Over the years I have heard comments like, “We operate like a startup,” “We act like a startup,” and “We are an overnight success that was 10 years in the making.” These statements are often euphemisms for “We are small and not growing as quickly as we would like.”
There are numerous estimates of startups in their first few years. One of the best descriptions that I have found is from Failory, but Investopedia and LendingTree have similar but differing takes on the statistics and root causes. All three articles linked to are worth reading. The net result is that the outcome of failure is much greater than the outcome of success, especially over time. So, “acting like a startup” is not necessarily a good thing even when it is true. You want to act like a successful startup!
Understanding the data and various causes for success and failure are great inputs to business plans. I have been a principal with successful startups, both early employees and founders. Understanding the data and various causes for success and failure are significant inputs to business plans focused on long-term success. As a Founder, there are a few points that I believe to be key to success:
- You have specific expertise that is in demand and would be valuable to an identifiable number of prospective customers. How would those customers use those skills, and how would they quantify the value? That understanding provides focus on what to sell and to whom.
- Have a detailed understanding of the market and key players to hone in on a niche to succeed.
- Understand your strengths and weaknesses, and then hire the most intelligent and most ambitious people whose strengths complement your strengths and weaknesses.
- Understand how you will reach those potential customers and the messaging you believe will compel them. Then, find a way to test those assumptions and refine them as necessary. Marketing and Lead Generation is very important.
- Have a plan for delivering on whatever you are selling before you get your first sale. A startup needs to develop its track record of success, beginning with its first sale.
- Cash flow is king. It is far too easy to run out of money while looking at a balance sheet that seems excellent because of receivables. Understand what matters and why it matters.
- Founders need to understand the administrative side of a business – especially the financial, legal (especially contract law), insurance, and tax side of things. Find experts to validate your approach and fill in knowledge gaps.
- Consistency leads to repeatable success. You standardize, optimize, and automate everything possible. Wasted time and effort becomes wasted opportunity.
- Finally, there needs to be sufficient cash on hand to fund the time that it takes to find and close your first deals, deliver and invoice the work, and then receive your first payments. That could easily be a 3-6 month period.
Those are the foundational items that are reasonably tangible. What is not as concrete but equally as important are:
- Having or developing the ability to spot trends and identify gaps that could become opportunities for your business.
- Having an agile mindset allows you to pivot your offerings or approach to refine your business model and hone in on that successful niche for your business.
- Foster a sense of innovation within your business. Always look for opportunities to deliver a better product or service, improve the efficiency and effectiveness of your business, and create intellectual property (IP) that adds long-term value.
- Focus on being the best and building a brand that helps differentiate you from your competition.
- Become a Leader, Not a Manager. Create your vision of success, set expectations for each person and team, and help eliminate roadblocks to their success. Trust your team to help you grow, and replace members quickly if it becomes clear that they are not a good fit.
As Steve Jobs once said, “It doesn’t make sense to hire smart people and then tell them what to do; we hire smart people so they can tell us what to do.”
Winning is hard, so focus on the journey. Making your customers’ lives easier and allowing your employees to be creative while doing something they are proud of will lead you to your destination. But, when things start going well, don’t sit back and convince yourself that you are successful. Instead, continue to focus on ways to improve and grow.
Success means different things to different people, but longevity, growth, profitability, and some form of contributing to a greater good should be dimensions of success for any vision.
The concept of an Iron Triangle is that along each side of the triangle is one item that is constrained by the items from the other two sides. In Project Management this is often referred to as a triple constraint. This identifies the fundamental relationships (such as Time, Cost, and Scope in Project Management) without addressing related aspects such as Risk and Quality. It provides a simple understanding of both requirements and tradeoffs.
Yesterday I spoke with Dave Mosby, an impressive person with an equally impressive background. He related Innovation to Fire, noting that in order to create fire you need fuel, oxygen, and heat. He added that they need to be in the right combination to achieve the desired flame. What a brilliant analogy.
Dave stated that for Corporate Innovation to succeed you need the proper balance of Innovation, Capital, and Entrepreneurship. I found this enlightening because his description substituted “entrepreneurship” for “culture” in my existing mental model. While the difference is subtle, I found it to be important.
As noted above, simplified frameworks do not provide a complete understanding. But, they do help understand and plan around the foundational items required for success. Mapping this to past experiences I was able to gain a better understanding of things that did not move forward as desired, and what I could have done differently in order to be more effective.
One idea was to create a fault-tolerant database using Red Hat’s JBoss middleware. We had a Services partner willing to create a working prototype, tune it for performance, document the system requirements and configuration, and package it for easy deployment. They wanted was $10K to cover their costs.
At the time I did not hold a budget of my own so created a purchase request supported by a logical justification. It modeled potential revenue increases for database subscriptions based on the need for a failover installation, as well as growth from potential expanded use cases. This was a slam dunk!
In my mind, this was simple as it was “only $10K,” and I had funded many similar efforts when I had my own company. But that’s the rub. I viewed these efforts as investments in understanding, lessons learned, and growth. Not every investment had a direct payoff, but nearly each one of them had an indirect payoff for my company. It was an entrepreneurial mindset that accepted risk as something required for rewards and success. I now see, many years later, how reframing my proposal as a way to foster innovation and entrepreneurship could have been far more effective.
It is never too late to gain new insights and lessons learned. And, a slightly different perspective on an important topic provided the understanding that should help with positioning projects for success in the future. And this flowed from a discussion with an interesting person who has, “been there, done that” many times.
This “pocket” story is from Scientific American, originally published on March 5, 2019. The Creativity of ADHD.
Over the years I have found that some of the most interesting, creative, and effective CEOs have ADHD-like tendencies. The strange thing is that they may not even be aware that they have it. Hyperfocus can be incredibly effective when attached to a driven person.
Below are links to a couple of posts that make these concepts and their benefits tangible:
Just examples of why it is best to look beyond labels, lay your preconceived notions to the side, and explore the potential that each and every individual can contribute. The best managers and leaders tend to have this ability.
And if you want to take that a step further, let it guide you on finding the best approach to teaching, coaching, and motivating the people on your team. It may take a little extra effort but the results are amazing.
Recently, I was speaking with a person who is part of a team analyzing ways to, “mitigate the risk of exclusive manufacturing in China” while not fully divesting their business interests in a growing and potentially lucrative market. This bifurcation exercise got me thinking about how many other companies are evaluating their supply chain relationships, inventory management, and the predictability of their cost of goods sold.
In the mid-1990s I had done a lot of work with the MK manufacturing software that ran on the Ingres database. Some of the issues were performance-related and fixed by database tuning, some fixed by using average costs instead of a full Bill of Materials (BOM) explosion using dozens of screws in a window, but some were more interesting and also more business-focused.
After NAFTA became law one manufacturer built a facility in Mexico and started having a few basic but important parts manufactured there. When I arrived as a Consultant the main problem they faced was a reject rate of roughly 20% and additional related QA costs. My suggestion was to treat this part (say a single piece of steel like the rotor from a disk brake system) as a component and build-in the cost of both the scrap and the QA. They could then benchmark the costs against other suppliers in an apples-to-apples comparison to determine if they were really saving money. That approach ended up working well for them.
While that approach helped manage costs it did not address the timeliness of orders or lead time required – important aspects of Just-in-Time (JIT) manufacturing. Additionally, it should be possible to estimate shipping costs by taking into account changes in petroleum costs or anticipated changes in demand or capacity.
There are systems that are out there that claim to estimate the cost and availability of commodities based on a variety of global factors and leading indicators. It is tricky, to say the least, and can’t anticipate an event like a pandemic. But, companies that are able to manage their inventory and production risk the best will likely be the ones that succeed in the long run. They will become the most reliable suppliers and have increased profits to invest in the further growth and improvement of their businesses.
The next 2-3 years will be very interesting times due to advances in technology and geopolitical changes. Those companies that embrace change and focus on real transformation will likely emerge as the new leaders in their segments by 2025.