Know What Matters

1. Live Life Intentionally by Working from the Future Back

Take the time now, while you still have a runway into the future, to determine whether you are living a life you will respect.

Pre-Mortem Visualization. The most important lesson in life is to live intentionally, not reactively. The "future-back" approach involves visualizing your desired future, both personally and professionally, and then working backward to define the steps necessary to achieve it. This process, akin to a "pre-mortem," helps identify potential pitfalls and prioritize actions that align with long-term goals.

Four Key Areas. Personally, this involves considering four key areas: relationships, health, work, and spirituality. By projecting yourself into the future and contemplating what will truly matter, you can make conscious choices today that lead to a life of self-respect. This requires a shift from reacting to daily events to proactively shaping your destiny.

Business Applications. In business, the future-back principle guides innovation and strategic planning. By envisioning the desired outcome and working backward, you can identify the specific objectives and initiatives that will drive success. This approach fosters a long-term perspective, encouraging you to discover today what will matter tomorrow and then bring what matters to life.

2. Competitive Advantage is the Only Sustainable End

Competitive advantage is everything.

Better Competitive Alternative. The key to a successful business is being a better competitive alternative, offering something that makes customers choose you over competitors. This differentiation is essential for attracting customers and building a sustainable business. Avoid "dirt farming," where you rely on an average distribution of customers and operate a low-margin business.

Differentiation is Key. To achieve competitive advantage, focus on differentiation. This means identifying a specific niche and becoming the number one choice for that group of customers. It's not about being everything to everyone, but about being the best for someone.

Long-Term Focus. Many companies lose their edge by focusing on short-term gains or copying competitors. Building competitive advantage requires a long-term perspective, anticipating future needs and investing in initiatives that will create lasting value. This involves asking, "What will matter?" and having the discipline to bring the answers to life.

3. Profits are a By-Product of Delivering Exceptional Value

If you focus on profit as the end, you fail.

Means, Ends, and By-Products. Understanding the distinction between means, ends, and by-products is crucial for building a business of enduring value. Profits are not an end to be pursued directly, but rather a by-product of delivering exceptional value to customers. Focusing solely on profit leads to short-sighted decisions and ultimately undermines long-term success.

Competitive Advantage as the End. The true end to focus on is competitive advantage, offering something your target customer wants enough to choose you over competitors. By prioritizing customer value and differentiation, you create a sustainable business model that generates profits as a natural consequence.

Initiatives as the Means. The means to achieving competitive advantage are the specific initiatives and projects you execute with discipline. These initiatives should be aligned with your overall vision and designed to deliver a better and more differentiated experience than your competitors. By focusing on the means, you create the conditions for value creation and long-term success.

4. Entrepreneurs Capitalize on Opportunities, Not Just Capital

Entrepreneurs are opportunists, not capitalists.

Opportunity over Capital. An entrepreneur's most important resource is not capital, but the ability to see opportunity. This involves recognizing a need and a possible solution before anyone else and having the courage and creativity to perform that job for a customer. Capital is a renewable resource, while the capacity to identify and seize opportunities is a unique and valuable asset.

Risk Aversion. Successful entrepreneurs are not reckless risk-takers, but rather risk-averse individuals who develop the skill of seeing patterns and recognizing opportunities with confidence. They see the greatest risk in missing out on an opportunity to meet a need.

Editorial Sensibility. Entrepreneurs don't necessarily create new things, but rather curate and refine existing ideas. They take a wide-angle view of possibilities, edit out the majority, and focus on executing one promising idea better than anyone else. This involves recognizing significance and seizing opportunities when they arise.

5. Control is an Entrepreneur's Most Precious, Non-Renewable Resource

You take the money; I’ll take control.

Capital vs. Control. While capital is essential for growth, it comes at a price: giving up control. For every dollar of investment, you sacrifice a slice of your ability to steer and control your vision. The capacity to exert control over the company's destiny should be of utmost importance to all entrepreneurs and business builders.

Maintaining Control. Before taking on capital, consider your relationship with the business. If you see the enterprise as the fulfillment of a vision, prioritize maintaining control. This may involve growing more slowly within your means, reinvesting profits, or creating dual classes of stock to retain voting power.

Consequences of Losing Control. Losing control can lead to short-term focus, pressure to produce results, and ultimately, a compromise of your vision. It's crucial to carefully consider the long-term consequences of taking on capital and to prioritize maintaining control whenever possible.

6. Feed the Growth Monster Strategically, or It Will Devour You

The growth monster demands to be fed, even when you’re running out of sustainable ways to satisfy it.

Growth as a By-Product. Investors value companies based on their perception of future growth. However, growth should be a by-product of a solid business model, not an end in itself. Blindly pursuing growth without a sustainable foundation can lead to disastrous consequences.

Sustainable Growth. Protect your business by letting it grow only at a sustainable rate. Focus on investing in new business areas that are aligned with your core competencies. Avoid the temptation to overextend yourself or compromise your competitive advantage in the pursuit of short-term gains.

The Growth Trap. Management teams often blindly grow, even if the returns on those new investments are weakening, until they effectively march their companies like lemmings right off the side of the cliff.

7. Empathy Unlocks the Future by Discovering Unspoken Customer Needs

Empathy is the key to innovation and the root of all learning because it’s the key to human relationships.

Beyond Articulated Needs. True innovation comes from detecting pervasive customer needs that customers themselves haven't even articulated. This requires getting inside the heads of your customers, watching through their eyes, and discovering unfulfilled needs.

Thoughtless Acts. Pay attention to "thoughtless acts," ways in which people naturally modify and rearrange the world to make it work better for them. These acts reveal opportunities to better meet customer needs and create innovative solutions.

Empathy as a Tool. Empathy is the key to innovation and the root of all learning because it’s the key to human relationships. It’s what allows us to connect to each other and bridge the divide between our subjective worlds. It pulls us out of our own mental models, our well-worn habits, to see the world through others’ perspectives. And it’s what enables us to understand the jobs we can do for our customers.

8. Concept Essence: Define What You Stand For to Guide Execution

How do you get a group of people to share a vision of something that does not yet exist?

Emotional Blueprint. A Concept Essence is not a business plan, but rather an emotional blueprint for how a company intends to compete. It answers the essential question: What will make us special in the eyes of our target guest? It outlines how you hope your target customer will experience you.

Long-Term Vision. A good Concept Essence acts as a self-regulating device for individuals and teams throughout a company. It guides the initial creation process and serves as a touchstone for decision-making as the company grows and evolves.

Clarity and Alignment. A Concept Essence forces the innovator to define the future in vivid and precise terms, turning it around and looking at it from all sides. It’s a tool to sell your vision of the future to those who must execute on it.

9. Get It Done: Execution Requires a Disciplined, Iterative Process

Strategy without detail is impotent; detail without strategy is directionless.

From Vision to Rollout. Innovation isn't just a flash of inspiration, but a detailed, disciplined process from vision to rollout. This involves a structured approach to discovering what matters, bringing what matters to life, and getting what matters done.

The Innovation Process:

• Discover what matters: Observe, look for patterns, brainstorm, and research.
• Bring what matters to life: Identify success factors, render a vision, lab test, and prototype.
• Get what matters done: Plan, version, and execute.

Mastering the Details. Sustained innovation comes from mastering the details and making incremental improvements while never losing sight of what matters and where you are going. This requires a relentless focus on execution and a commitment to seeing things through.

10. The Entrepreneurial Life: The Business Owns You, So Love the Work

You don’t own the business; the business owns you.

All-Consuming Commitment. The entrepreneurial life is all-consuming, demanding a high price in terms of time, energy, and personal sacrifice. It's a constant grind filled with disappointments, setbacks, and self-doubt.

Love the Work. To survive the challenges of the entrepreneurial life, you must love the work for its own sake. This passion will sustain you through the tough times and provide the motivation to keep going.

Trade-offs, Not Balance. There is no such thing as work-life balance, only trade-offs. Be prepared to make hard choices and prioritize what truly matters, knowing that there will be sacrifices along the way.

11. Transformation Requires Hard Choices and a Ruthless Focus

Business (and life) requires hard choices.

Prioritize and Focus. You can do anything, but you can't do everything. To succeed, you need to pick the things that matter and let go of the things that don't. Fewer things done well is the recipe for a successful business and an impactful life.

Saying No. That means saying no to some things so you can focus on others. Trade-offs are inevitable. Choosing one thing means not choosing another. Every opportunity seized is another lost. And not choosing is still choosing—it’s the worst choice of all.

The Three Ts. When making choices, prioritize against the three Ts: Time, Talent, and Treasury. How are you going to spend the hours, days, weeks, months, or years of your precious time or your company’s? How are you going to allocate the company’s human capital—its people and their energy, creativity, emotional commitment, and intellectual engagement? And how are you going to allocate the company’s financial capital?

12. Be Contrarian: Conserve in a Boom, Build in a Bust

The world doesn’t pay any of us to do what everyone else is doing.

Opposite Thinking. The best time to grow is when everybody is retreating and costs are down. The worst time to grow is in a boom.

Contrarian Strategies. During boom years, conserve resources and prepare for the inevitable downturn. During bust years, seize opportunities to build and invest when others are pulling back. This contrarian approach allows you to gain a competitive advantage and emerge stronger.

Avoid Mimicry. Resist the temptation to copy competitors or chase short-term trends. Focus on your own vision and long-term strategy. The goal is to be the best competitive alternative in your target niche, not to be a follower.

Last updated: April 16, 2025