Sunday, January 15, 2012

Your Unfair Advantage

In his recent blog post on pitching to potential investors, Guy Kawasaki argues that a startup needs an unfair competitive advantage. He states "That’s why they are called unfair advantages...If everyone had them, the field was level, and everyone was created equal, then they would be called fair advantages, which is an oxymoron.Whereas pitching to investors is important, it is vastly more important for a startup to actually execute its unfair advantage. Unfulfilled promises to investors do not leave anyone very happy.

My experience has convinced me that the primary unfair advantage of any  startup is an ability for rapid decision making. I am not just referring to the early days when a startup must be opportunistic and meet the needs of any customers that it finds. Later, as a startup attempts to break out to become a successful mid-size company, it must also leverage its ability to quickly make correct decisions. Success requires an organization that combines three essential elements:
1) the right team,
2) clear objectives,
3) and a constant focus on rapid execution.

The right team – Often the founder of a startup has the vision and talents to drive a Company's initial success. At a certain size, a single leader can only participate in a limited number of decisions and drive a limited number of activities. In order to scale the organization, a strong leadership team must be developed, one that works cohesively and applies a variety of talents and perspectives. Each member of the leadership team should have the experience and self-confidence to make decisions and enact changes. Decisions need to be made daily, and problems need to be solved constantly to enable the company to rapidly meet its objectives and overcome unanticipated challenges.

Clear objectives – The entire organization needs to be focused on activities that will generate the best results. Not only do decisions need to be made quickly, but those decisions regularly need to be the right ones. This requires a clear set of objectives that create the framework to assist everyone throughout the organization in making the right choices. Decision-making is disseminated throughout the organization, and everyone is expected and trusted to make good decisions. The culture of the organization has to attract and develop individuals who take responsibility for making decisions and solving problems. Everyone within the organization and especially the leaders need to maintain focus on the goals and objectives. 

Constant focus on rapid execution – As companies grow they often add processes, some good and some unnecessary. Processes do not replace the need for critical decision making. Adding process for the sake of process alone will destroy the company's greatest strength: its speed in making good decisions. The entire organization must understand the need to balance process and flexibility. Business decisions should not get sidetracked by every potential legal, HR, PR or other objection.  Every decision is evaluated by keeping the company objectives in mind. Company leadership must embrace and constantly communicate the need to focus on rapid and efficient execution, and find ways to make the organization more agile and competent in making timely decisions.

Large companies have established brands, established customer bases, and established processes to ensure standardization. These large company strengths add overhead to the decision making process. A startup should not try to match large competitors by mimicking their processes, modeling their tactics, or following their strategies. This plays to the large companies' strengths and the startup is at a severe disadvantage. Instead, a startup should leverage its unfair competitive advantage of rapid decision making. While larger companies have meeting after meeting to define, debate, and lay out their plans, a small agile company can adopt new technology, execute a new business model, capture a new market, or satisfy a multitude of happy customers. 

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