You’ve probably heard at one point or another that the key to startup success is execution. I’ve said as much myself. In the harsh reality of building businesses, ideas are commodities and successful business models are luxury goods. Except that isn’t entirely true. While inspired execution can determine success or failure, this only happens after a working business model is discovered. If you’re a bit puzzled, fear not. This distinction only became clear to me quite recently, after reading Steve Blank’s wonderfully insightful article for The Atlantic, “The Entrepreneur’s Identify Crisis: How to Find a Purpose and Execute It.” (Do yourself a favor and read the post and the content to which it is linked. I did, and benefited greatly from doing so.)
The key idea is this: the purpose of a startup is to find a workable business model. Full stop.
Of course, an entrepreneur will have a vision of the business she wants to create and hypotheses about how the components of a successful (read scalable and profitable) business model will work together—customers, distribution, pricing, partnership, financing, etc. But ultimately, hypotheses will be tested and validated until the model generates the results that the entrepreneur predicted, or they will be re-tested and amended based on market feedback. Once the elusive product-market fit is achieved, execution begins.
Here’s the kicker. Searching and executing are two entirely different activities that require distinct perspectives on strategy, process and organizational development. The good news is that search and execution are complementary approaches; you do one to get to the other. This is not to say that great execution isn’t important when one is searching. Poorly-constructed hypotheses and uninspired customer development will get you nowhere fast. However, when a startup enters execution mode, the assumption is that it has the reached the point where it can deploy standardized techniques to drive its business model.
Shall we work through the logic with an example? Let’s say I’m an entrepreneur who’s developed a mobile app designed to help upwardly-mobile professionals categorize their network contacts by level of importance and frequency of desired engagement (high, medium, low) as well as type of engagement (phone call, email, information sharing). The app will also create an internal network-based market for matching people who need assistance with folks who have the requisite skills and knowledge to provide it. (For those of you who might not know, favo.rs addresses some of this. To launch this business, I’ve generated the following hypotheses:
- Users. My target market consists of 35-44 year old professionals who currently use tools like LinkedIn to visualize their networks. I will leverage APIs from LinkedIn, Facebook and other networks to upload users’ contacts to my platform.
- Distribution. The app will be designed to operate on all Android devices, due to the open-source nature of the operating system.
- Pricing. While the basic app will be free for users, revenue will be generated through advertising and up-selling to value added services such as integrated network visualization tools.
Clearly, many more assumptions would be required to get this business off the ground, but this a good start.
What do you think will happen if I channel all of my resources into making this enterprise work?
In other words, I develop an execution focused-strategy based on a static business plan and financial forecasts; I proceed through a standard product development process to get the app developed; and I organize my fledging company into departments such as sales, marketing, and finance. Well, if I’m lucky I’ll have stumbled upon the “right answer”, market uptake will be swift and exponential, and I’ll be selling my company to the highest bidder in 18 months or less ala Instagram. However if my company’s growth curve matches that of a typical startup, my first business model will probably evaporate under real market conditions and I’ll be back to the drawing board before I resolve my first user complaint.
As shockingly undesirable as this may sound, it’s not a bad outcome—if I’m expecting it. In that case, what could I have done differently? First off, I would have grounded my efforts in a search-focused strategy that assumed my vision and business model were testable hypotheses. Next, finding the right customers and developing the right product would have superseded any attempt to follow a standard product development process. Finally, my team and I would have organized around competencies that would best enable us to articulate, test, and modify our hypotheses.
See the difference? While I’m not suggesting that the Search/Execute dichotomy is the “be all, end all” of startup development, it will help you ensure that your strategy, processes, and organizational structure are aligned with your goals. And that’s not a bad start.