The Top 1% Do These Things Different Than You | Ep 872
In this episode of The Game w/ Alex Hormozi podcast, Hormozi shares his insights into how entrepreneurs often misunderstand the true nature of their business and the core problems limiting growth. He stresses the importance of identifying the "big, hairy problem" holding the business back and prioritizing scalable solutions rather than starting new ventures.
Citing examples from his own experience, Hormozi emphasizes that overcoming challenges may require developing new skills and persevering through iterative solutions. He encourages entrepreneurs to distinguish solvable problems from incorrect assumptions, noting that the value they create equals the pain they endure in tackling the "good hard" aspects that unlock unrealized potential.
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Entrepreneurs Often Misunderstand Their Business
According to Alex Hormozi, entrepreneurs frequently misidentify the true nature of their business. Hormozi initially thought he was in scientific or product businesses like fitness and supplements, but later realized he was actually in sales/marketing and branding businesses. Conversely, he assumed he was in marketing for software, but the product itself was paramount.
Identify the "Big, Hairy Problem" Holding Business Back
Hormozi emphasizes identifying the core issue limiting growth and tackling it head-on. In mergers and acquisitions for plumbing companies, the bottleneck was a lack of skilled plumbers. Overcoming such challenges often requires developing new skillsets. Hormozi states that solving the "big hairy problem" could dramatically boost profits.
Identify the "Big Problem" Holding the Business Back
The "big problem" may differ from what entrepreneurs initially perceive. As businesses grow, former constraints become obsolete. Hormozi advises studying successful industry strategies to uncover the real limitation. He experienced lacking expertise himself when running a software company.
Confronting the "big, hairy problem" demands persistence through iterative solutions. Hormozi views challenges as opportunities to learn and refine strategies. He believes the value entrepreneurs create equals the pain they endure.
Prioritize Solving Hard Problems Over Starting New Businesses
Hormozi urges entrepreneurs to prioritize scalable solutions over pivoting to new businesses. He argues businesses can reach $100M valuations if key challenges are solved, driven by belief in solutions rather than wealth.
Entrepreneurs must distinguish "good hard" solvable problems from incorrect assumptions ("bad hard"). Progress requires persevering through difficulties and leveraging frustration tolerance. Hormozi encourages tackling the "good hard" aspects that unlock unrealized value.
1-Page Summary
Additional Materials
Counterarguments
- While identifying the core issue is important, it's also critical to recognize that businesses may face multiple limiting factors simultaneously, and focusing on just one might not be sufficient.
- The concept of a "big, hairy problem" may oversimplify complex business challenges that require a multifaceted approach rather than a single-point solution.
- The idea that the "big problem" changes as businesses grow might not account for persistent systemic issues that continue to affect businesses regardless of their size.
- Persistence and iterative solutions are important, but so is knowing when to pivot or abandon an ineffective strategy to avoid sunk cost fallacy.
- The emphasis on reaching $100M valuations may not align with the goals or definitions of success for all entrepreneurs, particularly those focused on social impact or work-life balance.
- The distinction between "good hard" and "bad hard" problems is subjective and may vary depending on an entrepreneur's skills, resources, and market conditions.
- Persevering through difficulties is important, but entrepreneurs also need to maintain mental health and avoid burnout, which might require stepping back or seeking help at times.
- The focus on solving hard problems might undervalue the importance of seizing new opportunities that could lead to business growth or diversification.
- The advice provided may not be universally applicable across different industries, business models, or cultural contexts, where the nature of challenges and solutions may differ significantly.
Actionables
- You can map your business model to identify blind spots by drawing out each component of your business on paper and questioning the value and function of each part. For example, if you run a small bakery, sketch out the supply chain, customer acquisition, product development, and sales process. Then, ask yourself if there are inefficiencies or assumptions you've made about each area that could be the "big, hairy problem" limiting growth.
- Develop a "challenge journal" to differentiate between "good hard" and "bad hard" problems by documenting daily business challenges and labeling them as either growth opportunities or resource drains. Over time, you'll notice patterns that help you prioritize which problems to tackle. For instance, if you find that customer service issues are a recurring "bad hard" problem, it might be time to revamp your approach to customer interactions.
- Create a "persistence tracker" to monitor your progress through difficulties by setting weekly goals related to your business's key challenges and recording your efforts to meet them. This could involve tracking the number of iterations you make on a product design or the hours spent researching a persistent operational issue. Celebrate small victories to maintain motivation and document how each step brings you closer to solving the core issue.
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Entrepreneurs Often Misunderstand Their Business
Entrepreneurs frequently have misconceptions about what business they're actually in, a phenomenon discussed by Alex Hormozi, who draws from his own experiences.
Business Owners Often Misidentify Their Actual Business
Hormozi’s personal journey showcases how entrepreneurs may think they know their business, but end up discovering a different reality.
Entrepreneurs Think They're in "Scientific/Product," but They're in "Sales/Marketing"
Hormozi, sharing his history with fitness businesses, initially thought his focus would be on the scientific aspects of fitness, like workout methodologies. However, he soon realized that the more pressing need was getting people into the gym. This revelation signified that he was truly in the sales and marketing sector, rather than just the scientific or product business.
Entrepreneurs: Are You in the "Brand" or "Product" Business?
He also discusses the supplements business, where he partnered with an expert, Dr. Cash, who focused on creating the best product with superior ingredients. Hormozi found out that success in this field stems more from robust branding and distribution channels than just scientific efficacy. Since the effects of supplements are generally marginal and most suppliers have access to similar ingredients, branding becomes the key differentiator for customers.
Entrepreneurs Think They're in "Marketing," but They're Actually in "Product" Business
In the software industry, Hormozi had an assumption that he was playing the marketing game. Yet the reality was that the product itself was paramount, as software must comprehensively solve a problem, or customers will quickly abandon it if it introduces more issues.
Entrepreneurs Identify the "Big, Hairy Problem" Holding Business Back
Through various business ventures, Hormozi has learned to spot the limiting factors hindering growth and profitability.
Successful Entrepreneurs Avoid Solving Inherent Business Model Probl ...
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Entrepreneurs Often Misunderstand Their Business
Additional Materials
Counterarguments
- While entrepreneurs may often misunderstand their business, it's also true that many entrepreneurs have a clear and accurate understanding of their industry and their company's role within it.
- Misidentification of the actual business could be a phase in the entrepreneurial journey, and some entrepreneurs may correctly identify their business from the outset.
- The dichotomy between "scientific/product" and "sales/marketing" might be oversimplified, as successful businesses often require a strong synergy between product development and marketing efforts.
- The importance of branding versus product quality can vary greatly depending on the industry, target market, and competitive landscape, suggesting that neither can be universally prioritized over the other.
- In the software industry, while the product is indeed crucial, marketing and customer service can also play significant roles in a company's success, especially in crowded markets.
- Identifying the "big, hairy problem" is important, but focusing on smaller, more manageable problems ...
Actionables
- You can clarify your business identity by writing down what you believe your business does, then asking five non-industry friends to explain what they think your business does based on your marketing materials. This exercise will highlight discrepancies between your perception and the public's understanding, allowing you to adjust your branding and messaging accordingly.
- Map out your business challenges by creating a "problem tree" where you write down the main issue you're facing and branch out with all contributing factors. By visually laying out the problem and its roots, you can identify the "big, hairy problem" and focus your efforts on addressing the core issue rather than the symptoms.
- Conduct a role-reversal exercise where you spend a day fo ...
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Identify the "Big Problem" Holding the Business Back
Alex Hormozi emphasizes that identifying and solving the "big problem" in a business is crucial for progress, but it's often a challenging task for entrepreneurs who are dealing with evolving business landscapes.
The "Big Problem" Often Differs From the Entrepreneur’s Initial Thought
Entrepreneurs may be misguided in focusing on problems that seem crucial initially, such as churn in a gym, Hormozi notes. These problems could be inherent to the business model and related to factors outside of the entrepreneur's control, like human behavior. The real constraint of a business might be hidden behind misguided assumptions.
Entrepreneurs May Solve Outdated Problems as Business Grows
Hormozi explains that issues which formerly propelled a business to one milestone may not be as relevant when trying to reach the next. As businesses grow, the focus may shift from customer churn to realizing that in sectors like dry cleaning, the true issues could relate to logistics and machinery. He portrays the problem as dynamic, with entrepreneurs needing to constantly reassess what truly hinders the business.
Entrepreneurs Should Study Successful Industry Strategies to Find the True Constraint
Hormozi suggests that entrepreneurs may mistake the key to making more money, such as content creation, without recognizing that the monetization strategy and business model are the actual limitations. They also must realize the necessity of selling to new customers and engineering consumption for repeat business.
Solving the Problem Requires New Skills and Capabilities
Overcoming the foundational issues within a business may require the development of new skills and capabilities that entrepreneurs might not currently possess.
Entrepreneurs Often Lack Expertise to Solve Core Business Issues
Hormozi personally experienced a lack of expertise when running a software company; he did not know how to write code, design, or improve UX, which were pivotal for his product. His monetization strategy was also rated poorly, indicating that his expertise did not initially extend to all necessary areas of his business.
Overcoming the "Big, Hairy Problem" Demands Persistence and Iterative Solutions
Addressing the "big hairy problem" requires entrepreneurs to evaluate which problem they feel more equipped to handle. Hormozi acknowledges that issues ...
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Identify the "Big Problem" Holding the Business Back
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Clarifications
- The "big problem" in a business refers to the primary obstacle or constraint that significantly hinders the company's progress and growth. It may not be immediately obvious and can differ from what entrepreneurs initially perceive as crucial issues. Identifying and solving this core challenge is essential for overcoming barriers to success and achieving business goals. Entrepreneurs must constantly reassess and adapt to address this fundamental problem as their business evolves.
- In business, entrepreneurs may focus on surface-level issues that seem critical initially, like customer churn, but these problems could stem from deeper, underlying factors that are not immediately apparent. Misguided assumptions can lead entrepreneurs to address symptoms rather than the root cause of a business constraint, potentially hindering progress. It's essential for entrepreneurs to dig deeper beyond the obvious challenges to uncover the true constraints that may be holding back their business growth. By challenging assumptions and exploring beyond the surface, entrepreneurs can identify and address the fundamental issues that are key to unlocking business success.
- Customer churn, often referred to simply as "churn," is a crucial metric in business that measures the rate at which customers stop doing business with a company over a specific period. It is typically expressed as a percentage and is used to assess customer retention and loyalty. High churn rates can indicate issues with customer satisfaction, service quality, or competitive factors, highlighting areas that a business may need to address to improve long-term success. Reducing churn is a key focus for businesses aiming to maintain a stable customer base and sustain growth over time.
- A monetization strategy is a plan that outlines how a business intends to generate revenue from its products or services. It involves determining pricing models, revenue streams, and tactics to maximize profitability. Understanding and optimizing the monetization strategy is crucial for sustainable business growth and success. It helps ensure that the business can effectively convert its offerings into revenue to support operations and expansion.
- The term "big, hairy problem" is a metaphor used to describe a significant and complex challenge or obstacle that a business or entrepreneur faces. It signifies a problem that is not only subst ...
Counterarguments
- While identifying and solving the "big problem" is important, it's also crucial to manage smaller, ongoing issues that can cumulatively impact business performance.
- Entrepreneurs may sometimes correctly identify the true constraints of their business, and the issue may lie in the execution of solutions rather than in the identification of problems.
- Assumptions are not always misguided; some are based on valid data and experience, and can lead to effective problem-solving if properly tested and validated.
- Past issues can sometimes resurface or remain relevant, and it's important not to dismiss historical data and lessons that can inform current strategies.
- Studying successful industry strategies is beneficial, but it's also important to innovate and not just emulate, as unique value propositions can differentiate a business in a crowded market.
- New skills and capabilities are valuable, but leveraging existing strengths and finding strategic partnerships can also be effective ways to overcome business challenges.
- Expertise in core business areas is important, but so is the ability to delegate and build a team with complementary skills to fill knowledge gaps.
- Persistence and iterative solutions are important, but knowing when to pivot or abandon a failing strategy is also a critical skill for entrepreneurs.
- While confronting uncertainties and challenges is part of entrepreneurship, fostering a healthy work-life balance and managing stress are e ...
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Prioritize Solving Hard Problems Over Starting New Businesses
Entrepreneurs are often faced with the temptation to start new businesses instead of tackling the major issues that can unlock significant value in their existing enterprises. Alex Hormozi expresses this viewpoint, urging business owners to focus on scalable solutions and confront formidable challenges head-on.
Entrepreneurs Often Doubt Business Scalability
Businesses Can Hit $100M In Value if Entrepreneurs Confront Key Challenges
Hormozi discusses a common belief among entrepreneurs that their business is not scalable, citing advanced technologies and mechanisms such as franchising that illustrate scalability is possible with the right approach. He implies that entrepreneurs may doubt their business scalability, for instance, when considering how to scale a dry cleaning business. He points out that any issues with scaling within traditional businesses are likely due to the entrepreneur’s approach rather than market constraints.
Hormozi argues that entrepreneurs can achieve milestones, such as a $100M value, if they address and solve the crucial challenges confronting their business. He believes there's a version of every business that can hit that mark, depending on the entrepreneur's ability to adapt and evolve their enterprise.
Successful Entrepreneurs Are "Missionaries, Not Mercenaries" - Driven by Solutions, Not Wealth
To achieve significant wealth through entrepreneurship, Hormozi urges entrepreneurs to be driven by their belief in the solution they offer as opposed to merely seeking wealth. This mindset, likened to being 'missionaries' rather than 'mercenaries', is crucial for enduring through the difficult times and complex challenges that come with scaling a business.
Solving the Problem Requires Persistence, Not Just Pivoting To a New Business
Entrepreneurs Must Distinguish "Good Hard" Solvable Problems From "Bad Hard" Problems With False Assumptions
Entrepreneurs need to differentiate “good hard” problems, which are solvable with the right approach, from “bad hard” problems based on false assumptions. Hormozi highlights that while scaling a business may present many challenges, it's essential to tackle these issues rather than pivot to a different business at the first sign of difficulty.
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Prioritize Solving Hard Problems Over Starting New Businesses
Additional Materials
Clarifications
- The concept of "good hard" and "bad hard" problems in entrepreneurship distinguishes solvable challenges (good hard) from those based on incorrect assumptions (bad hard). "Good hard" problems can be overcome with the right approach and persistence, leading to growth and value creation. In contrast, "bad hard" problems stem from flawed foundational assumptions and may require a pivot to address effectively. Understanding this distinction helps entrepreneurs prioritize problem-solving efforts and avoid unnecessary business changes.
- Entrepreneurs may doubt their business's ability to grow significantly, often due to challenges they face in scaling their operations. This doubt can hinder their progress towards achieving substant ...
Counterarguments
- While focusing on hard problems is important, diversification through starting new businesses can spread risk and open up new revenue streams.
- Achieving a $100M value is not the only measure of success; some businesses thrive and fulfill their mission without reaching such a financial milestone.
- The belief in one's solution is important, but the pursuit of wealth can also be a legitimate motivator for entrepreneurs, driving innovation and economic growth.
- Pivoting to a new business can sometimes be the most strategic decision, especially when the market demand shifts or when the current business model is no longer viable.
- Not all "good hard" problems are worth solving if the return on investment in terms of time, resources, and energy is too low compared to other opportunities.
- Persistence is valuable, but there is also merit in recognizing when to cut losses on a project that is unlikely to succeed despite continued efforts.
- Entrepreneurs must balance the focus on progress with the need for work-life balance and personal well-being, which can sometimes be compromised by an exc ...
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