We talk about strategy skills with our founders quite often, along with the significance of building these skills. In this blog, we break down what we mean by “strategy” and how we believe that in its simplest form, strategy is all about decision making.
Make the right decisions:
Strategy is future-oriented and we want you to see it in a decision making context. In our framework, we define it as a set of about 120 business decisions. These 120 decisions are divided into 20 major and 100 minor ones. On average, 20 major decisions are taken quarterly, while the 100 minor ones are taken almost every month.
All of these decisions are important because each decision affects the next, as in a falling row of dominoes. The impact of one wrong decision will affect the next decision and the overall strategy for the startup, leaving little space for course correction. This illustrates the significance of all decisions for the overall strategy of the startup. It means that 80% of the startup is designed and built upon these 120 decisions.
We think that the 100 smaller decisions are focused more on execution related fundamentals such as funnel development or adjusting a product feature for product-market fit. The 20 big decisions are the underlying organizational principles that affect the startup design in a significant way. The 20 big decisions could be selecting the end market, cofounder relations, finding the right investors, deciding the funding rounds etc. It is imperative that these decisions are taken with care in order to ensure startup success.
As founders are “living” their startup every day, their access to knowledge is at times limited so their decision making is not always on the mark. For these decisions to have the right direction, very deep engagement with startup coaches is recommended. These coaches or advisors bring in a breadth of expertise to give tailored advice to founders on what decisions to make. Startup founders cannot underestimate the importance of the accuracy and quality of these decisions. They must also value what coaches bring in and give due weightage to the decisions taken by coaches. One key benefit is that it saves you from spending your energy and resources on a lost path for several years. If founders take one good decision in even one sitting, the positive domino effect lasts years. For example, building a house under an architect’s guidance and building it on our own, manifests different outcomes. An architect would take into account more technical variables like airflow, sunlight, and future expansion. We believe that the 120 decisions made by startups have a similar effect.
If we expand this framework, we may see that startups in a new market fear that their unique ideas might be copied. For this reason, founders are usually obsessed with their ideas’ confidentiality.
Founders gradually understand that to achieve profitability, they have to get their idea out there. We believe that if a founder views their startup as an aggregate of 120 decisions; it will keep them cognizant of the state of their startup while also holding them accountable. In this manner, founders will develop their own forecasting ability. This ability will further refine whichever decision-making they plan to do in the future.
If we apply this to the startup’s product, we believe that the product vision is a strong tenet of the ScaleX process. This product vision is a layer over the MVP. Launching your product will require launching a set of features with the understanding that you will have to adapt or pivot these features based on market feedback. But having a long term vision and how this vision is served by the product is important for strategy.
Additionally, founders should develop a defensive strategy with an offensive mindset focused on the next three innovative aspects of the product that will take them to their product vision. Let’s expand on this thought.
So when you launch, your ability to forecast what a competitor might copy will be much sharper. The process can be compared to chess. When playing chess you predict the next moves your opponent might make. This allows you to preemptively pick what you would do in each scenario. It works the same way for startups competing in a market where their ideas are getting copied. By staying ahead of the competitor, the copies will eventually start dying out.
We mentioned that founders need to focus on the “next three” innovative aspects or what we call chess moves. In the first stage (e.g the Shopify platform is launched), their first innovation will get copied. In the second stage (Shopify enables white-labelling through APIs), 50 per cent of the copies will vanish but the remaining 50% will still venture to replicate your move in the 8-12 months to come. Skilled founders can then make their third move (Shopify launches Build-a-business program), thus consolidating the startup’s success. This is when all other competitors and copies are exhausted in trying to catch up. In the same vein, Apple has compelled companies into copying them, through continuous and stealth chess moves, while other companies try to catch up.
The depth and consistency of engagement with experienced coaches are therefore critical for first-time founders. It enables and builds quality decision making. The excellence of a startup depends on these strategic skills and decisions. We’ve spoken about intelligent grit in one of our previous blogs and as a conclusion, we’d like to emphasize that adding experience to intelligent grit, goes a long way in determining startup success.