Duh. It’s banal and impossible to disagree with, yet at the same time not very helpful to someone trying to start their first business. They already knew that was important, but the problem is that…
First time entrepreneurs don’t KNOW what is a good idea and what isn’t. You can read books, talk with mentors, etc…but until you actually start a business, you won’t really know. You have no experience to base your decisions on.
Finally, even the perfect business idea won’t succeed if you have no idea what you’re doing.

If you wanted to become a great race car driver, would you wait around for the perfect race car before getting on the track? Of course not, because even the greatest race car in the world with an inexperienced driver behind the wheel won’t win races (and will probably crash).

So what do you do? You get started with any old race car you can find so you can start practicing going around the track. As you build experience (and maybe even crash the first few cars) you slowly get better and better until one day you AND a good race car are well matched and end up winning.

I’ve never met a single person starting their first business who was sure it would work, and if they listened to Jack Welch they would never even try. But the people I know who were successful tried their idea out even though they weren’t sure, and learned a lot because of it. The key is to fail quickly and inexpensively, and then pick yourself back up to try again – it is the #1 learning tool at your disposal.

Besides, according to Wikipedia, Jack Welch hasn’t done any startups worth mentioning. The man is brilliant as a manager, but I have to disagree with him in this case.

12 Responses

Bruce Donohue

June 16th, 2007 at 8:46 pm

Although I agree with your pointing out Jack Welch’s
limitations on advising people due to his background, I respectfully disagree with your contention about the “idea” and it’s importance. I’ll address Welch’s background/ relevance first, and then I’ll give my explanation for my disagreement.

First – to qualify myself a little( that’s my caveat for not being on Jack’s financial and publicity level) I am a serial entrepreneur of servce businesses that are privately held companies probably below the radar on Wikipedia, nonetheless I have also recently been very involved with the R.H. Smith’s school of business at the University of Maryland and their entrepreneurship program.

Bruce Donohue

June 16th, 2007 at 9:48 pm

This is just my personal opinion from my life experiences of my own& others struggles to get a Co. off the ground… Welch hit the jackpot by coming up thru the Public co. corporate ranks.That said, he also earned a CEO’s pay and you could debate with the best of them whether he deserved it and/or whether it was excessive.Kudos for his writing a book about GE & becoming a public figure himself about the GE way of doing things.I don’t believe it has anything to do with actually being involved in a startup co. as a first time, in the trenches, school of hard knocks entrepreneur. Though his managerial past and his insight in running GE from the top do give him major relevance when it comes to strategy and “The big picture”.Because I believe in Michael Gerber’s E-Myth concept which states that most businesses are started by technicians who decide to go out on their own with what they know. They are not trained in how to run a business and invariably get overwhelmed no matter how good they are at doing what they do. Also one of the things that’s looked at when delivering a business pitch at the school is the co’s potential and viability determined by a thorough feasibility study. Trust me there’s nothing like having a board full of people tearing your plan a new rear because you chose a lifestyle business with no hope of proper funding/ and weren’t diligent in crunching the #’s & testing the concept.Not intent to just manufacture MBA’s for Corp.s, Univ. of MD has a “Dingman” process for taking the guesswork out of running a successful startup. You don’t have to be a born entrepreneur anymore.In this process the idea & corresponding 3 minute elevator pitch are paramount. Nothing starts without that. Do we really need another_____?(you fill in the blank.) Students also visited Warren Buffet-and I still remember he said,” Be careful what you decide to do(type industry/ business to get involved in because it will impact everything you do and possibly limit you if it doesn’t have a large market and future potential.) not in those exact words but it still hit me hard like a ton of bricks when he said it. It’s not enough to have a great ladder, and know how to use it, but you must make damn sure you put it on the right building so to speak. Yes it’s not easy to come up with a new concept and most ideas are just a variation of an existing concept(like the new one about the 25million doller per yearplus co. mentioned in Jak’s podcast that came up with a new way to de-ice planes!) It has to be a sincere simple concept story to explain to investors/ potential hires and new clients that has high potential of delivering returns down the road and that will meet a customer’s need/want now if you’re to engender any kind of momentum for all that hard work that’s sure to come.No you should not dive in expecting failure in the school of hard knocks when you can learn from others the process to do it right in the first place. It helps to learn some of this upfront when contemplating and planning a startup-if you don’t you better get an MBA, consultant, or experienced entrepreneur mentor on your team to help with that plan and it’s execution!!Or you will end up wasting your time your life and your money down a huge sinkhole. If you have a wife and family, a home on the line and want to retain a good credit rating and relationship with said wife and family you better keep the Co. and personal finances seperate and learn to schedule a balanced life and have some fun along the way to go with all that tons of hard work and long hours.Cash flow is paramaount.Most businesses are successful due to finance and marketing strengths but you still need that idea or else you just bought yourself one tough job and are only self -employed… not really a business in my book. If you’re going to do that, I reccomend you goin The International Franchise Association and attend their seminars and tradeshows to investigate a successful franchise to invest in to limit your risk. But Hey -If you have that IDEA then you can hire Francorp, a consulting co. for franchisors and sell franchises yourself as a means for a growth and exit stategy(the IFA can train you to do that as well.)If you got to start fom scratch somewhere and you haven’t re-invented the wheel you could pick a competitor in the field you want to go in(trust me if the business has potential there will definitely be competitors!) and go work for them and learn their operational plans and secrets undercover. Where there’s a will there’s a way…TAKE the learned way and don’t dive in and fly blind.Good luck, Brucew Donohue

Bruce Donohue

June 16th, 2007 at 10:09 pm

Lastly, my brother in law Walt learned this the hardway when he got downsized and started his own mechanical engineering contracting co.Mech Tech, LLC. to keep busy. His health, wealth and relationship were affected and not in a good way. He was very good at what he did and extremely experienced, but as he found out, albeit the hard way, it’s not the same as running a business. He did not fail for lack of trying and I dare say there just wasn’t enough of him to go around. I don’t believe this will entail another startup for him unfortunately. And yes I did offer my services- for free I might add but he was too embarassed to bring me in for me to see what a mess he created. What a shame as I would not haved judged him so harsh. Some people are to afraid to admit they don’t know when in reality they should shut up and listen to those that may be do.(The first thing I told him to do was pick up the phone and call the owner of the former co. he used to work for who ran a successfull multi-million dollar co. fo 30 years and who recently retired to Florida,to pick his brain even if he had to pay him to do so!!!) Screw the school of hard knocks. learn what works from others and then implement it.

Brian Armstrong

June 17th, 2007 at 3:35 pm

Thanks Bruce, interesting story. That book you mentioned, the E-Myth revealed makes a valid point about the mistake technicians make. It’s worth reading, for those who haven’t.

Brian

Jogendra Nath Danturty

July 12th, 2007 at 9:44 pm

Hi Brian

Your Analysis was Good. I reallty liked your courage to express your view point against Jack.

You are correct, there is nothing like a Good Idea, we have to try it out and learn and take it from There.

Cheers
Jogendra Nath

Bruce Donohue

July 13th, 2007 at 1:56 am

Dear Jogendra Nath:

I’m a bit confused. According to my interpretation of Brian Armstrong’s review of Jack Welch’s comments, Brian does not state that”there is nothing like a good idea”, but rather infers that
coming up with the proverbial next idea is not necessary. Also – something to ponder; how much time and money (whether your own, or other people’s, are you willing to spend, or should I dare say gamble on, just testing the waters by diving into business and trying to stay afloat whilst learning the ropes to succeed in bringing in the sales, cash-flow, and sustainability needed to make or break a business? For that matter why bother going to school, or learning the ropes by working for someone, if you’re just going to “wing it”? Very few people are like Bill Gates, and even though he dropped out of college, he was considered
one smart, self-educated cookie, compared to his peers! And even Bill had co-founders and a team of people who helped him jump through the hoops so he wouldn’t have to experiment a whole lot. I believe Mr. Gates was the exception, and not the rule. Fail a few times in business and you’ll literally watch your credit, and ability to raise capital for the next endeavor to be that much harder. Yes, I think that too much time can be wasted on vascilating when it comes to thinking of an idea, or writing the business plan, or just waiting around till you’re not afraid to leave your job first. I believe it’s a myth that an entrepreneur is a flat out risk taker. They are confident people who push things forward, yes, but they take only calculated risks. It’s kind of like real estate investing where you can actually make the profit on the back end come out buy buying right in the first place. You must know how to crunch the numbers first in order to accomplish that, and know about the market as well as the neighborhood itself to do it. I would never advise to dive in and just hope and think that sheer hard work or effort will somehow bail you out. Some people procrastinate and that is a personality defect or habit that must be recognized in the person, by the person himself, and efforts made to break or overcome this if that is the case. An Idea, is only just that, if you do nothing. Do your due diligence first to make sure the numbers look good, then get the heck off the fence and do something with the passion to pull it off over any obstacles that will invariably surface along the way.

Good luck in your future endeavors,
Bruce Donohue

Brian Armstrong

July 13th, 2007 at 11:06 am

Hi Bruce,

I’ve never seen an official study, but just from talking with other entrepreneurs it seems to be a common pattern that they all had several failed businesses before starting one that really worked.

This is part of the reason I like to talk about starting a business for less than $100. No risk to your credit, no capital to raise, etc.

It’s not to say you should try a business with the assumption of failure, but failing is the best way to learn and get successful…so you might as well do it quickly and inexpensively if you’re going to do it.

So I think it’s sort of silly to worry so much, as Jack says, about making sure your business idea is perfect. Try it! That’s the only way you’re really going to know. By telling people they need the perfect business idea, it just scares them to never take action at all.
Brian

Bruce Donohue

July 14th, 2007 at 3:50 am

Hey Brian, your point is well said, and taken. I believe maybe we’re just talking semantics here about the level of business one starts out with. I will agree that if you have no business experience, and are young, or do it on the side if you’re older, it is better to get your feet wet and try something. The experience and contacts you will meet will invariably help you even if you go in a differnt direction later. I see that seems to be your goal with this site – to help that process along. If I can ever assist in any way … let me know. As for me , I will only look at the big picture/ large opportunities that come my way due to my experience. Sorry I’ve been a little long-winded, and I hope I do not come across negatively.
I will try to temper my responses for you in the future. I just want you to know that one of the 12 proverbial “business hats” I wear is that of the Promoter, and as such I can be overly optimistic.
My experience – gained the hard way, has taught me to be a little more down to earth about my business’s projections and interim goals.
Thanks for the response. I hope you maufacture a few new entrepreneurs with your site.
Bruce

Brian Armstrong

July 14th, 2007 at 11:36 pm

Thanks for the support Bruce! Look forward to your your insights in the future.
Brian

John

June 17th, 2008 at 11:41 pm

I don’t like the word “wasted”. Why is it wasted when you learn something?

The downside to business failure, especially for young people, is that you (usually) get a BETTER job working for someone else. And that’s if you get hit in the head by a bat and forgot all your business lessons learned.

In other words, I can’t really see a downside.

Young people, please ignore Welch’s advice in this respect.

Brian Armstrong

June 18th, 2008 at 1:27 am

Welcome to the site John!

jack

September 23rd, 2008 at 12:00 pm

hi sir
how are you and all your family ?
i hope all is Ok..
i need how i can do good business
thanks
jack

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