Two great comments on strategy at startups

By October 18, 2011Uncategorized

I started life as a strategy consultant, which has left me with an appreciation for the power of letting strategy drive your business, but also an appreciation of how difficult that can be to do well.  Len Jordan from Madrona Venture Group has a guest post up on Techcrunch which describes a couple of common mistakes:

Firstly, on seeing the difference between errors in the strategy and problems with execution:

4. Strategy mistakes are harder to admit than execution mistakes.

It’s hard to admit when a strategy is flawed. It’s very easy, on the other hand, to decide that the market, customer and product thesis is correct but sales-and-marketing execution is weak. I’ve seen too many companies delay making a tough strategy choice by first trying to fix the flaw through a change in execution. If execution is flawed, fix it, but look beneath the veneer to make sure the substance underneath is sound.

Assuming the problem is in execution rather than strategy is I think common for three reasons:

  1. People round the board table feel more ownership of the strategy than the execution and it is therefore easier to point the finger at say sales or marketing than it is to admit to making a mistake.  Additionally, if you have venture investors they will have sold the investment to their partners on the basis of the strategy you have, and if it changes they will lose credibility internally.
  2. Strategy changes are more fundamental and harder to make than execution changes.  The whole company needs to re-oriented and sold on the new vision, rather than simply fixing a single department.
  3. Changing the strategy is scary because the new strategy might not work either, whereas if the problem is execution you know that if you fix it you are home and dry.

Secondly, on only having one strategy:

5. The average of two strategies is usually not a strategy.

Whether you have a board or not, you have to commit to a cohesive strategy. In tennis you can play at the net or the baseline, and both can be great strategies, depending on the circumstances. The average of the two — playing in the middle of the court (commonly referred to as ‘no- man’s-land’) — is the worst place to play and is never a good strategy. Too many startups split the difference: They continue with the old strategy, add a new strategy (like a new product), under-resource both and fail at each.

I think it is well understood now that focus improves the chances of success at startups and strategy is no exception.  Yet too many companies keep multiple strategies alive because they feel more comfortable with multiple avenues to potential success.  I’m all for giving yourself the best chance of getting lucky, but it is important to understand the costs vs the benefits.  Over estimating the value of a low probability high impact event is a very natural human tendency (it is why lotteries exist) but it can be cancerous for startups.  Alastair Mackintosh, my first mentor at Gemini Consulting once said to me “strategy is as much about deciding what you are not going to do as what you are going to do” – I still think that is great advice and is very applicable here.  Keeping too many options is always a drag on time and headspace.  Much better to pick one strategy and nail it.

Finally – you may have notice that the quotes from Len’s post are numbered 4 and 5.  The other eight are also well worth reading.

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  • This post is an advert for lean startup methodology, as it should be 🙂