Platt Perspective on Business and Technology

Building a startup for what you want it to become 24: moving past the initial startup phase 10

Posted in startups by Timothy Platt on June 15, 2017

This is my 24th 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 1-23.)

I began explicitly discussing three basic business model approaches in Part 22 and Part 23, that I continue to address here in this posting too:

• A conservative business model,
• A normative business model, and
• An aggressive business model.

And I begin this continuation by repeating a crucially important point of explanation made in Part 23, that is often overlooked as people make unexamined assumptions as to what words like “conservative” and “aggressive” mean, and certainly in a business context:

• Conservative in this does not necessarily mean building for reduced overall risk, and aggressive does not necessarily mean building from a more risk accepting and risk tolerant perspective, and it does not necessarily mean accepting more of it – even if that can be the case when making specific comparisons between specific businesses.
• The real distinction here can in fact simply be one of where the risk that is allowed for, is considered acceptable in the business’ overall operational systems.
• (Following up on my Part 23 new manufacturer example), would risk be best accepted in the form of reduced liquidity with its consequences, in order to better safeguard here-and-now production line continuity, or would it be best accepted in the form of allowing for greater risk there in order to safeguard liquidity levels – that would now be more readily available to meet other business needs? This is where business planning has to be comprehensively inclusive and where it has to take into account all anticipatable factors.

I began addressing a key defining and organizing term in Part 23 that I pick up upon here as I continue this narrative: “essential.” If I were to distinguish between the three basic business models under discussion here in terms of one word, it would be in noting how their owners and managers variously find meaning in that one. Business owners and managers, and from senior executives on down, seek to optimize what they are doing and what they are building for, in terms of their understanding as to what is essential and what is most essential and certainly in their immediate here-and-now. But they can systematically differ in where and how they use this type of word and both in that immediate here-and-now and as they plan forward and for their longer-term too, and certainly when making comparisons between same-type and same-level managers or executives as they work in businesses that follow different business models, according to the tripartite business model distinctions made here.

I have already been considering this from a risk management perspective, even as I have left out that terminology in the last two postings. I explicitly apply this label with its baggage of associated assumptions and presumptions here, where I will more generally consider the issues of stability and opportunity, as pressures towards them can come into alignment and as they can come into at least apparent conflict too. In anticipation of that discussion to come, I will continue to focus on first steps that businesses take when entering their first early growth phase and for the three basic business models under consideration here. And as part of that, I note here that where stability and opportunity and the benefits side to what would enter into a more traditional SWOT analysis, offer a roadmap to where a business seeks to go, risk and threats and potential weaknesses inform how and when and according to what timetable this might be carried out along.

I begin all of this with consideration of timeframes and the question of how far forward, strategic and operational planning would be carried out. The farther out you look and seek to predict and plan, the greater the uncertainty you have to accept and for reasons that arise both internally to your business and from its and your own outside contexts.

• Short term and even essentially here-and-now analysis and planning: tactical analysis and planning can offer real clarity of vision, but do so at the cost of not helping you prepare for new and emerging contexts or contingencies as they arise over time, and often even where simple longer-term change can accurately be predicted.
• Long-term planning has to be able to accept and even actively accommodate alternatively arising contexts, and the possibility that none of the predictive models considered might actually become the reality actually faced. Disruptive novelty and change can arise at any time and in a seeming instant; but the odds are greater that this will have to be faced, the farther forward you plan and predict into and the longer the timeframe you have to allow for.

And this brings me to the key words of this posting’s discussion: “stability” and “opportunity,” or at least planned for stability and predicted opportunity – where this means predicted paths forward in business development that would be expected to maximize value achieved, with ongoing stability while accomplishing that.

• New and still forming and developing businesses carry a significant level of risk in all of their decisions and actions that they take, and certainly insofar as those decisions would impact upon their working budgets and the levels of reserve funds that they might have.
• Ultimately, “essential”, “stability”, “opportunity” and I add “risk” and “cost” are all terms that are financially grounded, and that are most firmly grounded in liquidity terms.

That, I add is a very fiscally conservative assertion; when a business has lean financial reserves, a measure of such conservatism can be essential as a due diligence and risk management position. But let’s consider non-liquid assets, and assets that can only become explicitly financial assets of any sort, over time and as a business actually develops and begins to succeed. And the most important such assets in general and essentially categorically for any startup with potential, is the set of ideas and concepts, vision and understanding that could be developed into a unique value proposition that would make this new venture stand out.

I return here to the absolute essentials here: if you want to build a startup and make a successful go of it, find a path forward in what you could offer to a marketplace that would be uniquely yours, and develop your business into that. Don’t strive to be the 17th best business in town in the business sector that you would build into and the 17th best for offering an already readily available product or service; plan for and strive to be the best, and even the first and the best possible for what you can specifically offer, and with a point of distinction in what you do and offer that the consumers of a marketplace would see as offering special new value to them. And this brings me back to the main thrust of argument of this posting, and to stability and to the uncertainties of longer timeframes:

• On the one hand you need to be prudent and even conservative in managing your resources,
• But on the other hand and at the same time, if your do not take risk and invest towards fulfilling the potential of your initial dream: building to realize your new and novel and value creating vision of what you could accomplish, then conservative management of the resources that you have in place will not help you and certainly long-term.

Success here means finding and reaching an effective balance between taking a conservative and a risk-taking approach. And with this, I return to the notion raised in Part 23 of the normative business model, as noted at the top of this posting, as representing finding an effective balance point between conservative and aggressive, and with a goal of taking the best of both in finding what is hopefully a best combination for you.

I am going to continue this discussion in a next series installment where I will focus on making business analysis more data-driven. And I will delve into the questions and issues of where this source of raw material for insight would come from in a new business setting – and how it would be used 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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