What You Need To Focus On To Ensure Your Tech Startup Succeeds
The failure rates in the startup world remain high. We are entering the age of the Entrepreneur, we have an exploding Mentoring, Incubator and Accelerator market and most of the Educational Institutes are offering courses for entrepreneurship or offering some form of structured program teaching “Lean” or similar “Quick To Market” principles. Yet, the success rates in the sector remain stuck stubbornly around ten percent. Most of the courses, Incubators, Mentors and Accelerators offer similar advice. The terminology and tools used may vary slightly, but the approach remains largely similar, which must mean that all of the advice provided is, on the whole, correct. If you go through these steps, your Idea will be translated into a Vision, which will manifest as a Market Appropriate product offering. If the advice is right and the process you have to follow is well defined, why are the failure rates not diminishing?
Research your Idea well,understand what problem you are solving and who the customer is, do solid market and customer validation to ensure that the offering is market appropriate and that the business is viable and sustainable, and then get to market as quickly as possible.
As you go through the process, you will hopefully have done some research and reading and will follow a fairly well tested approach in launching. If it is available, you will have good support and advice offered by people with the right level of experience that have been there before. Other factors influencing the outcome are Motivation, Resources and Execution.
Motivation is one of the factors that will always be tested at the different stages of a startup and a lot of this comes from your upbringing, background, personal circumstances and the reality and size of the opportunity.
Your risk appetite, risk profile and the market risk will also be factors as they play a large role in defining your level of motivation.
Your risk appetite is partially genetic and is usually set in your formative years – little can be done to shift this and you have to learn to cope with it, or control it. Your risk profile is determined by your life stage and what your financial situation is. This can be managed, planned for and controlled to a large extent as it is a spreadsheet exercise. The last risk factor, the market risk, can be analysed and understood, but will largely be driven by factors out of your control, client behaviour and the competitive landscape. You can plan for a lot of this, but speed to market is usually the best way to mitigate this risk. You can’t compensate for being small by being slow! As an Entrepreneur you will usually have a fairly healthy ego. Other key required behavioural traits, resilience and perseverance, are also factors of Motivation.
The Motivation needs to be high enough to supersede your ego so that you are ready to listen to advice and take feedback when it is appropriate. With the right level of Motivation you can carry on in the face of unfavourable odds, overcome obstacles and bounce back as often as you need to.
All of these factors come together to define your personal drive and define the level of Motivation you have. There is little that can be done externally to provide or shift motivation at the right level so the best you can probably do is test and expose the level of motivation that there is, which is what a lot of Incubation and Acceleration programmes do. You either have it or you don’t, or it could just be a matter of timing.
Resources required are skills, time and cash. With the right motivation, the skills and time constraints can be resolved, leaving cash as one of the larger constraints. Available cash, will, by definition, always fall short of the needs in the Startup market, so this is usually a constant. If you have some cash available, you can use it to compensate for the lack of time or skills. You do need some cash to start a business, and can often find enough to get your product to market, although what you have to risk and what you have to sacrifice varies enormously from market to market.
Accept the fact that you will be resource constrained – that is what makes you an Entrepreneur and what makes the successes in the sector worth celebrating. How you remove these resource constraints will define you and the future of your business.
Execution is the last factor in the equation, and is where most of the challenges lie. When it comes to strategy execution, the success rates in the corporate world are amazingly similar to the success rates in the Startup world. It sits at between 10% and 15%. The difference is that in the Startup, as resources are limited, failure to execute strategy often means failure of the Startup, whereas in the corporate world, as the failure rate to execute on strategy is around 85% and this is the market norm, this leads, by definition, to an average or mediocre performance. Corporates have a lot to gain by executing on a good strategy and little to lose by failing. In a Startup, you have everything to lose by failing and everything to gain if you succeed. If the stakes are so high, why would you not use all the tools available to make sure you succeed?
Strategy Execution is the allocation of available resources according to an agreed list of priorities. It sounds simple, but for a Startup, resources are limited so competition for them is high, on top of this, strategy can change often as you pivot and get to understand the customer and the market. This means shifting priorities. You are in a complex and fast moving market, often delivering a complex solution, so having the skill to decide what to prioritise is not that easy. You also need to get agreement from a team of Founders that is often new and quite inexperienced from a management or entrepreneurial point of view. On top of this, the Founders will usually have different risk appetites and risk profiles that will influence their decision-making. To summarise, you are often in a highly dynamic, complex market with limited resources, an inexperienced team with different levels of skill and motivation and you have to deliver a product to a customer that you have not serviced before in a market sector you have not traded in before. This is the ‘Up’ part of the Startup, as it describes your learning curve. It doesn’t get much more fun than this!
Strategy Execution is all about deciding what needs to get done first and then making sure it gets done. It’s all about focus.
The Vision must be translated into an informed Action with as little stress, debating, vacillating and prevaricating as possible.
Action gives you Momentum and Momentum leads to success. If there is no Momentum, Motivation will diminish, valuable Resources will be squandered, and the Startup is headed for failure. Momentum is the only indicator of success.
If you have the capability to create a plan and execute on it without taking any shortcuts, the chances of success are high. If you do fail, you know you have the tools to fix it and get it right next time. Momentum feeds the Virtuous cycle, where Action leads to a positive outcome that drives Motivation and leads to availability of more Resources to feed the next cycle. This is why funding is often Milestone driven. The Funders invest in the team of people more than the idea, set Milestones and if the team can demonstrate their ability to execute, then they release the next tranche of Funding. This is a classic Virtuous Cycle, but as most Startups don’t get funded, you need to plan to Bootstrap and feed your Virtuous Cycle with paying customers.
For the early stage Startup the steps you have to focus on to succeed are as follows :
Have a great Idea
Validate the Idea with sound Customer and Market Research
Get a Product to market that is Market Appropriate
Sign your first Customer
Make your first Dollar
Once you are in the market and trading, you will have all of the metrics and insight you need to determine the best way forward and how to scale your business and fully leverage the opportunity. World domination is of course the plan, but you need to get your product to market before you set up a holding company, establish multiple lines of business, an extensible brand, get an office with a fountain in reception and become a Billionaire. Speed means that you have to be ‘good enough’ at each step. We all want perfection, but perfection takes time and costs money, all of which are resources in scarce supply.
The first step in your strategy execution will be to prioritise getting to market above being perfect.
To drive more success in the Startup world, Incubators, Accelerators and Thought Leaders need to continue polishing and evolving the processes they have, keep on providing the right level of advice through mentorship in both a formal and informal manner, but the real difference can be made by focusing their efforts and energy on giving the Startups the right tools to execute on their strategy. Knowing what to do next, by when, and in what order, is the foundation for success. Making sure it happens is the key.
Failures in the Startup market are usually defined by saying the timing was wrong, there was not enough cash or the team was wrong. These are all external factors that are seemingly out of control of the Founders.
Failure is usually because you did not get enough done with the resources you had available.
Failure is down to not following the processes the right way and taking shortcuts, which is another way of defining lack of ability to execute. Getting a product to market that nobody wants does not make you an entrepreneur, it makes you a business hobbyist. Great fun, low stress but not a business.
Start with Seven (Sw7) is a process designed specifically to help Startups firstly define and then execute on their Strategy. It provides the simplicity, speed and focus Startups need to succeed in the market. A framework that helps you “Fail Faster” than you thought possible whilst you still have some resources and motivation intact…….that has got to be a good thing, right?
This is the first in a series of blogs that will cover the steps you need to go through, to firstly define and secondly deliver on an effective Strategy for your Technology Startup. For more information visit www.Sw7.co or connect with Keith Jones via LinkedIn.