Issue No.51: Are you ready to be a "Business?"
Why it matters for Strategic Leadership?
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There are risks associated with rushing to establish as a “Business”.
There are multiple reasons why it occurs that should be acknowledged, including:
📈 The need to demonstrate success metrics
🤔 The expectations that you only exist as a startup for 3-5 years
💰 For shareholder management with investors.
However, having now worked at a startup and been an owner operator of a small business, I see the wish to establish as a Business too quickly as challenging. This is specifically in relation to strategy and performance management.
In essence, Strategy and Performance Management differ significantly between Startups and established Businesses due to differences in resources, goals, market position, and operational structures.
What does this look like in detail?
1️⃣ Strategic Focus
Startups should prioritise growth and especially market fit. As a result Strategy may be more experimental, dynamic and with frequent pivots based on feedback.
In comparison, an established Business can focus on sustaining competitive advantage, optimising operations, and scaling. Strategy is therefore more structured and planned.
I believe all businesses should be looking to harness the power of data as early as possible in their journeys.
2️⃣ Goal Setting
Startups have flexible goals and a regular cadence of change. The goals emphasise events happening in the short-term future, for example, securing funding and achieving product-market fit.
Established Businesses can utilise longer term planning, often with annual or multi-year strategic goals focused on market leadership and profitability.
I believe all businesses should adopt a hybrid approach as a year is a long time to be heading towards the wrong goals.
3️⃣ Performance Metrics
Startups tend to measure success through growth metrics. Therefore, profitability will be secondary to growth whilst scaling.
Alternatively established Businesses use financial KPIs like revenue, profit margins and return on investment, alongside operational efficiency and customer satisfaction.
I believe all businesses do need to take a balanced approach, combining growth metrics with margins, whilst always keeping the customer at the forefront of decisions.
Bridging the Gap
What can this look like in practice for Strategic leadership?
Startups tend to follow a more agile decision-making approach with a high tolerance for uncertainty that requires quick adjustments based on real-time data. Established Businesses make decisions through formalised processes.
Startups have limited resources that forces prioritisation of activities. Established Businesses have the capacity to invest in multiple initiatives.
Startups have dynamic structures that encourage innovation and adaptability, where employees often wear multiple hats. Established Businesses have more policies, and performance management frameworks to ensure consistency.
Startups encourage a high degree of experimentation, and failure is often seen as a learning experience. Established Businesses are more risk-averse and focus on protecting market share.
Startups require adaptable and risk-taking leaders who can navigate uncertainty and be more flexible. Established Businesses focus on managing complexity and ensuring stability through structure.
From Startup to Scale
In summary, all Businesses should operate with agility and experimentation for as long as possible. While established Businesses will be able to shift the focus towards efficiency and sustainability at an earlier point. In the volatile and uncertain world that now exists, I am encouraging myself to blur the lines and have a more mixed approach, adopting Startup mentality and experimentation, for as long as possible in a business.
"It’s not an experiment if you know it’s going to work" – Jeff Bezos
What are your thoughts on the differences between Startups and established Businesses?
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