The web is saturated with listicles and I’m going to add one more. It’s so simple and so basic this list often overlooked in the competition to deliver a clip of silver bullets to would-be entrepreneurs.
The first of the three F’s you want to get on your report card is Fast. Mark Zuckerber’s initial Facebook mantra was, “Move fast and break things.” That was brilliant, as the immediate reaction to “moving fast” amongst the risk-averse is the fear of breaking things. By giving explicit permission to make mistakes and to fail he encouraged risk taking amongst his cadre of engineers. Today as a far more mature company with heavy security and privacy responsibilities that mantra has gone into deep storage.
But it’s one thing to move fast and break things in what is in many ways a trivial business – social media. But if you are in the business of developing medical devices or new drug treatments you may want to move fast, but need to be very careful about breaking things. So before you decide that speed is the ultimate weapon that startup’s possess against incumbent companies, know your market and your customers and make sure everyone is clear about what level of quality is going to be necessary to attract and retain customers. Early adopters are by definition far more tolerant of bugs, missing features, inconsistent performance and other irregularities. But once you start moving up the adoption curve that tolerance decreases logarithmically, not linearly!
Where speed is necessary and where it tends to be lacking in large bureaucratic companies is in decision-making. Entrepreneurs need to be comfortable with having about 80% of the information needed to make a decision; large companies insist on getting as close to 100% as possible, which reduces risk but slows them down. So architect your organization so that decisions are made as close to the customer as possible. Top down, hierarchical decision making, inherited from the military model, is slow and ponderous. A bottoms-up, networked decision making model is not only faster but because it is close to the customer is likely to make better product and support decisions.
Another place to be fast is in responsiveness. Here again you can impress new customers who may be frustrated by how slow and unresponsive customer support is from their current supplier. Jeff Bezos drilled responsiveness to customers into the DNA of Amazon and despite its meteoric growth you can still easily return a product you don’t like and get your money refunded in hours, not weeks or months.
Pivot is the verb du jour in startup circles. It seems that if you haven’t pivoted you aren’t a real company. And it’s true that many successful businesses end up very different from the pitch deck that got them funded. Uber is the canonical example, having started in the black car/limo business and it’s buying up electric scooter and bike companies as it now realizes it isn’t in the limousine business, it’s in the urban transportation business. As I used to tell my team, “You need to be flexible. But if you are too flexible you’ll get floppy.” The best way to insert backbone into a company is by clearly elucidating and communicating the company’s core values. You may change your sales model from selling direct to selling through channel partners. You could call that a pivot, but it’s really being able to flex your model without breaking it. Again, pushing flexibility down and across is the organization is necessary. Your startup won’t be competitive if senior management is acting with flexibility but the company lives in fear of deviating from the exec team’s dictates. Flexibility should be driven by extrinsic factors, such as change in target customer or direct attacks by competitors, not by intrinsic factors, such as having just raised another round of capital. The planning for use of proceeds should have proceeded raising that round. Being too flexible in decision making gives the staff the feeling of being “jerked around.” That’s bad for morale and for the company’s reputation. Flexibility is necessary in a startup, but it should be measured, not helter-skelter and overly reactive to changes in the business climate.
Last and decidedly not least, but most important, is focus. I’ve never heard of a company failing by being too focused. The worst thing that can happen to a startup that is tightly focused on a small niche is that investors will say that your market is too small. Keep in mind their goal is building billion dollar valuation companies, and if you are building automotive tool sets for left-handed people you may well be able to dominate that niche, but since cars today are basically computers on wheels the days of the DIY mechanic are long gone. You can always expand your markets once you dominate a niche. Contracting when you’ve targeted a market that is far too large, like hobbyists, is costly and a ding to the company’s reputation. Where I find the least amount of focus in is engineering-driven companies. Engineers love building things and are trained to do so. However, that can often result in a company with a fully developed solution search of a market. Don’t try to change your engineering culture, but make sure you are constantly iterating product development to become even more deeply focused on a specific set of customer needs. As the saying goes, “When you have a hammer, everything looks like a nail.” Get your engineers involved with customer development, whether it involves them taking the same online survey you send out to prospects, accompanying the sales team on a call, answering support questions, attending usability lab sessions to watch real customers use their products to perform specified tasks, or being involved in competitive intelligence. Your business needs to focus on specific markets, customers and customer problems. Everyone in the company needs to be aligned with that focus. Once again, tight and accurate focus is another way to compete with and dislodge large incumbent companies. Keep in mind that focus is a means to an end: aligning the company’s resources on product/market fit, it’s not an end in itself. Focus is a process that needs to permeate a company, from top to botton.
It won’t help you if you are fast, flexible but unfocused! Your goal needs to be straight F’s. Failing on one of these three F’s will cause your venture to fail. There’s a lot more to building a successful company, but building these essential traits into your startup from the get-go will improve your chances of surviving the Darwinian battle for business.