Mindmap: McKnight Score Card: A Tool for Resilient First Two Years
Whenever I come up with a new business idea, I use McKnight’s Score Card to tweak it. It is an amazing tool to identify potential pitfalls and bottle necks right at the gate, and morph the original idea into something much more water tight. It gives me an amazingly resilient first two years, which make a huge difference.
I make it a point to regularly pick up some random books to read. It started as a feeding exercise for my neophilic indulgences. Over time, I realized that the most distant (and hence, most irrelevant) a book is to my then life, the biggest life-changing impact it had! Digital books stores had taken away that joy of serendipity. Sadly, my books are beginning to look like one another now.
Sometimes, you don’t need life changing book as much as a book that becomes a life companion. Like Intelligent Investor is to Warren Buffet. Something that you keep going back time and time again, throughout your life. To me, Will it Fly, written my one Thomas McKnight is such book. It is a collection of 44 questions you ask about your business idea, evaluate it honestly, score yourself from 1 to 10 (10 being the best), tweak the business idea in case the score is low, and repeat the whole process again.
The idea is to find the weaknesses in your business idea before it blows up in the market place, or worse, your competitor finds them for you. Vulnerabilities like these are the reason why startups are fraught with danger. When you go to a war where the chances of coming back alive is less than one in ten, like it is the case with startups, you need every piece of weaponry you can lay your hands on.
When it comes to de-risking startup ideas, McKnight Score Card is the big bazooka
44 Questions, 8 Sections, 1 Score Card
This is McKnight’s Score Card (well, something I made on Excel, based on inputs from the book):
“S” in the score card above is the Score. You score yourself between 1 and 10 for each question, 1 being the lowest and 10 being the highest. “W” is the weightage, suggested by the book’s author. “W.S” is Score multiplied by Weightage. If you mark yourself 10 on everything, you will get a total score of 860 (and a permanent seat in some lunatic asylum).
This score card is not about getting the highest total score. Some of the points may not be relevant to you business that you don’t care if you get a low score against it. The score card is also not about gloating over your strengths. The score card is a risk reduction tool.
It is a giant opportunity for a stupidly-optimistic entrepreneur (which most of us are) to understand, and connect with, risks in a visceral way.
McKnight score card shows you your weaknesses in just one glance. It helps you to realize that you are weak in a critical area before you go to the market. It helps you to effectively deal with most of the curve balls an investor is going to throw at you.
I’ll give you a brief introduction into each of these filters, so you can decide if doing this exercise is worth it for you:
Section 1: Essentials
- Compelling, unserved need: Are you selling something that people will crawl over broken glass to get?
- E.g. Immortality
- Explainable uniqueness: Can you explain how your product/service is unique?
- E.g. No-frills/Low-cost
- Sustainable differentiation: Can you sustain your uniqueness for at least two years, before the competition gets in?
- Demonstrable now: Can you show how your product works, today, even if you have to take a competitor’s product and tinker it to add/subtract features?
- Good competition: Are your competitors lazy fat-cats?
- E.g. Indian Airlines, when airlines were privatized. Or like Jet airways, when Air Deccan came in
- Bad competition: Is your industry full of mean-bully competitors ?
- Compelling pricing possible: Does your scheme of things allow you to price yourself so low, even at the cost of making loss, so that your competitors are driven away?
- E.g. Uber’s riders’ subsidy
- Closable customers: Do you have customers you can close today? Can you prove it?
- Quality of evidence of demand: How good an evidence do you have for projected demand?
- E.g. WHO Statistics
- Ahead of the market: Are you ahead of your competition or are you just a me-too? Or, are you too much ahead of the market that you are better off to wait for a few more years?
- Ambush exposure: What are the chances that someone much stronger than you, may be your bigger competitor, jumps into the market to decimate you?
- E.g. Microsoft vs Netscape
- Hot market: Is there frenzy feeding in the market that you can sell any crap?
- E.g. Tulip mania
Section 2: Personal
- Attitude of confidence and fearlessness: Fearless entrepreneur can create magic
- Commitment: How committed are the key stakeholders? With total, unassailable commitment, the project is unlikely to take off.
- Staying power: How long can you stay alive, even if things do not go exactly as planned?
- Passion: Are you passionate about the idea?
- Management competence: How competent is the management?
- Honesty and integrity: Most important criteria
- Success ethic: Have you seen success in the past?
- Looking good in the lobby: Will an investor invite you to stay at his home over the weekend?
- Cash flowing now: Can you start generating cash today?
- Revenue model that swamps costs: Are you making profits? Or, at least, do you have a revenue model that can actually make profits?
- Delivery advantage: Is there some unique advantage to way you reach your product/service?
- Resources available: Do you have all the resources needed to take the venture to the next stage?
- Preemption and domination: Can you preempt your competition from ever getting into the market and dominate it?
- E.g. What Starbucks did in the US, and what Cafe Coffee Day has successfully done in India
- Strategy to penetrate market: How good is your strategy to penetrate the market?
- Strategy for breaching the chasm: Can you take off and become airborne? It depends on many things, not just your ability to build traction.
- Proprietary ownership: Do you have absolute ownership of something critical to your business idea? An IP of sorts?
- Partnering candidates: Do you have potential partners, who can give you design tools, infrastructure, traction, etc. on the cheap?
- Appropriateness of location: Is your business situated in appropriate location for the business, and not appropriate location for you?
- Quality of backup plan: How good is your Plan-B. If Plan-A doesn’t take off, can you pivot successfully and morph into something else?
- Unfair advantage: Does your business have an unfair advantage that your competitors are crying over, but cannot do anything about it? If not, can you find one?
- E.g. Reliance Jio
Section 4: Finance
- Manageable capital requirements: Is the capital requirement within your means? Have you come up with a business plan that requires multi-billion-dollars before it takes a shape, and you have never done any fund mobilization?
- Low cash required before launch: Can you roll out the first-cut with minimal fund requirement?
- Visible capital: Do you have the means to mobilize whatever funds required to see the project rolled out successfully?
- High potential value: Can your business scale into something big?
- Foreseeable harvest: Can you or your investors see an exit over the next few years (typically, 4 to 14)
Section-6: Daunting Negatives
- Taboo: Is there a taboo value associated with your business idea?
- Lack of showstoppers: Are you cleared for clean take off? Can something happen to your business, or not happen, that can dismantle the whole thing?
- Pretending not to know: What unpleasant fact about you, your idea or your business that you are pretending as if it doesn’t exist?
Section-7: The Story
- High profile persons available: Do you have someone well known among your prospective customers to represent you? If not, can you go and get someone?
- Punchy, compelling story: Story connects with people. Traction building is all about people and business is all about traction building. Great story is a fantastic ammunition with both your customers and your investors.
Section-8: Carpe Diem
- Government relevance: Does Government play a big role in determining the fate of your business? If so, are you well represented?
- Low hanging fruit: Do you have easy-pickings, waiting for you to walk over and take? They are a huge advantage over initial traction building.
Before you go
These check lists look simple. Almost child’s play. But then, business is simple. We are complicating it needlessly. Most of the people I shared this tool with, felt underwhelmed, particularly all the hyping they received from me.
But to appreciate the potential of McKnight Score Card, download the DOCX I linked at the end of this post and start keying in your responses. Here is an example, showing the first point, Compelling, Userved need:
Take time to reflect on the point. See if you can answer this question from few more angles. If you detect some vulnerabilities, if you fall short on this dimension, spend some time to tweak your idea so that it scores better. Then score yourself based on how you feel in the gut. Ask a mentor who understands your business to vet your assessment. Because this is a high-impact dimension (weightage of 3), make sure that your idea scores at least 7 or an 8 before moving forward.
Repeat this for rest of the dimensions. Don’t sweat on lower impact dimensions or the ones that are relevant for your business. Nobody is perfect.
By the time you have traveled down the list, you will realize that your business is a different entity now, than the one you started with. The business may be so different that you may even want to go back and restart from the first dimension.
If you use this tool diligently, you will end up with a different, and better, business idea than the one you started with.
Wish you all the very best.
Word of Caution
If you are new to business, I would strongly suggest that you get a seasoned business person to sit with you and do this exercise. Else, you may tie yourself up into knots.
- Get the book “Will it Fly”, by Thomas McKnight, here. Ignore the poor rating.
- I made a mind map out of it to help me with my own thinking. If you are a visual thinker like me, you will find it valuable. You can view/download it from here.
- I have made a DOCX file, and converted the book into a checklist, and added few more points over time. Whenever I decide to apply the score card for a new business idea, I open this file and start writing. You can download it form here. The table at the last page is an embedded EXCEL object. So, if you plug in your score for each item, it does the simple job of computing the final tally.