Monthly Archives: October 2011

The Pre-Startup Checklist

Posted on by
312


Before a startup ever launches, you should have a checklist of critical items in place. These items have nothing to do with writing a business plan or forming the articles of incorporation. In line with the old saying “well begun is half done,” without these basic requirements, the venture won’t get off to a successful start. Even worse, ignoring this checklist can lead to your investing a lot of capital, time, and energy – only to find out that you’re doing the wrong thing, with the wrong team, at the wrong time.

The Real Difference Between Startup and Pre-startup

I’m going to define the core difference between startup and pre-startup using a single word: commitment. Commitment means that the entrepreneur and founding team have taken a real risk to make the business happen. They are clearly and unequivocally in. It’s Dodge City or Bust. Without commitment, the venture will remain stuck in pre-startup mode – as an idea that will never be actualized.

For example, I recently had coffee with an old colleague who wanted to talk about his new “startup.” He had written a business plan, registered a domain name, and was seeking advice on raising capital and building the technology. He was still working at his day job, where he planned to stay while building on the idea in his spare time. As we talked, I could tell that what he really wanted was someone with whom he could discuss the idea – to explore it further and get another perspective. He was still just trying it on and not yet fully committed.

You can always tell if someone is committed to a new venture by his or her actions. Have they taken a significant risk such as quitting their day job or putting their own money into it? Are they excitedly and constantly talking about the opportunity? Are people rallying around their cause and vision? These are all great signs of commitment – and that’s when you know you’re in startup mode. With them, a new business can be born and has a chance of success. Without them, you’re still in pre-startup or it’s a non-starter.

Continue reading →

The Stages of the Execution Lifecycle

Posted on by
289

Keep climbing the mountain


Navigating your company up the execution lifecycle 1 and keeping it in optimum shape is a great challenge. This article will show you how to do it successfully.

The stages of the execution lifecycle become easier to understand with a little pattern recognition. Basically, every business must shape or respond to its environment and it must do so as a whole organization, including its parts and subparts. If it doesn’t do this, it will cease to exist. Recognizing this, we can call out four basic patterns or forces that give rise to individual and collective behavior within an organization. They are the Producing, Stabilizing, Innovating, and Unifying (PSIU) forces. Each of these expresses itself through a particular behavior pattern. The combination of these forces causes the organization to act in a certain way.

The four forces of Organizational Physics.

Just like the other lifecycles, the execution lifecycle exists within a dynamic between stability and development. The basic stages of the execution lifecycle are birth, early growth, growth, and maturity and, from there, things descend into decline, aging, and death. The focus within the execution lifecycle should be to have the right mix of organizational development and stability to support the stages of the product and market lifecycles. That is, the lifecycle stage of the surrounding organization should generally match the lifecycle stage of the products and markets. If it’s a startup, the surrounding organization is the entire company. If it’s a Fortune 500 company, this includes the business unit that is responsible for the success of the product as well as any aspects of the parent organization that influence, help, or hinder the success of the product.

The stages of the Execution Lifecycle.

The surrounding organization should act a certain way at each stage of the product/market lifecycle, as you’ll see below. Note that, when a force is or should be dominant, it will be referenced with a capital letter:

• When piloting the product for innovators, the company should be in birth mode and be highly innovative and future-oriented (psIu)
• When nailing the product for early adopters, the company should be in early growth mode and be producing verifiable results for its customers (Psiu)
• When beginning to scale the product for the early majority, the company should be standardized and operations streamlined for efficiency (PSiu)
• When fully scaling the product for the early majority, the company’s internal efficiencies should be harnessed, as well as the capability to launch new innovations and avoid the commodity trap (PSIu)
• When milking the product for the late majority/laggards, the company should use the proceeds from the cash cows to launch new products into new markets that will in turn progress through their own PSIU lifecycle stages.

Continue reading →

Lifecycle Strategy: The 3 Strategic Follies

Posted on by
1


There are three classic strategic follies that cause companies to fail in their strategy execution. Essentially, all three strategic follies occur when a company attempts to bypass the long way around the product, market, and execution lifecycles and tries to find shortcuts instead. The three strategic follies are the Face Plant, the Flame Out, and the Lost Opportunity.

The Face Plant

The first folly is what I call the Face Plant. This happens when an entrepreneur is innovating on a product but targeting a commodity market. The company foolishly spends resources to solve a problem that the market views as already having been solved. The company doesn’t establish thought leadership in quadrant 1 and it doesn’t nail it and prove that it can solve the underlying problem in quadrant 2. Therefore, it doesn’t understand the true customer spending priorities and fails to create a product that meets them. It never establishes profit margins in quadrant 3 and so it comes into a commodity market against better-financed and more robust solutions, quickly getting crushed by those vendors with a more complete service offering.

Avoid the Face Plant.

It’s obvious that you don’t want to pilot a product directly into a commodity market. After all, no one in their right mind would invest innovation dollars into land-based telephones today (Note: Some entrepreneur may, in fact, invest in new land-based phones but they would do so by discovering a disruptive opportunity in the process of going the long way around the strategic path). What happens to many entrepreneurs is that they are so focused on product development and product features, that they don’t simultaneously validate and develop a market. They have a product in search of a problem. If the company isn’t testing, selling, and validating its early product prototypes with innovators and early adopters, then it runs a high risk of falling directly into a commodity trap.

Continue reading →

Lifecycle Strategy: How to Tell if You’re Doing it Right

Posted on by
360

In my previous post, I introduced the product, market, and execution lifecycles and why a successful strategy must align them. Now we’ll take a look at the four key indicators that will tell you if you’re on the right strategic path. The key indicators, which must be taken into account at each lifecycle stage, are Market Growth Rate, Competition, Pricing Pressure, and Net Cash Flow.

Four key metrics guide the timing and sequence of your strategy: Market Growth Rate, Competition, Pricing Pressure, and Net Cash Flow.

Let’s take a visual walk around the figure above and see how the key indicators work. First, notice that when you’re piloting your product for innovators in quadrant 1 you should be in negative cash flow. The total invested into the product to date should exceed the return. The market growth rate should be low because you’re still defining the problem and the solution for the market. Therefore, the competitors within your defined niche should be few both in number and capabilities. Consequently, the pricing pressure will be high because you haven’t defined the problem or the solution, so you have no ability to charge enough money for it at this stage.

Continue reading →

The Strategy Pyramid: What’s Behind a Successful Strategy

Posted on by
330

A successful strategy aligns the stages of three lifecycles: product, market, and execution. (E) is new energy from the environment.

Everything has a lifecycle. It is born, it grows, it ages, and it ultimately dies. It’s easy to spot a lifecycle in action everywhere you look. A person is born, grows, ages, and dies. So does a star, a tree, a bee, or a civilization. So does a company, a product, or a market. Everything has a lifecycle.

All lifecycles exist within a dynamic between system development and system stability. When something is born, it’s early in its development and it also has low stability. As it grows, both its development and stability increase until it matures. After that, its ability to develop diminishes over time while its stability keeps increasing over time. Finally, it becomes so stable that it ultimately dies and, at that moment, loses all stability too.

Everything follows a lifecycle that is a tradeoff between development and stability.

That’s the basics of all lifecycles. We can try to optimize the path or slow the effects of aging, but ultimately every system makes this progression. Of course, not all systems follow a bell curve like the picture above. Some might die a premature death. Others are a flash in the pan. A few live long and prosper. But from insects to stars and everything in between, we can say that everything comes into being, grows, matures, ages, and ultimately fades away. Such is life.

What do the principles of adaptation and lifecycles have to do with your business strategy? Everything. Just as a parent wouldn’t treat her child the same way if she’s three or thirty years old, you must treat your strategy differently depending on the lifecycle stage. And when it comes to your business strategy, there are actually three lifecycles you must manage. They are the product, market, and execution lifecycles.

  • The product lifecycle refers to the assets you make available for sale.
  • The market lifecycle refers to the type of customers to whom you sell.
  • The execution lifecycle refers to your company’s ability to execute.

In order to execute on a successful strategy, the stages of all three lifecycles must be in close alignment with each other. If not, like a pyramid with one side out of balance, it will collapse on itself and your strategy will fail. Why? Because aligning the product, market, and execution lifecycles gives your business the greatest probability of getting new energy from the environment now and capitalizing on emerging growth opportunities in the future. (I discussed in a previous post that the goal of any strategy is to get new energy from the environment, now and in the future.) As you’ll see, aligning all three lifecycles also decreases your probability of making major strategic mistakes.

Continue reading →

The Goal of Any Strategy

Posted on by
333

It's not survival of the fittest. Success goes to the best adapted.


Every potential business strategy has the same ultimate aim. This is true whether you are trying to sell your business, go IPO, enter a new market, raise venture capital, hire top-notch talent, fend off competitors, manage increasing regulations, win an industry award, or create the next hot startup. It doesn’t matter what the strategy is — the goal is always the same. This goal is also independent of time or context. It’s just as true in recessionary times as it is in boom times. It was true one million years ago and it will be true one million years from now. So what is this goal of strategy?

The ultimate goal of any strategy is to acquire new energy from the surrounding environment now and in the future.

The evidence for this comes from the most fundamental tenant of evolution: adaptation. Before we continue, let me clear something up about evolution. When most people think of evolution they think of Darwin. And when people think of Darwin, they usually recall the term “survival of the fittest.” However, Darwin himself never used that term. Well, that’s mostly true … Darwin only used the term late in his life to refute the notion that success goes to those most fit. Instead, what Darwin made clear is that survival (and prosperity for that matter) goes to those most adapted to their environment. If there’s good adaption or integration with the environment, then the species will flourish. But if the environment changes and the species can’t adapt, it will fail. That’s why you’re reading this – and not some brontosaurus.

Continue reading →