Start It Up!
This week I have some musings on what we can learn from the startup world.
All I Need
In the start-up world, they have the idea of the ‘Minimum Viable Product’ (MVP), which the least amount of the product concept that gives potential users enough of an experience of it to make a judgement about its utility and value to them. Generally, this is a product with the bare minimum of the core features, often built from existing technologies and a bit flakey but usable.
As they progress through various iterations of the MVP, the start-up learns what the key features and criteria are for the market. Often, their initial assumptions are challenged and disproven. Sometimes, they find that their original idea has no real traction but there’s an aspect of it that does, and they can refocus on developing that (a so-called ‘Pivot’).
So what if we created a Minimum Viable Organisation? The minimal set of structures, principles, processes and people that could deliver the organisational purpose. This is effectively what a start-up is doing organisationally (although all too often they follow the existing status quo with disastrous consequences, as we’ll explore later on). But what if you did it as a thought experiment in an existing organisation?
Imagine the bureaucracy you could strip out. Imagine the number of Bullshit Jobs you could discard. Imagine the amount of ‘busy work’ you could eradicate. In fact, imagine how you could re-imagine the whole way the organisation functions.
I’ve often mused on what would happen in an organisation if everyone was given permission to stop doing anything that they couldn’t find a good justification for. If people could stop sending out reports that no-one read, stop going to meeting that were just talking shops and never achieved any impact, took themselves off of those ‘for information’ circulation lists. I think there’d be a bit disruption initially and a few bruised egos but most of the choices made would prove to be good ones and the benefits would be substantial.
But few would have the balls to do it, so a thought experiment is a safer approach - but also more freeing, because everything can be questioned.
Start with the basics, the things that need to happen to deliver the product or service, to support the customer journey, collect the money and meet the regulations. What’s the least number of people, the least structure, the lightest processes, the fewest rules you would need to do that? What are the different ways you could do that?
Then what else would you add in? Do you need all the usual silos of HR, Finance, Legal, IT, Marketing, Sales? Do you need any central functions at all? What’s the least you could get away with? It’s likely to be rather less than you imagine.
Buurtzorg run a 15,000 person organisation with about 50 people in Head Office. Handelsbanken have a similar small central structure with most responsibilities carried out by the individual offices.
I did a LinkedIN post about this a while ago and I think my final point still stands. If an organisation isn’t doing this, then one of their competitors is and they’re coming to get them.
Four Steps to Heaven
One of the foundational ideas in the start-up world is that of Customer Development, as Startup Expert Steve Blank articulated in his 2005 book “The Four Steps to the Epiphany”. In his model, he identifies four steps to building a startup but he makes the key distinction between the two stages of “Search” and “Execute”.
“Search” is focused on finding the all-important ‘Product-Market’ fit, around which the startup can be built. “Execute” is about proving the idea can scale and building the business around it.
“Search” and “Execute” require two very different mindsets. The first is all about experimentation and iteration, dealing with uncertainty and ambiguity, learning from failure. The second is about planning and forecasting, putting in processes and controls, setting targets and goals, taking action and decision making. (BTW, this explains why I spent most of my career developing and marketing products in a constant state of mild schizophrenia!)
We’re all comfortable with execution, it’s what we’ve been trained to do. It’s the everyday work of an organisation, whether large or small. If you’ve worked in a corporate, it’s practically all that goes on.
Most of us are uncomfortable with search. We don’t like the uncertainty and ambiguity, we’re not used to having to change all the time, we are afraid of failing. So most of us avoid it.
What kills a lot of promising start-ups is that they move into the execution stage before they are ready. The thing that makes the biggest difference to whether a start-up succeeds or not is how good a Product-Market fit they achieve. That may mean staying in the Search phase for some time, or even going back into that phase if Customer Creation (i.e. proving that the sales funnel can scale) doesn’t work.
However, if they rush into execution before achieving a good Product-Market fit, they won’t be successful no matter how well they execute the next stage. If they plough on with Company Building when the Customer Creation doesn’t go so well, because they are scared of going back into the uncertainty of the Search stage, they will also fail.
Another mistake is that they apply conventional metrics during the Search stage (usually at the behest of their investors). The key thing to measure at that first stage is how much learning is happening. How many iterations are you achieving, what are you learning from each, how are you applying that to the next MVP? It doesn’t matter what your sales and revenues are, or how many customers you have, or what your profit and loss looks like. Those are only relevant after you have a good Product-Market fit and are building a business around it.
How often have we approached something in the wrong mindset, trying to apply structure and tie things down when we should be curious and open to letting go and seeing where things go? How often have we avoided the uncertainty of experimentation and discovery and run for the comfort of execution and its false veneer of control and predictability? How often have we judged something a failure because we have been evaluating it against the wrong measures?
I often ask myself if I am applying the right mindset and measurement to what I am trying to achieve. It’s amazing how often I am looking to execute when I should be searching, looking for measurable outcomes instead of enquiring what I am learning. We’re all start-ups in our own ways, we can all learn from Steve Blank’s model.
There Are More Questions Than Answers
Another way of looking at Steve Blank’s model is to say that you need to sit in the question, and be comfortable doing that, until the answer appears. Of course, we do that all of the time, don’t we?
It seems obvious to say that we need to find out what the customers want and then meet that need. By that, I mean, find out what they really want, not what they say they want or what we think they want. That means we have to ask good questions and listen carefully, we have to interpret what they tell us.
This is often a problem for startups. They find it hard to escape their idea of what the customer wants, or see past what the customer tells them they want (they forget that the problem is never the problem …)
The standard approach is to form a hypothesis of what the product should be (i.e. the answer) and then do some research to prove or disprove it (this is often called a ‘scientific approach’ by startups, which scientists respond to with a weary eye-roll and shake of the head).
The trouble is that the hypothesis carries with it a whole load of implicit assumptions and biases, which colour the ‘research’ phase. So what often happens is that startups get locked into these assumptions and falsely interpret the market need, so do several iterations of the product to fit a market that only exists in their heads. They continue with increasing desperation until they start to run out of money, shout ‘PIVOT’, abandon their original ideas and just get curious about their prospective customer base. They then discover a real need and, if they are lucky and have enough money left, produce something that actually has the Product-Market fit they longed for.
Why don’t they just get curious about the customer needs from the get-go, I hear you ask? Good question.
Brene Brown uses an approach called ‘grounded research’, where she does lots of interviews with people and collects stories. She then codes these (nope, no idea, that must be the clever bit!) and looks at what the data tells her (I’ve always thought this was a rather neat way of going about things). Then she starts to draw conclusions. No hypotheses, no assumptions and biases - the proof of this being that her findings on shame were really NOT what she wanted to find out and were very uncomfortable for her personally.
In an podcast with a startup entrepreneur, he explained his approach to developing a new business and she said “Oh, that’s the same as what I do!” - namely, be curious, talk to people and draw conclusions from what they tell you.
Only that’s not what they most startups do. First of all they make up a story about the product, so they can raise finance and interest. Then they have to keep that ballon of hot air inflated because that’s what they told their investors was the truth and was going to happen. That’s why they bang their head against that particular brick wall (which they have constructed themselves) until they nearly pass out. At which point, they have no option but to do the thing they should have done from the beginning.
And I’m sure there’s absolutely no parallels with our own lives there at all, is there?
So, ‘be curious’ is great advice. Sit in the question. But it’s not always easy to do, because even if you don’t find it uncomfortable personally (and most of us do), some of those around you will. To save their own discomfort, they will push you out of it by urging you to ‘do something’ and ‘get into action’ i.e. execute and give the false impression of progress.
Resist that pressure. The treasure lies in the question, so stay in it.
Luck be a Lady
One of things they hardly ever tell you about how to be a successful startup (or anything else, for that matter) is that you need to be lucky. Yet, at the heart of every successful startup, is a huge dollop of good fortune. For sure, you can help yourself be lucky, give yourself a chance of being in the right place at the right time, but at the end of the day Lady Luck will make her own choices about where she bestows her favours.
Steve Blank says the MOST important factor for success is Product-Market fit but he also says that some people just happen upon it whilst others search really hard and never find it. He’s seen some great teams, full of really smart people, brilliant at execution, fail miserably, whilst others who are disorganised and largely dysfunctional stumble across a great Product-Market fit and succeed in spite of their myriad shortcomings.
So really the MOST important factor is luck.
Although there are few Business books, and especially the hagiographies of the self-appointed ‘Entrepreneurs’, that even admit to the influence of good fortune. I guess we all want to believe our success is the result of our own efforts and outstanding qualities. Especially if that’s what we’re trying to sell to others.
So, you can stop reading all those business books and bios of ‘Entreprenuers’. You don’t need to get up at dawn, flog yourself with birch sticks, run a marathon and meditate for 2 hours, all before breakfast. You don’t need to ‘hustle’, ‘fail fast’ or have ‘big hairy audacious goals’. You only have to do one thing. And this is my salutation to you.
Be lucky.