This is the 6th installment in the Startup Lessons series I have been writing in the wake of my experience with Get Satisfaction. This one is a tough one to write and it is important to acknowledge that when it comes to strategy there is a lot of nuance and the fact remains that you are dealing with a complex multi-variant problem so there is no playbook you can pull off the shelf and just hit go. Having said that, a key failing of startup management teams is the inability to develop and adhere to a strategic planning process that lays out priorities and initiatives that have to be attacked in order to achieve the only metric that matters, growth.
To recap, here is the series thus far:
1) Hiring
2) Dynamic Org Structures
3) Product First
4) Marketing
5) Board Management
6) Tough decisions: Today I want to highlight is the challenge of making tough calls in a startup, decisions that may mean giving up one thing you already have in exchange for something you would like to have. You can’t have it all so you have to narrow down the range of strategies you are executing to those things that sustain the company over the short and medium term, grow shareholder value, and result in a culture of winning. The bottom line is that your resources will constantly be 120% consumed and the only metric that matters is growth, so bias every decision you make to delivering growth
Case in point during my tenure was the observation I made in late 2010 that a reliance on a feature driven packaging approach was hamstringing the company and creating a bias to the direct sales side of the business. Enterprise sales models deliver revenue and there is an extensive library of company case studies on building large businesses off enterprise license agreements but those models don’t deliver customer number growth and coverage across businesses of all sizes.
We kicked this can for a full year – we wasted a year – until we took one step in the right direction and replaced our antiquated billing system. The problem is that this is just one piece of the puzzle and it wasn’t until I took it on myself to start driving change on the pricing model itself that the product, packaging, and pricing aligned. The massively frustrating part of this work was getting people to look beyond the revenue impact in the current customer base. Once we moved beyond the protracted months long debate that centered on existing revenue streams, people got behind it and delivered a thoughtful and well presented agent-based pricing model. and then abandoned it.
This realization helped me understand the human psychology of decision dynamics more than anything else. People, rational and educated people no less, have a tendency to overvalue the thing they already have relative to the thing they are moving to. Looking at the revenue impact of customers moving from high price points to lower price points that are consumption metered misses the point that protecting the existing revenue is not the strategic priority. growing the business is. The risk in allowing the compromise to be driven by existing customer dynamics is that it is is encapsulated by the saying “a camel is a horse designed by committee”. so much gets compromised in order to protect something that you end up in a position that really isn’t much different than where you already are.
When you push out tough decisions that will ultimately never be made with perfect information you are wasting the one resource you will never get more of – time. Assumptions have to be made and decisions fully committed to, the consequences of failing are serious but equally serious consequences result from failing to act when action is precisely what is required. If the decisions and commitments were easy they would already have been made, the fact that teams struggle with tough decisions is not the exception but when you know with certainty that what you are doing today is not optimal and within your capacity to improve, there is no excuse for pushing it for the sole reason that doing nothing is easier until the point when you literally have no choice but to change.
(Cross-posted @ Venture Chronicles)
Startup Lessons: Tough Decisions is copyrighted by Jeff Nolan. If you are reading this outside your feed reader, you are likely witnessing illegal content theft.
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