Focus on momentum to build the factory, not just the product

Startup success is all about momentum. This is because startups do not have a great starting position to fall back on — they typically start with no customers, a small team, and no viable product. This means that you’re catching up for as long as you’re a startup. You’re catching up to the incumbents you’re trying to disrupt, to the competition which got a head start, to unrelated businesses with whom you’re competing for investment capital.

In a startup, momentum manifests through your growth rate, the rate of improvement for your product and operations, and the rate of learning (because startups operate in an environment of uncertainty, learning is critical). When you’re moving at maximum velocity, it doesn’t matter that others have more customers, a better product, and a lot of intellectual property because you are moving faster than they can, so you will eventually catch up. And, if you are sufficiently differentiated, they will struggle to respond. This is how seemingly unthreatening challenger brands disrupt incumbents in the long run.

The best founders embrace their underdog status. They win by moving quickly and doing things radically different to their competitors. Absolutes are less important for early-stage companies because they are moving swiftly. When searching for product-market fit, they push almost recklessly, committed to learning as much as possible about their market and what could solve its most significant problems. After achieving product-market fit, the best leaders focus more on building an engine for growth rather than implementation details. What matters most is that the company can move quickly, whether it comes to decision-making, revenue growth, or product development. When these areas are healthy, their strategy can be more flexible, and they can adapt to their new learnings and the conditions of the market and ecosystem.

As a leader scaling a product into a discovered market, your time is usually best spent creating the environment for fast-paced growth rather than directly growing the company yourself. For example, in product development, it is critical to build the factory, not just the product. Many companies have built electric car prototypes, but very few have scaled these into production. This is because the organisational competencies required to create a proof-of-concept are different to the competencies needed to scale a product. This applies to software, too. It’s easy to build a simple software product that solves a specific problem for a small audience. Building reliable software that addresses the needs of a big enough market with outstanding reliability can be very different. It usually requires the efforts of many, so things like centralised/top-down decision-making and a tendency toward big bets can stop working. Leaders who work too hard to retain a tight grip on the decision-making of product development outputs are more likely to fail than those who instead focus on building a strong team with scalable operations that can execute without too much direct influence.

The principle of momentum over starting position is applicable to almost any operational challenge in a startup or scale up. A straightforward and achievable first version of something new, coupled with sound operations and discipline to improve it as needed, is usually better than investing significant time into your current understanding of an optimal solution for that problem. A company in need of a process for to solve a problem (e.g., onboarding new staff) is better off implementing a very simple process that can be established in a week, coupled with great mechanisms for feedback to be collected and improvements to be made to the process, than if they were to invest in designing their ideal onboarding process upfront, followed by weeks or months of work to implement this untested process. By focusing on the minimum effective dose solution, you can eliminate most of the problem quickly. By employing solid operations for learning and iterative improvement, you can gradually build towards a more robust and optimised process than you could’ve designed upfront.

13 June, 2022

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