Wednesday, March 19, 2008, 10:28 AM ET|Posted by Will Richmond
Back in the mid-to-late '90s when I was running business development for Continental Cablevision, then the 3rd largest cable operator in the US, I had the opportunity to meet with a lot startups that wanted to partner with us to gain access to our 5 million subscribers. Meeting these startups and hearing their ideas was almost always interesting but all too often our talks were inconclusive.
Why? Because frequently there was at least one or more completely unrealistic assumption in their business plans, which made us skeptical about the company's likeliness to succeed. I often found that otherwise intelligent and analytical executives had somehow convinced themselves of something that just wasn't realistic. I came up with a catchphrase that helped guide our evaluation of proposed deals: our go/no-go decisions would be "constrained by reality."
That principle has stuck with me, and has been reinforced through my own startup experiences, watching CEOs who also understood this principle and those who did not. Being "constrained by reality" especially means that the optimism that all entrepreneurs and startup executives radiate must be tempered by a careful analysis of what's actually happening in the market and what limitations the new product, feature, deal, etc. will meet up against. Not doing so can be a fatal mistake.
I bring this up because, as with early other immature markets, the nascent broadband video space has become a hotbed of entrepreneurial activity. Yet I continue to be exposed to ideas that are not aligned with market realities or key customer priorities. These companies are in for a rocky road ahead.
Conversely, I'm often impressed with CEOs who are no less confident, but do completely grasp the importance of being "constrained by reality." One technology CEO told me recently that his team spends an inordinate amount of time focused on "sequencing" or trying to model their customers' priorities. This informs their product development agenda and helps them stay aligned with recognizable opportunities. Similarly, a content executive told me that his company is very focused on production cost per minute because, having done an analysis of advertising CPMs, sell-out rates and splits, they have a solid grasp of what's required to be profitable. Another content executive acknowledged that while changing behaviors in his large company was critical, it was akin to "turning a barge" - something that needs to be done slowly and with care.
The above examples illustrate the subtle mix of optimism and pragmatism required for success in the broadband video space. I often try to explain that as exciting as broadband video is, it must be looked upon in evolutionary, not revolutionary terms. Feeling the constant pressure of being "constrained by reality" helps instill the kind of discipline that ultimately contributes to success.