We have a number of companies that have recently made the shift from proving out product / market fit to focusing on execution. This often happens in the $3-6 million revenue range and in a SaaS business, it happens when growth is sustained at levels well above 50%; the sales engine has shown an ability to scale beyond the initial founder; SaaS metrics are strong; and churn is under control, and hopefully negative on a net revenue basis. Company leaders then shift to the task of attempting to scale the business without breaking the components that are working. A lot has been written on how to scale a predictable revenue model and how to build out teams. I won't attempt to replicate that here.
This stage of focused execution needs to be combined with an emphasis on strategic thinking – and the CEO needs to spend sufficient time on each. Execution is about every day behaviors and process excellence and it should be the daily focus for much of the organization. Strategy involves fewer people, it happens less frequently, and if done correctly, it should be asking big and uncomfortable questions. People use the word strategy all the time to describe things that are actually pretty functional and tactical. Sales strategy, HR strategy, customer retention strategy, outsourcing strategy and so on. These are all important but at a micro versus macro level. Corporate strategy is about winning and is played with the knowledge that for you to win, others will lose.
I had the opportunity to spend some time at Uber’s headquarters in San Francisco recently. Uber has great offices, tremendous energy, and an intensity to the place that is surprising in an 8,000 person start up. In a discussion with one of their senior executives, who had come from another great tech success story, I asked what was different at Uber versus so many other successful companies. The answer was that the team at Uber feels that their future, their success, and their existence are constantly under tangible and measurable threat every day. The battlefield is multi-faceted – there are well funded existing competitors and new ones emerging all the time, there are local & state & federal & international regulators trying to stop them, and entrenched providers attempting to avoid disruption. While many of these battles are tactical, the war is strategic, and major “bet the company” decisions are made with high frequency. While this strategic urgency may be more palpable at Uber than other companies, status quo can’t exist forever for any business. In the words of Andy Grove – the former CEO of Intel who completely shifted the company’s strategy from DRAM to microprocessors during a period where another CEO would have been complacent with dominant market share – “only the paranoid survive.”
The paranoid CEOs ask themselves and their teams the tough questions:
- If I worked for competitor x or competitor y or some absolutely new competitor, what would I do to hurt or kill us?
- What would happen if we lost our largest customer? our biggest channel? What could one of our competitors do to take this away from us?
- How could one of our competitors shift the economics of our industry? How would we recover?
- What if a competitor with a broader footprint offered their answer to our solution – for free?
- Is there a strategy for killing any of our competitors or mortally wounding them? This means understanding at a high level where our competitors make their money and where they are most vulnerable
- What if the market evolves in a certain direction? What would render us less relevant or not relevant?
- What are we doing today that is a distraction of time and resources that could be better spent extending our competitive advantage?
While this sounds obvious, most start-up CEOs get so caught up in the day-to-day details of their business, especially when they are scaling and dealing with all of the issues related to growth, that they forget that businesses built on disruption can get what they have been giving and face disruption of their own.
What are some things a CEO and a management team can do?
- Schedule strategy off-sites at least once a year and force your executive team to do some work ahead of time answering key questions on the market and your company’s position; emerge with a clearly articulated point of view on where to play and how to win in your market
- Jump on sales team calls once a month and ask the team what changes they are seeing – new competitors, different customer questions, surprising losses, anecdotes. These can all be leading indicators
- Build a product management function that is macro as well as micro-focused and feature / function focused. Your head of product management should be your strategy consigliere
- Become an industry expert. Talk to everyone – analysts, bankers, partners, competitors, other tech CEOs in tangential spaces – ask them what they are seeing, feeling, sensing
- When you hear something or read something that looks new or different – send it to your management team – use slack or something collaborative. It is always interesting how that gets the interplay going and how thoughtful different team members can be on topics that seem out of their functional area
- Maintain a thorough competitive analysis document – again, using Slack or something collaborative; empower your entire team to post information about competitors as they come across it, and conduct a thorough update every 3-6 months, which should include signing up for your competitors’ sales demos
Execution is a prerequisite to success but not a guarantee of it. The right strategy and good execution trumps excellent execution and the wrong strategy any day. Strategy is ultimately owned by the CEO because key strategy decisions don’t happen unless you agree and make them happen. If you are not asking questions such as: “How do we win?” and “How will this (competitor, event, market dynamic, customer segment, etc.) impact our ability to win?” then you are not doing a big piece of your job. Remember – strategy is about winning.