Platt Perspective on Business and Technology

Virtualizing and outsourcing infrastructure – 2: identifying where lean makes sense in a business

Posted in startups, strategy and planning by Timothy Platt on April 7, 2011

This is my second posting on building a lean business, following up on Part 1: developing a lean core competency business model. I started developing a basic model for building a business model and for developing processes and operations that maximize focus on goals and priorities, and on core capabilities. The name of this series focuses on information flow and on Information Technology as a service and that is because information development, processing, storage, distribution and security are crucial to making this work and for all services, resources and capabilities that might be considered. So when I cite developing a lean office space capability this is something that will or will not work in large part according to how effectively employees can remain actively connected and engaged, and regardless of where they are physically located – an information management problem.

At the end of Part 1 I cited two real-world business models that would readily lend themselves to this approach: startups and I will add early stage companies, and online stores. As background information on these two models I cite my series:

Startups and Early Stage Businesses and
• Online Store, Online Market Space as posted in Startups and Early Stage Businesses, (see postings 20-33, 35, 37, 40, 41 and 55.)

I am going to start this posting by sharing some general observations about startups and early stage businesses and I will then proceed to discuss lean business models and lean operational execution in light of startup and early stage best practices.

I have worked with a fairly wide assortment of startups and early stage businesses, and in a wide range of industries, targeting a variety of market spaces. Some have set out to be business to consumer (B to C) oriented and some business to business (B to B). A quality I have seen in every successful venture in both groups is that their founders have had a very clear and well defined focus on:

• What they were building, with a clear and compelling mission, and
• How they would do this with a clear and consistent focus on effectively and cost-effectively using liquidity and other resources available.

Simply pinching pennies and refusing to make a commitment that might involve investment is a sure sign of trouble, and startups in particular with founders who are unwilling so put any of their own skin in the game almost never succeed. They have nothing to loose if they simply walk away at the first sign of challenge or set-back. But carefully and systematically thinking through what resources are available and making their expenditure really count, is a very positive sign. Knowing to do this and how to track ongoing performance greatly increases chances of long term success. And I pick up on this approach here in the context of the lean business model and regardless of how long that business has been in operation.

• Do not be afraid to make decisions that call for spending, and both in time and effort, and the acceptance of risk and uncertainty, as well as direct cash layouts.
• But know precisely what you are doing and with what possible outcomes, and plan and execute in terms of core competency and business results efficiency.
• Think and act in this as if you were operating on a narrow margin and from a shallow resource base – as if you were a startup just starting to bring in revenue and working towards break-even where every action and every decision and every sale counts.
• Look for ways to cultivate efficiency and limit the infrastructure and fixed-operating expenses created, to what you would need to most cost-effectively build and secure market share.
• In this, look for unexpected and non-standard approaches to gaining efficiency. What does your competition do that could more effectively be done through third party providers or by outsourcing, renting or other non-ownership models?

New and novel paths towards operational efficiency and results focused in-house development can become your unique value proposition as this can and will directly impact on how effectively you can meet your marketplace and customer needs.

I am going to pick up on this in Part 3, where I will apply it to the context of well run online stores.

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