Secrets to STARTUP SUCCESS

HARVESTING LESSONS USING THE FOUR-QUADRANT FRAMEWORK

For an early-stage venture, the question, “What have we learned?” is more important than the question, “What have we done?” As you bring your concept to life, you will move along a learning curve that takes you from passionate belief in your idea to a more basic under­standing of how it plays out in the real world. You get to experience your idea in motion. But how do you make sense of all the informa­tion available? How do you separate the signal from the noise and harvest the right lessons amid the often-overwhelming stress and ur­gency of the startup path?

The four-quadrant framework provides a useful filter to direct and balance your learning across four domains that drive new venture success. Gathering facts, generating insight, and reducing uncertainty in these four areas will reduce your risk and help you position for growth. Build a consistent practice of coming up for air to review your plan and evaluate progress. You can concentrate your learning in the four buckets below, using the suggested questions to stimulate and guide your learning process. Treat these questions as starter list, re­vising and adding to suit your situation.

FOUNDER - As the old saying goes, be careful what you wish for. Many aspiring founders are surprised along their startup journey to learn that the role they envisioned for themselves is not what it was cracked up to be. To ensure that your passion and skills are aligned with your startup challenge, periodically revisit the questions related to founder readiness outlined in Chapter Three with an eye toward what has changed and what is being learned.

■ What are you learning about yourself as a founder and entrepreneur? What are you learning about your founding team? What has been most surprising to you, and how can you apply these insights going forward?

■ What have you learned about your passion? Do you feel the “fire in the belly” or a “weight on the shoulders”? What factors contribute to each?

■ Are you on a path to satisfy your core purpose for making the entrepreneurial leap? Have your reasons and goals shifted? If so, how and why?

■ Where is the emerging fit between your skills, experience, personality, etc. and the requirements of your new venture?

■ How can you better deploy your strengths and cover for your gaps? How are your core team’s strengths and weaknesses playing out in the venture process?

■ Are you bringing your best energy, focus, and performance to your venture? If not, what factors stand in the way and how can you best address them?

MARKET - Without a ready market there will be no venture, so finding your market sweet spot is the primary purpose of early iteration. Here are a few specific questions to ensure that you hear and make sense of what the market has to say.

■ What have you learned about your core customer? Who are they? Who are they not? What motivates them to use your product or service? How are they using it, and what value are they deriving?

■ What have you learned (or what has changed) about the overall market opportunity? What new opportunities and threats are emerging and how might you respond?

■ What have you learned about competitors? Who is succeeding in your space and why?

■ What factors are driving sales (or lack of sales)? What is working or not working about your customer acquisition process?

■ How can you best differentiate your venture and your offerings, based on what you have learned? What is your clearest competitive advantage at this time?

MATH - Once you are up and running and are delivering products and paying suppliers, you can begin to better understand the economic viability of your concept as it plays out in the real world.

■ How has your math story played out so far, compared to the plan? What are you learning about the basic economics underlying your business model and strategy?

■ What key planning and financial assumptions underlie your model and how are these testing out? How might your plans change as a result?

■ What are you learning about the dynamics of profitability and return (R = M x V, from Chapter Five), and what feasible opportunities to increase returns are emerging?

■ What have you learned about your venture’s ability to generate cash? How are cash reserves relative to your plan?

■ What have you learned about required resources and capabilities going forward? How might this impact your strategy, costs, and timelines?

■ What is working well or not working well about your approach to financial planning and controls? How well are you staying on top of the numbers?

EXECUTION - Getting things done in a startup environment tends to be more difficult than new founders expect. A key aspect of your new venture learning curve is mastering the elements that must come to­gether to execute on the business plan and strategy.

■ Talent. Where are strengths and gaps in terms of talent?

Are the right people in the right roles to propel the venture forward?

■ Systems and processes. What’s working well in these areas and where are weaknesses or vulnerabilities? What has been learned about technology opportunities and risks?

■ Teamwork. What are you learning about the role of teamwork in accomplishing the venture’s goals? Where is tight teamwork necessary and where should people run independently?

■ Communication. What communication patterns have developed within and outside the venture? Are goals and priorities clear? Are tough issues being discussed candidly with the right people in the room? If not, why not?

■ Alignment. How well are the goals and interests of key stakeholders aligned with the goals and priorities of the business? Where are areas of misalignment—where personal motivations or needs are in conflict with the business need—and how can these areas be better aligned?

STAY THE COURSE OR CHANGE DIRECTION: PRINCIPLES FOR MAKING TOUGH CALLS

Rapid iteration builds agility into your business, but it’s important to remember that iteration doesn’t always mean change. Iteration means executing on an idea and then evaluating the result. Sometimes the result will suggest staying the course. Some ventures iterate along steady, stable paths where the costs of changing direction seem to out­weigh the value of the change. When dealing with higher-level issues involving major new products, systems, strategies, or business models, entrepreneurs face both higher stakes and unclear choices. As Arthur Rock, a seasoned entrepreneur and venture capitalist, wrote in his classic 1987 Harvard Business Review article, “There’s a thin line be­tween refusing to accept criticism and sticking to your guns.”12

Here are a few principles that apply to the challenge of how to make tough calls when faced with difficult forks in the startup road:

■ Establish a balanced set of decision-making criteria that re­flect your longer-term goals and the fundamentals of venture success. Before becoming attached to a potential solution, ground yourself in what you are trying to accomplish and what is most important for the overall venture. A few exam­ples: How does the potential change align with your passion, purpose, and capabilities as a founder? How well does it align with market realities? How does it perform from a customer and market perspective? How will it impact cash flow and your overall math story? How easy or difficult will it be to successfully execute?

■ Strive to generate multiple alternatives from which to choose, rather than impulsively going with the first change or solu­tion that comes to mind. It usually takes little time to gener­ate and consider additional options, and this almost always improves the quality of the decision.

■ Distinguish facts from opinions. As you consider and discuss your options, flag assertions or assumptions not supported

By data. While intuition plays a valuable role in informing your choices, be clear about what data are available to either support or disconfirm your “gut.”

■ Design experiments or pilots to gather additional data and

Work out kinks. Even the most sweeping decisions can usu­ally be tested first on a smaller scale. Rather than committing to a major new partner, for example, try selling and delivering a few projects together to test compatibility.

■ Preserve future flexibility where possible. Not all commitments are created equal when it comes to future implications. Will this choice lock up a major chunk of your resources with no ability to adapt? Consider how best - and worst-case scenarios might play out over the longer term and how you can weather and adapt to problematic outcomes.

■ Delay important decisions until the last responsible moment. This is a popular principle among technologists and system designers, who understand the importance of decisiveness in the startup environment. But additional time often brings new data or information that can substantially transform the quality of a solution or a choice, so allow critical choices to “season” as time allows.

Secrets to STARTUP SUCCESS

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