Startup strategy, do you need one?

Yes, it would help if you had a strategy for your startup. One of my favorite quotes (I have a lot of them) is from baseball legend Yogi Berra “If you don’t know where you are going, you will probably end up someplace else.” Having a startup without a strategy is like heading out on a long journey with no destination in mind. As a result, while your efforts can feel like you are making progress, you often aren’t.

Having a startup strategy is like having a map to navigate with when you are starting. However, on the other hand, spending too much time crafting the perfect business plan often leads to “paralysis by analysis.” Of course, you want to know where you are going, and having a plan is a good idea, but the most critical part of a startup is getting started.

Sourcing the best ideas

In my experience, the best ideas tend to come from one of two places. The first place is where founders have a vision for their business and are living in the future. Secondly, great ideas come from founders experiencing firsthand the pain point of the product they want to develop. In summary, great ideas come from founders who have a vision for the future or solve a problem where they are their first customers. Both idea sources are founder-driven and customer-based.

“The very best startup ideas tend to have three things in common: they’re something the founders themselves want, that they themselves can build and that few others realize are worth doing. Microsoft, Apple, Yahoo, Google, and Facebook all began this way.” Paul Graham

Ideas from founders with vision

One of my all-time favorite blog posts is Paul Grahams’ “What Microsoft is this the Altair Basic of?” This quote from Paul Graham sums up the founder’s vision source of great ideas:

“Often, the founders themselves didn’t know why their ideas were promising. They were attracted to these ideas by instinct, because they were living in the future and they sensed that something was missing. But they could not have put into words exactly how their ugly ducklings were going to grow into big, beautiful swans.” Paul Graham

Ideas from founders who are their first customer

Based on my observations, the second source of great ideas tends to come from founders that are their first customer. The founder recognizes the solution to an unrecognized or ignored problem that they have a way to solve. They live the pain of this problem and have a burning desire to fix it. The founder is their first customer.

Where are the best market opportunities?

The best market opportunities exist at the intersection of tactical customer value creation and strategic market opportunity. Market opportunities usually come from the disruption of an existing value chain or the emergence of a new market. Big opportunities come from changing industries and emerging markets.

There is an excellent quote from the masters of scale podcast with Brian Chesky of Airbnb. In the interview, Brian explained how the founders married the customer experience with an orthogonal industry (Cinema).

CHESKY: I often find that to reinvent an industry, you do not take inspiration directly from that industry, you need to look at orthogonal industries. For us the orthogonal industry for travel was cinema. The best trips you’ve ever seen are the trips that characters in movies have, and we would provide that analogy in real life. I actually literally hired a storyboard artist from Pixar. We had him storyboard the perfect Airbnb experience. When we did that, we realized there was this two-hour movie and only 20 minutes were in the home. There was all this leading up to the home, getting to the airport, going around, going to dinner, or hanging out with friends out and about. Most of the trip was not in the home. We realized at that point, we need to be the end-to-end business of travel. So the same way that we did things that don’t scale, we called it “magical trips.” We decided: let’s find one traveler and create the perfect trip for them.

FEDex an idea that disrupted an industry

In the book “The origin and evolution of new business” by Amir Bhide, there is an excellent description of the origin and evolution of FedEx. Fred Smith, the founder of FedEx, had written a paper in University theorizing the idea of FedEx. Interestingly enough, the paper received a C from his professor because the concept seemed too farfetched. However, after serving in logistics in the military for ten years and then running a small airline for several more, Fred had the industry experience required to launch FedEx. FedEx was a BIG idea that reshaped the transportation industry.

WeWork disrupting commercial real estate

Commercial real estate is a laggard industry and one of the biggest markets in the world. The real estate industry is ripe for digital transformation and new ways of doing business. In light of the recent seismic shift, COVID has introduced us to how we work and the commercial real estate market. The current timing for flexible workspace and coworking couldn’t be better.

Most people that follow the tech industry will be well aware of the drama and intrigue surrounding the WeWork saga. WeWork, one of the most funded startups ever, had to abort their IPO because of many question marks regarding their financials. However, in my opinion, WeWork will bounce back and thrive in a changing industry where remote work is the emerging new norm.

How do I develop my startup strategy?

Start with the customer. I would recommend making sure you understand your customer and the problem you are solving. While this may sound straightforward enough, I have seen many startups start with a solution and try to push it on the market. In my opinion, you are much better off to start with the customer and understand the full scope of the problem first. All of the companies and startups in this article began with the customer first. With a well-thought-out value chain, you can evaluate the position of your idea within the chain. You will want to do some value discovery to figure out what is most valuable to each chain stage.

Start small and think customer!

The following quote by Reid Hoffman nicely sums up where to focus your time and energy when starting. Take the time to learn from your customers and build the best experience you can.

Over the last 20 years, I’ve worked on or invested in many companies that scaled to 100 million users or more. But here’s the thing: You don’t start with 100 million users. You start with a few. So stop thinking big, and start thinking small. Hand-serve your customers. Win them over, one by one. – Reid Hoffman

In summary, yes you need startup strategy.

Start small and think customer. If you see you are starting to get some traction and things look promising, now is an excellent time to investigate the problem you are solving at a higher level. My favorite tools for evaluating a strategic market opportunity are a combination of; competitive analysis, value chain, and stakeholder mapping. These three tools will give you great insights into how you fit in an industry.

If you have a solid understanding of your customer and the idea’s position within the value chain, you are ready to make some pragmatic decisions and develop a launch strategy.