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The Importance of First Principle Thinking

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As an entrepreneur, it’s incredibly easy to get caught up in the day to day grind.  Let’s be honest, life as an entrepreneur is manic and chaotic for the best founders.  There’s simply no easy day: operational fires are put out on a seemingly never ending basis, employees shuffle in and out, and new products are constantly launched. This frenetic pace makes it quite easy to feel overwhelmed when it comes to forward planning and structuring time on a daily basis.

Too often, I see entrepreneurs getting caught up in the moment without allocating proper time for reflection.  For many, the idea of constantly hammering out emails, leading meetings, or steering conference calls represents the maximum value add to their company. I would know since I was once guilty of this very attitude!  It was only a year back when I began to truly recognize the value of taking a step back and reflecting on the key business objectives and goals each and every day.  Once I retreated slightly from the daily battles, my perspective immediately improved.  The game slowed down, I was able to identify trends and developments much earlier than before.  To use a sports metaphor, my anticipation improved. It was as if I was now putting myself and the company in a better position to succeed over the medium to long term.

Aside from having more time to reflect and ponder on critical elements of the business on a more regular basis, was there something else at play that led to this positive outcome?  Absolutely. This more inward looking time allowed me to focus intensely on first principle thinking.  To elaborate, this thought process is anchored around looking at the key pillars of your business at a very foundational level.  For instance, if you’re in a consumer facing business, it would mean taking a deep dive on why certain customers aren’t using your service today.  Moreover, it could also mean truly understanding where and what your customers are doing today in lieu of utilizing your product or service.  This is a trickier exercise than it might sound as it requires a strong dose of empathy on the part of the entrepreneur.  Additionally, it requires the entrepreneur to have an ear to the ground and routine interaction with customers (or with someone who consistently engages with customers).

The illustration above relates to demand for a business or core product.  First principle thinking can in fact be leveraged anywhere and everywhere for your business.  There’s perhaps no better place than in the cost structure of a business.  True first principle thinking will take the entrepreneur on an exciting journey to imagine a world with the optimal cost structure and then help to reverse engineer that reality in a systematic fashion.  With this end point better in mind, it’s far easier to take a structured approach to improving each line item.  You will also have a much better sense for where the real areas of opportunity lie.  This is critical since it will help the entrepreneur save considerable time.  This first principle thinking will allow the founder to also understand where he shouldn’t be spending time to improve his P&L.   From past experience, I can confidently assert that this is probably even more mission critical.

Overall, I would highly encourage all entrepreneurs to take a step back more often, smell the roses, and indulge in some quality first principle thinking time.

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