How to keep your focus?
The biggest asset any startup has is the time of its entrepreneurs and key talents. The success or failure of the startup often hinges on their ability to focus their efforts on the critical path at any given time. The challenge is the abundance of opportunities that seem to have a promising potential to make the future of the company. Crystalizing everyone’s energy to focus on what’s important is what separates stars from dust. As the startup grows and faces scalability and growth challenges the issue of focus becomes even more challenging. Now you have more talents involved, more items on everyone’s to-do lists and more temptations…
Here are some examples I faced as CEO, entrepreneur, and advisor / mentor:
A fintech growth-stage company with a growing albeit challenging business in one segment, has been presented the opportunity to bid on a small project of a leading global corporation in an adjacent segment that requires significant product changes.
2 unexperienced entrepreneurs have a great idea for their first startup. POC looks great and so is the initial feedback from early adopters. They seem to have validated initial value and growth assumptions, showing a promising product-market fit. They are torn across seeking investors, continuing bootstrap and expanding the team.
SaaS Startup that has landed its first couple of paid piloting customers overseas, has the opportunity to get into a small local project that has much less risk and much better chance to provide meaningful feedback over time.
An early stage impact startup with zero resources, that developed a prototype product for 3rd world countries, has been approached by a large global NGO to start a long and demanding process of collaboration.
An IoT B2B startup that developed a leading MVP and initial user base has raised $10M from private investors. Its product isn’t ready for scale, its team is not staffed for sales and it has yet to establish its positioning. Not sure where to start.
A super lean healthcare startup built a successful MVP funded through non-dilutive grants and competitions, is gaining very nice and viral market traction but too small to support product development. Facing a dilemma to invest in raising money or bootstrap and risk losing first mover advantages.
Entrepreneurs are optimists, we have to be. Seeing the positive outcome of opportunities where others do not, is what defines this profession. That is why the abundance of opportunities with potential positive outcomes is most challenging. You may read these examples and say “that’s easy: yes, yes and yes, do it all”. In an ideal resource endless world, that would be true, but startups and growth companies are far from such utopia. The challenge is to decide, and it is not by chance that the word decide is made up of the French “-cide” or Latin “-cida” which mean “killer, cutter, slayer…”. We don’t like to kill opportunities…
Over time I learned the 2 most important things for creating something new are: passion and focus. Passion is your reason for doing things, your motivation, your own personal answer to the big Why question – why am I doing this?. It is also the gravitation for team building. The other important thing is focus. Focus has two parts to it: What you need to do and When do you need to do it.
Start with Why
Simon Sinek talks nicely about this on TED. Why is inspiring he says. Why is also motivational, your desire for a change, a vision that you need to give birth to. This means that the first thing you do when assessing any new opportunity that requires a ‘killing’ decision, you first measure the alternatives up against your “why”. Is it aligned with your passion? Does it serve the goal you set out to achieve?
The Why question helped the 2 unexperienced entrepreneurs in the example above. After some work with me as a mentor, they realized that their main goal is to learn from the current experience as much as they can. They were very young and enthusiastic. I posed to them 2 possible scenarios: in one, they brought onboard an experienced CEO and investors who led the startup to an exit that rewarded them nicely; in the 2nd scenario, they kept at it on their own, stumbling and falling, learning a lot, and eventually another company beat them to it. So now they had to choose if, in 2-3 years’ time they want to be rich or experienced? They chose the latter, and that helped set the tone for all other decisions.
In the healthcare example above, the Why question also helped. As founders, our passion was to create a tool that can help families in similar situation to what we personally encountered. The niche nature of the field meant that raising funds was going to be a long and challenging process. Realizing the Why can be achieved by bootstrapping helped put some priorities in place: losing first mover advantage was not that important in this context (i.e. if somebody else would copy the idea and run with it faster, the goal of helping others would still be achieved…). Focusing on bootstrap growth was better aligned with our passion (too bad it took me a year of chasing investors and VCs to realize this…).
Focus – What
As a leader of an organization you need to take care of all its value chain. Simply putting it, you can bucket your assignments into 4 areas:
- Product (including R&D, IP, regulation etc.)
- Business (including all sales, marketing, biz dev etc.)
- Financing (including raising money, budget planning, admin etc.)
- People (recruiting, inspiring, managing etc.)
Having worked in management consulting for several years, I realize this is a bit simplistic but this is not an MBA class… this needs to be a practical tool that non business-trained entrepreneurs can follow easily.
The interesting part is the movement across these 4 areas. You can place these areas in 4 quadrants and spiral your way out. For most entrepreneurs the starting point is people = partnering with co-founders. Then you move on to the next quadrant, product. You plan and build a POC (proof on concept) or MVP (minimal viable product). Then you move on to business (or market) where you test your POC / MVP and adapt some of your assumptions. After you have spent enough time bouncing back and forth between product and business, and assuming you survived these bounces, you come out with some product market fit. Now you are ready to move on to finance and try to raise money for this little baby you have in your hands. This might not be the same sequence for everyone but it is very similar.
The thing is, that you need to remember you are only in your first spiral cycle. It does not matter how many times you bounce back and forth between product and business, or if you replace or add another co-founder on the way. You are still in your first cycle. Most people lose their energy and resources somewhere along the way. But if you do survive and make it to the first significant financing, you immediately start the second iteration. You go back to expand the team, build more of the product, test it some more in the market and hopefully start to test some of your growth and marketing plans. This again is simplistic but it works for most.
Focus – when
The spiral model helps you keep your focus. You have to remember at all times what cycle you are at. If you are now starting out, then your goal is to get to an initial MVP with validating problem-solution (i.e. product-market fit). This means that any opportunity that does not serve this current cycle is given lower priority. This approach helped the impact entrepreneur with the NGO opportunity in the example above to decide. While the NGO opportunity seemed like it could be the best thing that ever happened to him, he also realized it could bury him. He was still too early in the game to have the bandwidth and staff to see this opportunity through, and because it did not include resource expansion, he decided to respectfully decline (for the time being). Place yourself in his shoes to see why this is not an easy decision to make. Often mentors or advisors can help make such hard decisions. Timing is everything, that’s why an opportunity that might be great for year 2-3 could be disastrous for year 1.
The When focus also helped the SaaS company. This company was already several years on the road, passed investment several rounds, including one down round and 2 leadership changes. Their investors were tired. In this context, the opportunity to have a nearby small customer who could provide meaningful feedback and a small (yet steady) revenue stream, was not well timed. The company needed to focus all its leftover resources on getting the big named customer pilots off the ground. As the CEO of this company, I learned that such decisions come at a personal cost. This hard decision resulted in saying good bye to some near and dear people, but it was necessary in order to save the ship. Eventually we were able to transition 2 of the top 10 insurance companies in the US to recurring revenue stream, and built a nice pipeline of piloting customers, when we got acquired.
In most cases the spiral moves evenly across quadrants. You build something small, you test it with a few customers, you raise enough funds to take you through to the next cycle and so on. Rarely one quadrant bursts ahead faster than the others. But when it does it poses some interesting challenges, like in the example of the IoT startup that raised $10M after an initial MVP. The product was not scalable, the team was not there (yet), competition was building up, market adoption was slow and even the messaging was off. Yet they were able to convince one affluent individual to make a relatively large investment. The spiral model helped envision how the next cycle would look like. As their advisor, we started at the end of the next cycle and worked our way backward from the future to present time. They made some reasonable assumptions regarding what level of expectations can be managed with the investor over time. Given the cards they had at the time, they realized they were not going to meet any financial expectations and their best chance was to get to a promising position with a few leading customers (that were moving faster than the rest of the market). This helped them focus first on recruiting the team that had the best chances to land one of the big elephants. People came onboard with the right contacts and influence. The rest of the decision followed suit.
Life is unpredictable, and so is business. It is impossible to plan everything in advance. Most good strategies keep a nice balance between a top-down well planned approach, and a bottom-up opportunistic one. Startups are fundamentally no different, but they do have some unique characteristics that make this a lot more challenging. The young nature of startups often leads them to go after opportunities more than established companies. There is little ‘baggage’ or tradition to hold people back, which is the essence of their agility. Plus, there is a often desperate need for success which shortens the patience needed to follow through on a well-crafted top-down strategies. This high temptation is exactly why startups need to adhere to the 80:20 rule. Focus at least 80% of your time and resources on your top-down strategy. You cannot afford to go after opportunities that are not relevant to your current cycle. True, that 20% of super lean bootstrapping startup may not reach a critical mass to do anything, but that only goes to reinforce that the smaller you are the more focused you need to be…
As you grow, you can afford to ‘play around’ your main area of focus a bit more. Just like in the example of the fintech company above. They could afford to put few resources on the adjacent market. The lack of expertise in that specific domain required some outside help, but as long as they could keep it under the 20% threshold it could be worth it. As their outsourced domain expert, I was able to map out some of the landscape, paving the road to strategic move that followed later.
Summary – make or break
- There are many good opportunities. Everything seems important, but you MUST prioritize.
- In order to do that you can use the model of Why, What and When.
- Start by measuring every opportunity against your personal Why. It may be good business for someone else but it’s not why you are in this to begin with…
- Then move on through the 4 sections of What (product, business, finance and people) in a spiral motion.
- Remember your When. An opportunity is only great if it comes at the right time.
Remember that making a decision is ‘killing’ an opportunity that could make your company, but not making the decision is more likely to break it. And if that happens, know that the stardust of your startup is the building materials for creating new stars…