Secrets to STARTUP SUCCESS

Startup Agility

Executing with Focused Flexibility

“A startup is an experiment: An inquiry into how the world might look under the vision of the startup's founders."

—Eric Ries, Co-Founder, IMVU

Despite the eagerness and optimism of passionate entrepreneurs, there is no such thing as a sure thing. Each new venture is a learning lab in which the founder’s ambitions and ideas are tested against mar­ket realities and cold financial facts. The birth of a business is an in­herently creative process in which possibilities are generated, torn apart, refined, and reconstituted, all to adapt to environmental un­certainty that will persist long after the startup phase.

Passionate founders must especially guard against betting the bulk of their resources onto a singular, unforgiving strategy. As we move into the second decade of the twenty-first century, commercial mar­kets are increasingly turbulent due to the transformational effect of technology on all facets of business and life, redefining how products and services are designed, produced, purchased, delivered, and serv - iced.1 Amid this uncertainty, executing with agility is more vital than ever.

In 2006 and 2007, Mark Williams and his team poured their time, energy, and capital into building out a range of learning products for Apple’s click-wheel iPod, creating digital versions of well-known ti­tles, such as Netters Anatomy for medical students, Frommers Travel Guides for vacationers, and BrainQuest digital flash cards for kids. The click-wheel device would soon seem as ancient as the rotary phone, but in 2007 it remained one of the hottest mobile devices on the planet.

As 2007 drew to a close, Modality’s early product sales were slug­gish—not nearly enough to cover its monthly burn rate—but Mark and his team remained optimistic because of advances in several areas. The iPod’s internal architecture was virtually closed to third-party developers, so Modality built software that would write content di­rectly to hidden database files on users’ devices. Although technical barriers prevented Modality from selling products through Apple’s iTunes platform, it created a web portal to allow iPod owners to di­rectly buy and install the company’s products. And, in a move that symbolized its growing support, Apple provided a spot in its popular retail stores for a test run of Modality’s BrainQuest learning products.

Thanks to the team’s passion and tenacity, Modality was begin­ning to gain momentum. It had finally figured out how to sell and dis­tribute early products, and relationships with Apple and publishing partners were improving week by week. Mark Williams looked toward 2008 as the year when his team’s innovation and persistence would pay off.

But in January of 2008, he learned that paradigm-rattling changes were on the way. After years of closely guarding the operational guts of its devices, Apple was preparing to open up the iPhone to software developers around the world. The company planned to release a Soft­ware Development Kit (SDK) in March, hoping to spark a flood of innovative iPhone applications from both professional and amateur programmers. Mark had kept an eye on the iPhone since its release six months earlier, thinking it would be the next logical device for his products. But Apple’s 180-degree shift from super secrecy to wide - open invitation caught nearly everyone by surprise.

Apple’s turnabout presented a painful choice for Mark and his team. Switching their full focus to the new iPhone would mean stalling, and ultimately abandoning, their hard-won progress on the click-wheel frontier. But staying with the click-wheel iPod would leave them as undisputed masters of a once-great but forgotten tech­nology. Mark decided to give up his “bird in the hand” in hopes of seizing what new opportunities might lay in the bush.

The next few months were a whirlwind of innovation, salesman­ship, and surprise for him: Trips to Cupertino, California, to share his iPhone-based prototype with Apple; word from Apple that Steve Jobs loved the prototype; and then an invitation to join Jobs on stage at Apple’s World Wide Developer Conference (WWDC) in June. The June 2008 WWDC functioned as a coming-out party for the AppStore distribution channel and for the new generation iPhone. When called upon, Mark took the stage and made the most of his twenty minutes, walking the audience through a demo of the Modality Netters Anatomy application that featured high-definition, colorful, zoomable screen shots of human heart, brain, nerve, and bone anatomy. Apple’s online AppStore, the channel that would forever change the face of mobile computing, would soon make its debut, featuring Modality’s first iPhone-based Netters Anatomy digital flash cards priced at $39.99.

Mark had bet big on the iPhone and the AppStore, and he needed a significant revenue payoff to make it worthwhile. “If we don’t get a good bump from this,” he said at the time, “we might need to talk about how to close this thing down.” Fortunately, by mid-August, sales had gone through the roof: five Netter’s Anatomy titles alone had grossed more than $600,000 for the month of July. For the time being, Modal­ity had survived a dangerous blow, and had positioned itself as a force to be reckoned with in the emerging mobile learning space.

Mark Williams’s story illustrates a common experience for entre­preneurs, who must often let go of cherished strategies or hard-earned assets in order to seize new opportunities and deal with emerging threats. With the benefit of hindsight, Mark’s decision to aggressively redirect his resources into iPhone development seems like an obvious move, a no-brainer. But at the time, it meant trading away a newly sta­ble platform for a disrupting dose of uncertainty. It required a psy­chological openness to change and a high degree of operational agility, attributes that would continue to be vital as Modality’s operation grew in size and complexity. The broader lesson here is that highly success­ful ventures almost always diverge from the founder’s original inten­tions, a fact that places a premium on openness, learning, and agility.

In this chapter I’ll outline two core attributes that drive strong and agile execution. The first is an ability to manage the paradoxical ten­sion between whole-hearted commitment and wide-eyed flexibility. The second is developing a healthy approach to iteration, meaning that you rapidly iterate your business idea, capture lessons learned, and capitalize on your learning by making smart, tough calls about how to change your product, your business model, or, in certain cases, your venture’s core identity.

Secrets to STARTUP SUCCESS

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