What is the recipe of a successful company? How to become an expert in any discipline? People are struggling to get answers to these questions. We have thousands of books full of business advice. We have terabytes of information on any subject. (I believe 80% of information is pretty useless. It contains no real value, just a compilation of other sources.) OK, back to the topic.
I am reading a very interesting book (in fact it is a list of research papers) Nature of Expertise. This research is dedicated to human expertise. What is the difference between an expert and a novice? How can we train novices to become experts faster? The general notion about expertise is that it takes about 10,000 hours (~10 years) to become an expert in a complex discipline like programming, chess etc. Yes, there are exceptions, but you have to spend ~10 years on average to become a great software developer.
I’ve contemplated that for over several weeks and tend to think that this is nearly true. Only now I really feel I can do something significant. I wanted this 5 years ago, but obviously was not ready enough. I lacked some skills such as User Experience and Leadership. I was quite bad as a CEO, but improved a lot over the last years.
An even more interesting question is whether we can apply the same rule to companies. It seems we can. If it takes 10 years for a person to become an expert, it seems it takes about 5 years for a company to find its way. It means that on average a company is struggling for the first 5 years, gains some experience and is then capable of doing something significant. Let’s take some random examples. I’m not picking companies that meet the criteria above, just some companies I know and for which I was able to find history records:
|37 signals||1999||2004 (Basecamp)||5|
|Fog Creek||2000||FogBugz 4 (Dec 2004) – won Jolt award 2005||4|
|Atlassian||2002||2007 (Confluence won Jolt award)||5|
|Rally||2002||2006 (won Jolt award)||4|
|Mint||2005||2007 (best online financing software)||2|
OK, it seems there are 2 groups of companies: some of them are really quick and did something cool right from the start. Some of the companies follow the 5-years rule. Also, it seems that fresh startups are more apt to succeed quicker. Does it mean that the years-to-success number is decreasing? Maybe. It will be compelling to verify this tendency. It can also mean that years-to-failure is decreasing as well.
There is a very interesting data about 100 largest publicly traded software companies that shows how fast they hit $50m revenue.
There are 3 groups of companies: Rocket Ships ($50m in 6 years or less), Hot companies ($50m in 12 years or less) and Slow Burners. On average, 8 years is required to have $50m revenue. I believe it is somewhat consistent with the 5-years milestone. Obviously, it takes time to grow when you have created something cool. Usually it is not an immediate effect.
I think it takes a good deal of time to research many companies, identify their first key milestones and find out typical patterns. There are so many factors like company size, management style, environmental changes etc. Still it will be very cool research to do and I believe it will be possible to evaluate companies based on its results.
Does the “10-5 law” exist? I don’t know. But. If you can’t master something in 10 years, maybe you should focus on something else. If you can’t do something great as a company in 5-6 years, maybe you should change your business goal.