Strategic thinking for Startups

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Congratulations on taking the plunge to starting up your own business. This environment is a massively complex one because you will be navigating through some pretty crowded spaces, shouting for attention from an over-stimulated populace, getting them to stop their frenetic pace long enough to listen to you and decide if they want to plonk down their hard-earned money. You literally have 15 seconds to pitch your deal before they are gone!

Why strategic thinking is important for startups?

In the face of all this, one can see that strategic thinking takes the back seat. Everything seems to be only in the here and now. We won’t have a future to work towards if today has nothing to offer. So why would a startup founder even want to think strategically, if he hasn’t even passed the operational phase?

Taking this line of thinking is dangerous. By living only in the here and now, a business can become a flash in the pan – a bright spark today and then gone tomorrow.

In an interview with Entrepreneur magazine, multi-millionaire Tomas Gorny shared one key concept, “Don’t chase the money” (Read the article here). Instead, Gorny focuses on a few key concepts and replicates that over and again: these are (1) create more value (as opposed to accumulate more wealth), (2) never compromise on quality, (3) deliver the best products that customers need, and (4) always view your offering from a customer’s perspective.

These are the 4 key strategic thrusts that Gorny relies on for business after business, and they have made him from a penniless Polish immigrant who couldn’t even speak a word of English into a multi-millionaire. So, for any startup founder who decries strategic thinking in favour of operational excellence, you may just be doing things right, but not necessarily the right things.

So in this article, we discuss how strategic thinking can be applied in startups and what you might like to do to make that work for you.

Intent

Well, we all know that we want to make a huge pile of money. But if that is your driving intent, as Gorny and a whole host of other entrepreneurs have said before, you will quite likely fail. Monetary success should be the outcome of a well laid out intent; and not the intent in itself.

I was once invited to join a startup. What they do is find “exciting” emerging technology and find new markets to penetrate. Their business model is to broker the deal between the inventor and the customer and to make a cut off the deal. They called themselves technology enablers – I call them opportunists. When I asked one of the founders what they were in this for, what their strategic intent was, his response was, “Well, we’re all in it for the money, of course! Do you know how much we can make when we find the right customer?” Needless to say I was not interested.

So look at your business and answer these questions, “What am I here to do? What do I want this business to represent? What am I doing to alleviate the pain of our target customers?” If you can’t answer these questions clearly, maybe you shouldn’t even start on your journey?

Thinking in time

This process is to look at what’s been happening over time with respect to what you are trying to achieve and how you can do things better. This will be a source of your competitive advantage. To do this, list down all the events and decisions made thus far. Then assess their impact on the current situation, identifying what you could do differently. From there, you will be able to identify what you can do for your target market. You can use this template to help you…

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This is one of the fastest and easiest ways to give to your market exactly what they need. It also helps you frame your value proposition. For Gorny, chancing upon a two-for-one deal for shoes on the Fourth of July when all he needed was a pair helped shape his ideal to offer to customers what they really needed. No more, no less.

Systems thinking

But what if you wanted to dive deeper? What if you wanted to offer a deep-rooted solution? After all, there are already many people who play on the periphery of the situation. Take for example the myriad number of coaches who simply sell you their sales program; to them, all business problems boil down to not having enough sales. So sign up for their sales program - which is never cheap - and you will be on your way to success. Or what about those who tout positive psychology – that all you need is to have a huge intent and shout it to the universe, and you will be successful? Don’t get me wrong, I am not against this, and I know how important it is to maintain a positive frame of mind when you are running your own business, but these people rely ONLY on these shallow thoughts and sell you a product or service based on this. The sad thing about this is that many people buy into their prosperity mentality – that success is merely between your ears and all you need to do is simply think and grow rich – and fail to see that the issue may be anything but your positivity. After all, I can be as positive as the next person about flapping my arms to fly, but try as hard as I can, I will NEVER fly because reality is against me. Hence, there is a need to dive deeper, to get at the root cause of the issue, and to offer a holistic solution. If you are looking for that, then you would want to adopt systems thinking.

I have written a lot about systems thinking and I don’t want to repeat it here. You may check out these related articles:

Related: New Systems Thinking – Part 1: A refreshing way to find solutions

Related: Get unstuck with the centres of gravity for change

But what I do want to reiterate is that to succeed as a startup, you cannot be a me-too. You have to offer something more radical and for that, you should dig deeper into the situation faced by your customers and you can do that with systems thinking.

Why don’t you try this? After all, many people don’t and this is yet another source of competitive advantage.

The Hypothesis-Driven process

If there’s one thing that the startup will be adept at doing is the hypothesis-driven process. After all, startups start with an idea. Most of the time, the ideas are filled with assumptions. The worst thing for us is to act on the assumptions. Instead, we need to test them. There are four tests that all startups need to clear: (1) the customer value test, (2) the execution test, (3) the scalability test and (4) the defensibility test.

Related: 4 tests for your startup

Take a look at this. It comes from the annals of one of our clients (the specifics have been blocked out to prevent confidential information leaks).

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This startup’s hypothesis was that Chinese companies operating outside of China will need some help assimilating with local culture. So they came up with the idea that a X-day program would be a good offer. But this startup didn’t have any credibility in the market, nor any expertise. Just a great idea. To see if they should spend more resources developing a program of such nature, they came up with a set of questions to be answered based on the four tests. They then went out there and spoke to target customers, getting their feedback, and their commitment for a solution.

The last time I heard, they were hitting revenues just north of $1 million. Not bad for a 4-year-old startup.

And this is yet another source of competitive advantage. Since many startups live in their own world and are afraid to go out to the market and ask the right questions, the one that does will do well.

Start it right now

Startups are usually very focused on making the perfect widget and spend inordinate amount of time and money on it. Yet what value is that if nobody wanted it? How you use your resources is a strategic decision and you should spend it doing the right things. Getting your intent right, shaping your value proposition and testing it in the market are more important in the beginning than simply making the best widget and hoping for people to come to you. And the time to start doing that is right now!

I wish you every success!

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