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Startup Planet - Essential Resources for CEOs and Entrepreneurs at Startup and Emerging Growth Companies

Essential Resources For CEOs and Entrepreneurs at Startup and Emerging Growth Companies

Top Ten Rules For Startup Success

What Makes less than 1 in 100 Early-Stage Companies Successful?
By Bob Norton

In my experience, few people understand the many different ways that a start-up must be managed as compared to more mature companies. Decisions must be faster, risks must be higher, and the solutions that are developed must be less complete (80% or less) and more narrowly targeted. During the bubble many "big company" executives were recruited to run startups with little more than an idea and a huge VC investment. This, of course, came back to haunt the investors when they realized too late that running a startup is a very different animal than a larger company. Most of these executives, though looking good on paper and in front of a board, were fish out of water in any startup company, no matter how much money they had in the bank.

There are so many unknowns involved with a new product and market that you must ALWAYS iterate towards the best solution in increments – You cannot pretend to know all the answers up front. Odds are, many, many changes will be required along the way. There must be a trial and error phase to reduce risk and move from theory to real customer feedback and/or market data. In technology this is an alpha or beta test and it is NOT just for debugging. The sooner you can get here the few resources will be wasted. The best entrepreneurs are flexible and can change on a dime so long as it is not the fundamental principal, or the primary customer value proposition they are building their company on.

A startup must be designed and launched quickly, and then, with high quality and bandwidth customer feedback (read quality face-to-face interviews), it must be constantly modified. It is like a heat seeking missile that is always readjusting its course based on the latest radar data. Generally, big companies cannot do this, while startups MUST DO IT so as to leverage their main advantage over companies with larger resources!

Top Ten Rules For Startup Success

  1. Once you start burning cash, and until you reach profitability, time is your enemy. Respect it and limit any product development to a fixed schedule. (You Are Leaking Fuel and at high risk!) If the SR-71 can be designed, developed and launched in 18 months so can your project. Replace anyone who does not believe that they can develop a product in 12-18 months. Most should be 6 months maximum after the team is in place.
  2. Expect, and constantly make, small course changes daily, then weekly, and then monthly. Iterate towards the best customer focused solution until you hit gold and find a solution the customer cannot live without and is different than anything else out there. This means constantly showing potential customers what you have so far. Although many entrepreneurs are paranoid about this, it is clearly a NECESSARY evil. So get a confidentiality agreement signed and share your progress and ideas in exchange for feedback. A startup is like a heat seeking missile and requires constant course corrections.
  3. Be willing to take significant calculated risks and manage those risks aggressively by tracking them closely. Keep a list of major risks and assign each key risk to a specific senior individual to always be thinking about, tracking and managing.
  4. You must remain flexible; do not invest time and money in things that can change rapidly, invest only in those fundamental things that will have sustainable value. Many companies blow resources on things they know will not last because a single customer wants a special feature. Early stage companies cannot afford much of this. Don’t fall into this trap! You must build value long-term by investing in things that will last and apply to many customers, not one. If a customer wants a special feature tell them it is not part of the standard product and we can not resell this work so it will cost you $XXX,XXX, where X is cost plus a very significant margin. Most will back off and if they don’t then you learned a valuable lesson about a market need and gotten the new feature paid, for worst case.



Other Articles On Executive Management and Organizational Development (printable PDF Files):

  1. The 11 Required Elements of a Successful Vision - What is a "Vision" and How to Develop and Use It - (1.3 Meg.  PDF File)

  2. Modes of Management - Shifting Management Gears As Your Company's Stage of Development Evolves

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