Your startup doesn't have a strategy - and that's alright
A short essay about startup strategy
I began writing this short illustrated essay mostly for myself. I have been working with startups - mostly early stage - for a long time. And whenever I do something for a long time, I can’t help but notice patterns. I have a software engineering background. This means that patterns grab my attention.
I don’t consider myself an expert in how startups work. I just stuck around long enough to practice my thinking. With this essay I want to put into words what I “feel” is right. Thinking patterns which guide my decision making.
I hope it helps you with working at, or with a startup.
Before I start, I need to add some caveats, though.
My goal is to describe a model I have in my head and translate it into words. I claim no truth to anything in this essay.
The closest spectrum on which to judge this essay would be between useless and useful.
The second caveat is that I will be ridiculously simplifying things.
I hope to touch the sweet spot of witty, insightful essays.
The next caveat is really important to me. I will make some snarky, seemingly dismissive comments. Some of these might be directed towards a group of people. This is a result of the massive simplification, which borders on the ridiculous. My wish is not to offend people. It would be great if we could come together, and get a good chuckle out of my comments.
And the way to do this is by not taking ourselves too seriously. And I know this is a thin line to tread. The responsibility to strike the right balance lies with me as the author and not with the audience. I can't just demand from the reader to not take themselves seriously. But my intention is not to put myself above others or put others down.
Why did I write this essay?
It started out as a reaction to a pattern I observed. Patterns get me started thinking about what is behind them. Are there problems to solve, needs to be fulfilled?
While working in a startup context, you will inadvertently come across the term "strategy". Sometimes it will be used in phrases like:
"We don't have a strategy."
"We should have a strategy."
"What is our strategy?"
"My strength is in strategy."
"I am focusing on our strategy."
Or some variations thereof. To me it sounds a lot like a placeholder term for a large collection of different concepts. "The stuff between where we are and what we want."
So, do you have a strategy?
Coming back to the title of the essay, I would like you to perform the following simple assessment task. If you don't have a strategy: It's alright. I want to show in this essay that strategy is just an umbrella term for something ridiculously simple. The uncertainty around it and a shared narrative on the importance of strategy creates a vacuum, into which a lot of resources are being pulled.
Open your startup knowledge base. If you don't have a single, canonical, organization-wide repository of your information, you don't have a strategy.
Open the section, which defines where you are standing. The quality and length of the information is irrelevant. As long as it exists in written form. If you don't have that, you don't have a strategy.
Open the section, which defines where you want to go. Again, it is irrelevant how long or sophisticated this is, as long as it is written down. If you don't have that, you don't have a strategy.
Now take a look at your activity. The daily tasks, the initiatives, the conversations. Can you draw a mental line, a storyline, from where you are to your activity, to where you want to be? If not, then you don't have a strategy.
The more I learned about how organizations (in my case mostly early stage startups) work, the more I was convinced that strategy as a concept is overrated. But the narrative around strategy is still very strong. We have an entire industry promising that value can be captured by finding the right strategy. But that exact narrative is culture as well. To rise in the ranks of the strategy industry means building strong relationships, learning the vocabulary and insignia, and being lucky.
The narrative is so strong that I met countless people who wanted to "do strategy". Over time it sounded more like "I want to be part of the in-group, that shares my background."
But this is an essay about strategy, so I will now focus on describing my ridiculously simplified model.
I will first describe my model of a startup. I believe it also applies to different organizations, but I don't want to set myself up for too much failure.
Next I will describe my model of strategy in this context. This is going to be very short.
And finally I will describe the relationship of a startup and its strategy.
What is a startup?
To demonstrate how ridiculous (and useless) my description [of a startup] is, I will first talk about a concept everyone should be familiar with: riding a bicycle.
My description is as ridiculous as saying: riding a bicycle is the art of balancing the forces at play with careful adjustments. The goal is to reach a destination and to not fall.
We don't learn riding the bicycle by understanding the forces at play (especially anything angular is still super weird to me). We interact with them and get a "feel" for it. There is also a lot of room for misconceptions when you try to understand the bicycle from the conceptual level: apparently gyroscopic forces are almost negligible.
Analogous: Running a startup is the art of balancing the forces at play with careful adjustments. The goal is to create value and to not run out of cash.
The relevant forces for startups are growth, churn, and cash.
Cash (or slightly better cashflow) is your lifeline. If the startup were a game (which it kind of is), then cash would represent the turns you have left before you need to reach your win condition. If you want to modify the understanding of cash a little better, think of cashflow as a pulse - the heartbeat of a startup. It is a matter of how much pressure of cash is present in your vessels. All the other organs could be fine. No pulse equals quick death.
Growth is how many customers you can acquire. Or better: how much value they get out of using your product.
Churn is how many customers you lose.
Out of the three forces, growth is the most interesting. Having enough of it can solve almost any other issue with cash or churn.
Remember, this is ridiculously simplified.
Since growth is so important, let's take a look at the growth machine.
In the lingo of the strategy industry, this is called a flywheel. There are a lot of variations of different ideas, activities, and jargon to this basic flywheel. And color. Lots of color.
What is (startup-) strategy?
Strategy is basically sprinkling the flywheel with ideas, activities, and jargon, and color.
That's all there is to it. Technically strategy also includes sprinkles for churn and cash, but it's not that important.
How does strategy relate to a startup?
Now to the most interesting part. How does it relate to the startup? Not at all. That's why the title says "that's alright". The only thing you need to keep on doing is the following:
Ask yourself: which force is my activity acting upon? Churn? Growth? Cash? If it's not growth, it's most likely a useless activity.
Which part of the growth machine am I trying to improve with my activity?
How can I be faster figuring out if my activity is having the desired effect?
I cannot overstate how ridiculously important point 3 is. Remember cash being the lifeline? If you run out of turns before the machine gets going, it's game over. Sure, you can extend the life with some activity, or by taking away perks from your employees. But it is almost never worth the effort compared to the potential of growth.
To figure out if your activity is working, you need to be able to tell if it's working. Do not start an activity if you won't be able to tell if it's working. And then make it fast. You need to be able to build, test, and measure 4 times in a week in any area of the growth machine.
And that's how you work with the growth machine.
One minor addition. Why is growth so disproportionally important?
There is a critical point in the life of a startup. It is when the growth machine is really working. You fuel it with cash (that's why the startup jargon for how much money you are spending is "burn"). But you get more energy out of the machine than you put in.
Once the machine is working, you will deal with a different type of customer. This is the meat, and the distribution resembles a bell curve.
That's what's behind the phrase "move fast and break things". You don't care too much about breaking things early, because you did not reach the tasty part yet. If you believe that there are no more customers than those you can acquire early, then you picked the wrong market. But that's a topic for a later essay.
The way to think of it is that you are sacrificing cash and customers (churn) to build the growth machine.
I have seen often that a lot of activity in startups is wasted on reducing the churn. "If we don't do this, we will lose customers." It is really hard to bring up the courage to ignore this. I know that it doesn't feel good or right. Especially since it feels like you will look bad. But you can't make everyone happy. It's better to make the majority happy you haven't reached yet.
This is all I have for now. Please let me know if this was useful to you. If not, are there things I could have done better? I am quite happy that I was able to put a rough sketch of my learnings in writing, and I am looking forward to more nuanced conversations with you in the future.