Platt Perspective on Business and Technology

Building a startup for what you want it to become 17: moving past the initial startup phase 3

Posted in startups by Timothy Platt on August 5, 2016

This is my 17th installment to a series on building a business that can become an effective and even a leading participant in its industry and its business sector, and for its targeted marketplaces (see Startups and Early Stage Businesses and its Page 2 continuation, postings 186 and loosely following for Parts 1-16.)

I began Part 16 of this, with a focus on innovative products and services that would be conceived, designed and developed, and then produced as finished offerings and brought to market. And with that What side to innovative new business development in place, I turned to at least begin considering the How side of that, and business process innovation.

• Innovation and effort to achieve it, bring both risk and reward or at least a significant potential for both. And the more innovative and the more disruptively novel the product and service offerings that a business would seek to build itself around, the greater the potential risks and the greater potential benefits that it would face from that. There are a great many possible reasons for this that I could cite here, including the need to break new ground in at least some areas of product design and production when offering the truly innovative. But one other contributing reason for this, and certainly on the risk side that is all but certain to occur, comes from consistently observed findings as to how innovation enters and diffuses throughout a marketplace for its acceptance. The more novel, and particularly the more disruptively novel a new offering is, the more skewed its initial acceptance will be towards primarily attracting pioneer and early adaptors. This is true for the general consumer market and it is, if anything even more pronouncedly true for business-to-business products and services, where business purchasing decisions tend to be conservative, and business purchasers and their managers seek out the assurance of prior successful performance track records – and certainly before their making significantly scaled purchases of the significantly new and novel themselves. (Think in terms of managers buying into the proposals of business process improvement consultants here, and at least as importantly think in terms of in-house business process innovators and their need to achieve buy-in from managers and senior management that would be required to in-house prototype and then more fully implement change. Purchasing costs are not always just monetary here, and this involves a lot more than just buying a new next generation of business equipment.)

If an innovative new product, to focus on that side to this set of issues, can gain a significant foothold of market acceptance and if it takes off from there in sales and acceptance, that can bring a new business a tremendous level of initial success and set it up for being able to grow from there, with its next round innovations already substantially bankrolled. But innovation per se, can and usually does begin with at least some initial friction to its market acceptance.

These opening thoughts bring me back to the note that I appended to the end of Part 16 and they bring me to the main line of discussion here in this installment too:

• How you can come closest to reaching audacious timeline goals in developing and growing your new business venture while still maintaining sufficient fiscal and organizational prudence to be able to sustain your effort?
• How can you more effectively organize and plan and operationalize your basic business processes, so as to reach your goals there, or at least approach them as closely as possible?
• And I added that this is where the issues of lean and agile enter this narrative, and eliminating process waste and inefficiencies. And along with developing and maintaining an effective organizational focus and a corresponding system of priorities, this means developing the communications and other capabilities that would be required to make all of that work.

My goal for the rest of this posting is to at least begin to address these issues and challenges. And I begin that by repeating a point that I have made many times and in many contexts, throughout this blog and its offerings. Many of the best teachers I have had in my work life and professional studies have been problematical for what they have done and for how they have done it. When everything is moving along smoothly and effectively, it can be difficult to pick out single precise details that clearly and specifically drive success there, or discern the core factors that make this success happen consistently; single, readily identifiable and analyzable leading causes do not readily stand out as driving all of this. But when everything hits a wall and problems arise, it is often possible to step back and see more or less precisely where the major determining weak points and fault lines are that everything broke down from. And it can be a lot easier to see how those weak points arose and how they were or were not responded to before they overtly failed. And this type of analysis can offer real insight into how to do better and where and why in the specific business, and more generally in a perhaps more widely recurring business context. This applies to bad management and leadership practices and improving upon them. It applies to bad business processes and to bad practices that are based on them, and when seeking to develop best practices that have been tested and validated from real world experience. This can mean identifying and coming to anticipate single point of failure weaknesses, and when seeking to better anticipate where they might arise. This is widely applicable as a window into businesses in general and where they can be improved, by aiming a perhaps glaring spotlight on where they need such improvement.

I begin this discussion here with a category of bad example businesses that I found myself working with and attempting to work with at an earlier stage in my work life as a consultant: pre-dotcom bubble-burst startups, from before the first large scale culling off of early-failure online startups when reality first set in for what was still a whole new world: online businesses.

Pundits proclaimed that online business changed everything: Everything! And they extolled how this meant that the more usual, traditional approaches and requirements for business success no longer applied. Then the bubble burst and reality reasserted itself with a bang, as new businesses that in many cases had yet to bring in any real income at all – and that were touted as having astronomical market valuations and just for being online, collapsed from a failure to even begin to attempt to operate as long-term, fiscally prudent ventures. I no longer have what I used to call my “dead dotcom tee-shirt collection” but at one point I had quite a selection of that type of marketing detritus, given to me by these businesses.

Some of the early dotcoms that I worked with did succeed and still survive – and very successfully. But many died and relatively quickly – and very predictably. I got into some real arguments with founders who I was attempting to consult for who saw more value in the incidentals, than in prioritizing the less sexy, but long-term essential. Ill advised marketing expenditures and I add putting in expensive professional model pool tables and the like for their computer programmers and other employees were only part of this, though their collective impact took a real toll too. I should write more specifically on my experiences from this part of my overall career, and share some stories. But I will simply note here that I and a lot of others who got involved with these businesses have some entertaining stories to share. My point here, and my reason for adding this digression to this posting, is largely encompassed by “lean and agile.” And to express this in terms of bad example learning opportunities, I offer this to highlight something of the potential that startups and early stage businesses face when they take what can all too easily become an essentially opposite approach to that – with the consequences that arise from attempting that.

The failed, dead dotcoms that I refer to here, failed because their founders believed the “no rules need apply, new economy” hype that was extolled in the popular press – and largely by writers with no real business world experience whatsoever to base their prognostications upon. The ones that succeeded, and that in many cases did so after enduring long periods in the pre-profitability wilderness, did so because they capitalized on every advantage they could find and achieve and because they did in fact husband and preserve their liquid assets and resources as they built their way towards success. They were lean and agile as they developed their early stage-accepting markets, and then as they sought out and achieved wider market acceptance and market participation that went beyond the pioneer and early adaptors that they reached and did business with at first.

If I had to pick a single most important lesson from all of this to share here, I have to admit that there are a number of potential competitors for that. The early dotcoms and certainly the poorly conceived and managed ones that I write of here, have proven to be rich and detailed sources of insight for how to do better, and for essentially every phase and aspect of startup and new business development. But a couple of points do stand out that I would focus upon here and now:

• Simply building a business for a new market (e.g. going online) or related business model, does not and cannot make all of the basic experience and knowledge of what constitutes a good business go away. And business founders who believe the hype and who proceed as if gravity were suddenly repealed, tend to find out what is only hype and what is in fact real, the hard way.
• And product and service innovation: innovation in what you would bring to market, demands efficiency in how you build and operate your business, with a lean and agile focus on the essentials and with incidentals – however appealing set aside at least for now and at least until they become realistically affordable. Disruptively novel simply raises the stakes there. It compels adaptation of the best of what is already out there for business practices, and it incentivizes developing new and even disruptively innovative new business practices (and for early dotcoms on working online per se.) I started this point with a focus on product and service innovation. The dotcom examples that I have offered as examples here, did not for the most part offer dramatically new innovative products or services; they offered what they did through a disruptively new channel: the still new-to-most online channel. That absolutely compelled lean and agile, and innovative lean and agile for any new business that was to succeed in this arena.

And with that, I come to a fundamentally important point in this discussion, which I offer here in what are perhaps cartoonish-seeming, but nevertheless significant terms:

• Product and service innovation demands matching business process and practice efficiency, and business process innovation where that can help the organization to keep its focus better than its competition can achieve.
• And disruptively novel innovation can in effect compel the development and use of matching business process innovation.
• Awareness of these points can help a more established business that already has business development funding reserves to use them more effectively and prudently; this awareness can amount to the make or break difference that determines whether an innovative startup or early stage business even survives and certainly when it seeks to form as a source of innovation, and does not yet have any accumulated reserves of that sort that it could take more calculated business growth and development risks from.

Established businesses have it easier here than more lean-of-necessity, new business enterprises. Though ultimately a great deal of both good and best here, and bad and worst are matters of what is sometimes that rarest of all commodities: common sense.

I am going to explicitly discuss early stage businesses and the transition to that first early growth stage in my next series installment. And to clarify what that means here, this is where revenue generation becomes reliably consistent and where it first expands to become a consistent if still modest ongoing profit flow. And as briefly noted but not discussed in this posting, I will discuss communications best practices there. Meanwhile, you can find this and related material at my Startups and Early Stage Businesses directory and at its Page 2 continuation.

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