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Your idea is overrated

I’m not going to rehash the “why I don’t sign NDAs” stuff that I’ve written about in the past (here it is if you want to see it), but being asked a few times this week to sign NDAs has gotten me thinking about the value of ideas.

Actually, this is something I’ve recently been noodling on and my conclusion is that people 1) overvalue their idea on the front end of a project and 2) once something has become successful undervalue the day-to-day tactical execution that made the idea successful.

Ideas are great. But they’re not as valuable as most people make them out to be.

and by correlation,

Execution is almost universally underrated and in hindsight taken for granted as a given once a company has become successful (and rarely given the credit it deserves).

History shows that this is generally the case. The vast majority of companies that we consider to be the lions of the internet had plenty of competitors. In fact many weren’t the first or only ones to come up with the idea that made their company. What separated them from their competitors was their ability to out execute everyone else in a way that took a good idea and made it a great company. Often, in fact, another company was the early market leader only to have their leading position overtaken by an upstart who was hungrier, more nimble, and more focused on the basics of executing a great business.

The examples are legion. In our own portfolio everyone talks about how great Zynga is. And indeed it is. But so was Playdom. A few years ago it wasn’t at all clear who would end up emerging as the market leader. The idea of social gaming didn’t make Zynga. Outstanding execution around that idea did. In the online advertising “yield optimization” market Rubicon Project was the early leader. AdMeld – at least in my opinion – simply out executed them and moved past (as has PubMatic – that market continues to be very competitive). Famously, Overature’s performance based keyword buying market idea was perfected by Google. Back in the day, Microsoft wasn’t the first company to come up with an OS. Or business software. And, of course, Facebook moved past MySpace even after it seemed like MySpace had gained enough momentum to keep it’s market leading position (and before both was Friendster, Tribe, etc.).

My point isn’t that ideas aren’t important. It’s just that execution of those ideas is far more critical. And it’s worth thinking about that as you consider the operations of your own business.

May 5th, 2011     Categories: Uncategorized     Tags: , , , , , ,
  • Braydon Johnson-McCormick

    Edison’s 99% perspiration is the name of the game….nnBy extension, does your thinking apply to how you view the importance of patents? I would think it does…

    • http://www.sethlevine.com sethlevine

      Yes – not a big fan of patents at all. My partner Brad summed up ourrncollective thoughts here:rnhttp://www.feld.com/wp/archives/2006/04/abolish-software-patents.html

      • Ciprian Patrulescu

        @Braydonu00a0 – Edison was not the first person to make a lightbulb.u00a0 Look up Humphrey Davy, Frederick de Moleyns, Joseph Swan.u00a0u00a0 @Seth – Eisler’s saying is an instant classicu00a0 “Iu2019ve always wanted to take a shower after I finished thinking about, discussing, or deciding how to deal with something with regard to a software patent.”

        • http://www.sethlevine.com sethlevine

          Nice!

  • http://twitter.com/nicholasnapp Nicholas Napp

    Could not agree more. nnYou tactfully avoided mentioning the Winkelvoss/Allen/Wozniak examples too. In each case, the company’s value today was almost entirely created _after_ they left the building i.e. success is all about the long term execution. It amazes me that individuals who left a company well before all of the hard work of scaling it still feel entitled to a large portion of the reward.nnIf building a successful company is a ten step process, having the idea amounts to little more than a fraction of step 1…

    • http://www.sethlevine.com sethlevine

      Nick, That was actually an explicit conversation I had on this topicrnlast week. By definition what these guys are getting paid out is farrnmove than the “value” they brought at the idea stage. It’s an examplernthat supports my notion that the idea phase is truly “overvalued”…rnrnseth

      • http://twitter.com/nicholasnapp Nicholas Napp

        Yup!nnNow, all that being said, let me tell you about my idea that is truly unique and worth a fortune… ;-)

        • http://www.sethlevine.com sethlevine

          as you know – any time nick!!!

  • http://twitter.com/TotalTab Nick Reuter

    Hi Seth, nnWhile I certainly agree success depends on execution, that hardly means the idea is overrated. A crappy product that no one wants won’t succeed, even if it’s executed marvelously. nnWhen I first saw this up on twitter, I actually thought this post was going to be about the idea itself being overrated, i.e. not as good as you think it is. I clicked here thinking, what am I not considering about MY idea? I think I’m executing it well, but if the idea sucks… well then there is no business! nnYou need both. The reason this idea v. execution gets brought up so often is that 99% of everyone out there has ideas, and they never execute. The intent is to motivate execution, because an idea alone is like an engine without gasoline, it’s not going anywhere. nnGood post!

    • http://www.sethlevine.com sethlevine

      Nick – Certainly if the idea sucks, well – there’s not really an idearnthere. And almost by definition, even if the idea is a good one, it isrnovervalued by entrepreneurs in the way that you describe below (everyrnentrepreneur lives in Lake Wobegon where all the ideas are abovernaverage; they’re all great drivers too!). Every day I get emails fromrnpassionate entrepreneurs who have an idea they’re excited about that Irnthink just isn’t that exciting – that’s the fun of both VC andrnentrepreneurship (but the stats suggest that most of these businessesrnwon’t, in fact, be successful).rnrnI really started thinking about this concept a few months ago when Irnlistened to an early Facebook investor give a talk about how great thernFacebook idea was. He was completely off base (and didn’t have hisrnhistory right at all). But it’s a common problem and I hear it a lotrnin reference to Zynga (“what a great idea”). It’s not that these ideasrnaren’t good (by definition to build a successful company that have tornhit at least that threshold), it’s that the execution is what madernthem great…

      • Anonymous

        Thanks Seth! u00a0But isn’t it true that an idea can suck and still “be” an idea? Creating a one-person social network is an idea, albeit a horrible one :)nnYes, the ideas are overvalued and are basically value-less without action. I only meant to imply that execution on a bad idea = nothing of value either. Execution on a good idea = a potentially viable business.u00a0nnSo I actually think we are in agreement. I might have been thinking about it incorrectly, because once an idea goes to execution it is technically no longer an idea. I still think a lot of good business (most!) start from an idea and then move to execution. It’s when they stall on that path they wind up being nothing!

        • http://www.sethlevine.com sethlevine

          I agree with what you’re describing. Not all ideas are created equally andrncertainly the idea needs to hit a certain threshold in order for any amountrnof execution expertise to matter. Not to mention the timing of that idea hasrnto be at least in the zone (how many great ideas didn’t work out the firstrntime because they were too early…).

  • http://sco.tt Scott Yates

    I actually find this situation kind of helpful in a selfish way. nnHere’s why:nnIf someone says that they have a great idea, but they don’t want to share it because they are afraid it will get stolen, I nod solemnly and walk away. Inside I’m rejoicing because they’ve given me the perfect reason not to have to stand around and listen to their crappy idea.

    • http://www.sethlevine.com sethlevine

      ok – that’s pretty funny! but 100% true.

  • Dan Munro

    Seth – sorry to hear you’re still seeing NDA’s. Not that you need more ammo about execution vs. idea – but I found John Greathouse’s blog on this to be really definitive. If you haven’t seen/read it – worth looking at – and then forwarding to anyone who even suggests an NDA. Your post is great too – but this gives you an arms-length way to highlight the obvious. John’s post is a really GREAT story – around a globally recognizable brand – Mickey Mouse and how the original idea (Oswald the Lucky Rabbit) was the originating idea that was recaptured by Walt himself – and then how HE and the team executed it vs. owning the original idea (including the original creative team – stolen by Universal). Here’s the link: http://bit.ly/hC3odj – and worth sharing ;-)

    • http://www.sethlevine.com sethlevine

      great find dan – thanks for passing it along!

  • Anonymous

    Has outstanding execution been reduced to “[doing] every horrible thing in the book”? http://techcrunch.com/2009/11/06/zynga-scamville-mark-pinkus-faceboo/ Seems so in the case of Zynga. Scamming users was part of Zyngau2019s business model from the start. Let’s not rewrite history.n

    • http://www.sethlevine.com sethlevine

      please. talk about something you know about. and check your history.rnzynga, like a ton of other companies at the time, ran offerpal offers.rnit was a minor part of their revenue and they stopped when theyrnrealized that it was confusing to users. by your definition (runningrnoffers) almost every large platform company on the web would bernimplicated. btw aarington subsequently backed way off that initialrnarticle – it was written to be sensationalist an draw in gulliblernreaders (which it apparently succeeded in doing in droves)…

  • http://www.rahuljaswa.com Rahul Jaswa

    I don’t think many people undervalue execution. I think people make a rational calculation that the less competitors there are in a market, the more likely they are to execute best among them. Eliminating a potential source of new competition (which, by the way, there are also plenty of examples of) doesn’t seem at all mutually exclusive with believing execution is the most important variable. In fact, you might argue that precluding enhanced competition is an important way of executing. n

    • http://www.sethlevine.com sethlevine

      Rahul – I’m not sure where you’re headed with this (what did you mean by your comment that there’s a valid argument in the opposite direction – meaning that VCs should sign NDAs?). nnEvaluating competition in a market seems pretty rational. This post wasn’t about that.

      • http://www.rahuljaswa.com Rahul Jaswa

        Entrepreneurs ask for NDAs because they’re afraid their ideas will get out and it will introduce new competitors or make their existing competitors stronger. Ideas might be less important than execution, but the winner in a market is he or she who executes best. If there are more, better competitors, it’s hard to be the best executor. n

        • http://www.sethlevine.com sethlevine

          true but i don’t think getting an NDA signed has any effect on thernnumber of competitors in the marketplace.

    • http://www.sethlevine.com sethlevine

      Rahul – I’m not sure where you’re headed with this (what did you mean by your comment that there’s a valid argument in the opposite direction – meaning that VCs should sign NDAs?). nnEvaluating competition in a market seems pretty rational. This post wasn’t about that.

  • Andrew

    u00a0Seth,nnnnThanks for your post. Iu2019m a first time entrepreneur in thentech industry and feel itu2019s important to come to a solid understanding of theninterplay between ideas and execution. I consume a large amount of VC- producednmedia and the takeaway I get from most blogs/videos about this subject is thatnthe execution is much more important than the idea. This has proved to be truenin my own experience however I do have questions about the premise of thenargument.nnnArenu2019t ideas a major part of execution? Isnu2019t a big part ofnexecution developing a strategy which is essentially a collection of ideasnabout producing, marketing, distributing, financing a product or service? Annentrepreneur has his original idea, but donu2019t companies, especially tech companies,nthrive only if they have a constant influx of new ideas. Facebooku2019s firstniteration was essentially Myspace for college students (via college e-mailnaddress). But didnu2019t Facebook really set itself apart when it implemented othernfeatures like photo-tagging and newsfeed that were most importantly greatnideas? Wasnu2019t it a better idea tonfocus on market share rather than ad revenue in the early stages? nnnI donu2019t think this is an academic discussion. I think itu2019s annimportant consideration when forming a team. Just as a team must ensure competencynwhen it comes to sales, product development and finance, it should also have peoplenwho can help make sure the company is never lacking in vision and creativity. Mindsnthat are great at generating ideas are not necessarily ones that are great at findingnpatterns, categorizing information or understanding emotion. u00a0My company doesnu2019t have a Chief Idea Officer,nbut having a variety of intellectual abilities is just and important as havingna variety of technical skills. I find it fascinating that a number of great startupsnhave founders that are neither Ivy league wiz kids nor people with high-levelnbusiness experience. The following ones come to mind: Groupon- whosenfounder/CEO was a music major at Northwestern, Etsy, whose founder/ CEO was anwoodworker and carpenter, and AirBnB- whose founder/CEO was a graphic designer.nYou can only make the case that these people were u201cgreat at executionu201d bynsighting the success of their current companies- which is circular logic. nnnI understand that your point is about value perceptionsnregarding ideas and execution, but I feel like many VCs just take the positionnthat u201cthe execution is more important than ideau201d and leave it at that. I wouldnlove your insight into what exactly is meant by u201cthe ideau201d and what is meant bynu201cthe executionu201d.nnn-Andrewu00a0

    • http://www.sethlevine.com sethlevine

      great comment andrew. to your last point, i actually think VCs overweightrnthe idea, not the execution. but you’re right about part of execution beingrnin part continual innovation (which is also ongoing idea generation),rnalthough i’d still argue that the core execution (keeping the lights on,rnrefining a sales process, etc.) are vastly undervalued (in part becausernthey’re just not as sexy as the lightbulb stuff). thanks for the comment!