Many people use animal analogies to define the changes that a startup undergoes. Growth can be like that of an insect, with huge, transformative steps, such as from caterpillar to butterfly via chrysalis or a mammal, with a more gradual growth process.
In my experience you need a bit of both to make the change to market leader. At a macro level you need to be an insect, making giant, metamorphic leaps, but at a micro level behave like a mammal, adapting, sometimes swiftly, to the environment around you.
Here are seven areas you need to focus on before you are ready to move to market leadership:
Start by being clear about the reason behind your startup. This involves asking yourself a lot of questions including:
These will define the DNA of your company, so before you move forward you need to be clear on these points – otherwise you have no hope of growing to become a market leader.
Momentum in a startup’s first stage comes from the founder, but as the business grows it develops its own impetus and collective conscience. This is when you need to bring in professional managers to guide it to the next level – which can threaten the position of the founder and original team.
The key is to achieve a balance – keep the founders doing what they do best, producing dramatic innovation, whilst ensuring that they don’t limit the company’s ability to grow. Keep a track of where you are, and set targets and milestones for what you need to achieve to move to the next stage.
Finance defines everything you do. Aim to be cash flow positive as soon as you can be. You need to have the courage to spend wisely, even if that means accepting that quality will be low in non-critical areas. Apologize, and remember that the end justifies the means.
You can make investments later in the lifecycle when you have the funds to do it. Moving to a new stage of growth will require more money – aim to generate as much of this from your own revenue as you can to strengthen your position and ensure flexibility.
The company’s development will also be linked closely to the market you are in. If it is a new sector there is the possibility for rapid growth, but more mature markets mean new entrants need to be disruptive to succeed. Read Geoffrey Moore’s Crossing the Chasm, if you haven’t already, to learn more about how market stages impact your entire strategy and your ability to grow.
Within the market my advice with picking your target customers is always to start small – you can always grow and go after larger businesses later. Fit your customers to your stage of development and the level of service you can offer.
Get good people – and retain those you need. At the beginning you’ll find it relatively easy to recruit technical staff, because they will be excited by the challenge, but more difficult to find strong, experienced commercial employees. As your customer base develops and the engineering task shifts more to maintenance, this will switch around.
The moment arrives where the company shifts from being a technically driven to a sales and marketing company. This is probably the most dangerous moment as the established order, threatened, will fight back and the new breed of commercial employee and customer will place new demands on the company for reliability and process.
Remember that professional people require certain things to join and stay. On a personal level they want benefits packages that go beyond those of technical staff, while they need processes and structure to enable them to be clear on what they are doing to take the company forward. This can bloat a young company, so be sure you are ready to take the step from a technical to a fully-fledged company.
It can be difficult to build scale alone, so look at the market and see if you can create value for partners. If you can’t, then don’t look at selling through this channel as it will complicate your strategy – simply do it yourself. When dealing with partners set the right expectations up front and always pick the right companies for your current stage of business. When you change, so will the type of partners you need – this might mean ending relationships that date back to your startup phase, but you need to be realistic and focus on those that will help you grow.
When launching, hire intelligent, high energy people with a couple of years of experience and nurture them. Not only does this keep costs down but it drives momentum and helps you attempt and achieve things that more experienced staff might baulk at. However do have some ‘adult supervision’ in place. As you become more enterprise-ready, increase the percentage of more experienced people.
This is where the insect analogy comes in – set a deadline or target, and when you achieve that, undergo the metamorphosis from startup to an enterprise- ready business that can lead a market. It does mean things could look radically different in terms of structure and staff, but it is vital if you are to make the leap forward.
There are multiple factors that impact whether you are able to make that leap from startup to market leader. Many of these, such as external market conditions, can appear to be outside your control.
That’s why you need to combine the ability to transform yourself like an insect with the adaptability of a mammal if you are to make the change and create a market leader – rather than going down an evolutionary dead end.