I’ve written before about some of the advantages startups have when they are very small, like the benefits of having a pathetically small number of customers.
Another advantage of the early stages is that most don’t have to juggle
too many competing priorities.
If you don’t have customers, a product,
investors, or a board of directors, you can pretty much stay focused on
just one thing at a time.
As companies grow, it becomes
increasingly important to build an organization that can execute in
multiple areas simultaneously. I’d like to talk about a technique I’ve
used to help manage this growth without slowing down.
This
technique rests on three things: Identifying the kinds of work that
need to get done, creating the right type of teams for each kind, and
steering the company by allocating resources among them. For this
analysis, I am heavily indebted to Geoff Moore, who laid out the
theoretical underpinnings of this approach (and describes how to use it
for companies of all sizes and scales) inDealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution.
Four kinds of work
Innovation
/ R&D – this is what all startups do in their earliest stages.
Seeing what’s possible. Playing with new technologies. Building and
testing prototypes. Talking to potential customers and competitors’
customers. In this kind of work, it’s hard to predict when things will
be done, what impact they will have, and whether you’re making
progress. Managers in this area have to take a portfolio approach,
promoting ideas that work and might make good candidates for further
investment. The ideal R&D team is a small skunkworks that is off
the radar of most people in the company. A “startup within the startup”
feeling is a good thing.
Strategy – startups first
encounter this when they have the beginnings of a product, and they’ve
achieved some amount of product/market fit. Now it’s time to start to
think seriously about how to find a repeatable and scalable sales
process, how to position and market the product, and how to build a
product development team that can turn an early product into a Whole Product.
As the company grows, this kind of work generalizes into “executing the
company’s current strategy.” Usually, that will be about finding new
segments of customers that the company can profitably serve. It’s
decidedly not about making incremental improvements for current
customers – that’s a different kind of work altogether. This kind of
work requires the most cross-functional of teams, because it draws on
the resources of the whole company. And although schedules and
prediction are difficult here, they are critical. It’s essential to
know if the strategy is fundamentally working or failing, so the
company can chart its course accordingly.Your strategy might be
wrong; might take a long time to pay off; might even pay off in
completely unexpected ways, which is why it is unwise to devote 100% of
your resources to your current strategy. If you invest in strategy at
the expense of innovation, you risk being unprepared for the next
strategy (or of achieving tunnel-vision in which everyone drinks the
Kool-Aid). If you invest in strategy at the expense of growth, you can
starve yourself of the resources you need to implement the strategy.
And if you neglect maintenance, you may not have a business left at all.
Growth
– when you have existing customers, the pressure is on to grow your key
metrics day-in day-out. If you’re making revenue, you should be finding
ways to grow it predictably month-over-month; if you’re focused on
customer engagement, your product should be getting more sticky, and so
on. Some companies and founders refuse to serve existing customers, and
are always lurching from one great idea to the next. Others focus
exclusively on incremental growth, and can never find the time or
resources for strategy. Either extreme can be fatal. This kind of work
is where schedules, milestones, and accurate estimates thrive. Since
the work is building on knowledge and systems built in the past, it’s
much more likely to get done on-time, on-budget, and to have a
predictable effect on the business. Growth work calls for relentless
executors, who know how to get things done.
Maintenance
and scalability – “keeping the lights on” gets harder and harder as
companies grow. Yet the great companies manage to handle growth while
keeping the resources dedicated to maintenance and scalability mostly
fixed. That means they are continuously getting better and better at
automating and driving out waste. Continuous improvement here frees up
time and energy for the parts of the company that find new ways to make
money. Often a company’s unsung heroes are doing this kind of work:
invisible when doing a good job, all-too-visible when something goes
wrong. These teams tend to be incredibly schedule and process-centric,
with detailed procedures for anything that might happen.
Companies
of any size do all these kinds of work, and do them well. You don’t
need any special process to make it happen, just good people who are
committed to making the company successful. So why do these different
kinds of work cause problems? And why do those problems seem to get
worse as the company grows?
We’ll talk about those problems in detail in part two.
(Image source: business2profit)
