Startups versus Corporates
Flexibility and pace are your competitive edge
TL;DR
Startups are under-resourced compared to corporates. Their key advantages are 1) flexibility of culture which leads to better adaptability to externalities 2) pace of execution & decision making which allows for faster cycles of iteration. Optimise for pace & flexibility to keep your edge.
Outgunned and Outnumbered
Stacking up the resources of corporates you are competing with very quickly leads to a sobering conclusion - you don’t have a chance. Well, you don’t, if it were a race in which you run the same company operating system. This is why it is important to lean into your competitive advantage aggressively.
Acting like a corporate at early startup stage is a sure fire way to fail. If you previously worked at a big tech company and start your first venture you need to forget some ways of working and adopt a different approach. Hopefully some of the thoughts here can help you with that.
End of the Runway
Most startups have to deal with the reality of a drop dead date or runway. Naturally this means that you either have to turn profitable or create as much value as possible before then. Profitability is rare early on and even then you may want to go for a fundraise to accelerate growth and grab market share. In other words, fundraising is hard to avoid so creating as much value as possible before raising to give you the best possible leverage in a negotiation and minimise dilution, is part of the meta game of building a company. It should, of course, not be the guiding principle as that leads to short-term thinking but it should be an important factor in your strategic decision making matrix.
Bring your Swiss Army Knife to the Gunfight
Both to win a fight against corporates and to get yourself into the most favourable position before you run out of money, will require you to create a culture that unemotionally optimises for value creation.
Value creation is not a straight line. The infamous “pivot” is something that occurs quite often at early stages of a business. Of course naturally you are more focused given your limited resources but you have a spectrum of strategic choices. Being emotional about a certain strategy that is not working or is creating unconvincing outcomes, results in wasted resources. Don’t fall prey to the sunk cost fallacy that leads you to put more resources behind a suboptimal strategy. Also don’t forget you have limited business cycles until you are out of funds so every strategy should get a predetermined time allocation (and budget) to be deemed valid (scarcity breeds creativity). Figure out milestones and deadlines to avoid putting more of your limited cycles into an approach that is just “somewhat working”. This systematic approach to strategy validation is important and I’ll write more about this some other time. But remember that sometimes killing a strategy and dedicating the remaining cycles to a different approach yields the better result.
Everything that applies to strategies also applies to the tactics you use to implement them. Run experiments, measure as much as you can and adjust your approach. An early stage business is far from perfect and very few tactics will survive over time. There are always opportunities to adapt and learn. Does a new iOS feature give you an edge? Use it as soon as possible. Did you find a new productivity tool that can increase employee efficiency. Validate it and then mandate it quickly. Not getting comfortable and maximising learning with every cycle as if your (company’s) life depends on it, allows you to be more productive than any corporate despite their resource advantage.
This unemotional adaptability of your strategy gives you a clear edge over the oil tankers that are corporate entities. While you are gracefully jet skiing the tides of new ideas meeting customer reality with flexibility and an open mind, they require years to change course by a few degrees.
Faster Harder Better
While adaptability gives you a larger range of strategic outcomes and possibilities, pace allows you to pursue those additional options efficiently. Whatever the length of your business cycles, you need to squeeze the most possible progress out of them to optimise value generation.
Whenever this point comes up the notion of work life balance is raised. Everyone has to determine that balance for their company and operate within those limits. Remember that if you are working at the pace of a corporate, however, your chances of success will be lower, despite your higher adaptability. My experience in life has been that if you want to have a fighting chance to be successful, you need give it your best shot. There is enough natural adversity to building a thriving company, not spending enough time on it should not be the reason you don’t manage to get a good outcome early on.
Managing a company relies on lines of command and communication. Optimising both of these for pace is key. Crucial information should be with you whenever it is available not whenever the meeting is scheduled to review it. Ideas for improvement should be broadcast to the relevant decision makers continuously. Any misalignment needs to be addressed immediately to allow for more effective working. In other words, cram as much alignment, coordination, reporting and ideation into a given cycle as possible.
Optimising lines of command means decision making needs to be efficient. Define the limit of autonomous decision making and expect timely escalation whenever anything falls outside of those bounds. Waiting for a one on one to unblock a team is a waste of valuable time. Ensure your managers are investing time to align their team with the company strategy so that everyone is working effectively towards the same goal.
I’ll dedicate a post to lines of command and communication as these are important topics that are out of scope for this post. Needless to say you can operate orders of magnitude faster than a corporate by ensuring communication and command flows work efficiently. Design those flows mindfully and optimise for pace.
It’s the Culture, Stupid
Obviously honing your edge requires the right culture and the right team. Early stage hiring needs to select for employees who score highly on adaptability. You also want to ensure that expectations towards work-life balance are aligned. It is fine to be forthright and explicit about what is at stake at this stage of your company’s life cycle and what is required of everyone to make it work.
Changing direction is emotionally taxing. You need to be passionate about what you are doing to deliver high output so if direction is changed this can be disconcerting. Explaining the decision as well as the value of adaptability and pace repeatedly is important. Failed strategies should be celebrated and learnings should be exhibited like trophies to soften unavoidable emotional blows.
With changing strategy you may also have to reorganise the team and people could end up in jobs that they previously did not imagine doing. In terms of career development this can be problematic. Hiring generalists at the beginning of their careers for roles that don’t require specialist knowledge is the safer option. Without a firm strategy you don’t have a firm organisational structure figured out. A point worth making is that maximised value creation will lead to the best return on the value of everyone’s equity which will hopefully make up for any perceived loss in a straight line career progression. In my experience people early in their careers actually join startups exactly for that diversity of remit that usually comes with the early stage and get antsy as things get formalised later down the line.
It requires discipline to keep pace and run business cycles efficiently. Proper goal setting and reporting are crucial to keep things on track. Giving the team more visibility will lead to more ownership of the strategy and ultimately alignment which in turn will make the task of running cycles easier.
As always, leading by example is crucial to establish the right culture. Be ruthless with strategies and tactics you have championed and if they are not working, quickly and visibly shut them down. Show everyone that there is no double standard and legitimise the mantra of flexibility and pace.
Conclusion
It’s not easy to run fast and be flexible at the same time but making the most of your startup advantage will mean that you are maximising value creation. This will both give you an edge over your corporate (and even startup) competitors and put you in a stronger position should you fundraise. With an ever more rapidly changing business landscape being fast and adaptable may be the only choice to build anything with longevity.