Startup Whisperer

Avoid Strategic Planning Thunderdome

In a startup you should be review your strategic opportunities at least quarterly.  In big companies, you'll start this planning in early Q3.  You'll then go thru several months of vetting and enter into what I call the "strategic planning thunderdome."  Fans of the Mad Max films will remember this reference, "two men enter, one man leave."  Please do not do this in a startup. It is not meant to be a political death match.  There is no internal posturing required.  This is a startup and you are trying to build a business.  Do not expect to have all of your operating variables known.  But, you should have a planning process that is lightweight yet thoughtful.

This is a useful template when you are sitting down with your team.  Download strategic_planning_diagnostic.pdf You are typically balancing how much you are optimizing for market share, revenue, or EBITDA.  Most likely as a startup with fast mover advantage you'll be optimizing for market share.  Think about customer, supplier, and your overall mix (share, revenue, or EBITDA) when assessing where you want to focus.  For example. at WidgetBucks, we're optimize for customer value over supplier.  In other words, we value share and product innovation to publishers and suppliers over working with direct brands.  We'll get there eventually but its not the right timing yet (its right when we're big enough where they will want to work with us).  Take your strategic assumptions thru your prioritization criteria and you'll quickly and easily get to the top 3-5 initiatives for your company. 

Remember to not stare at your proverbial navel too long.  Do this once a quarter.  Get your team involved, agree, and get moving.  Speed is your advantage but don't try to do too many things at the same time.

The Avis Rule

I have worked at big companies.  Once you get 4+ hops between you (the CEO or business leader) and the customer, you are generally spending more time managing people than actually being an active contributor.  Your job is to provide strategic direction, people development, and communication.  I always have to remind myself of that.  In a startup, you are constantly dumbfounded as to why you can't get these big, monolithic companies to move faster.  The reality is that they wont.  They are big.  There are some exceptions to this rule:

- The Avis Rule - guys that are in second place or lower do try harder;  I remember being the RealPlayer product manager in '96 and trying to get a distribution deal done with both Microsoft and Netscape.  Guess who was easier to do a deal with?  Microsoft.  #2 in the browser wars (at that time) was hungrier.

- Beers and Steak Dinners - if you've built a personal relationship with your business partner, you will get stuff done.  Its not Web 2.0 but its reality.  People like to connect with people. 

- Competitive situations - if you do a deal with another large company, the other company will either try to kill you or partner with you.  More likely they will try to buy you if they think they are going to lose you.  This is especially true with M&A events and VCs.  Alas, this is just human nature.

I have been running a totally ad hoc and un-scientific poll over the last 2 months around prospective customer response time.  Granted there are a lot of variables that weight the response time by personal relationships, but, here was a fun little exercise that I did. 

Average response time from initial email to email response:
Advertising network executive - 1-2 days
Major search engine - one week
Advertising agency - one week
E-commerce executive - one week
VC - under 1 hour
Brand - > 2 weeks
Internet startup - under an hour

What does this imply?  Faster companies move faster.  It is interesting to note that even big advertising network companies respond pretty quickly.  I tend to plan our business development path around engaging viral and word-of-mouth networks versus relying on big enterprise deals with big players.  Even when you close a big deal, its still hard to get the wallet share of revenue or impressions up in a timely manner.  If you need a big customers to move the needle, then pick off #2 or #3.  They usually need the help and haven't invested as much in R&D.  You could really fill a gap for them. 

Plan your time wisely, take a deep breath, and  understand that its hard work sitting thru staff meetings all day in a big company.

Open The Kimono

Your job as a leader in a company is to communicate.  Communication is key.  Especially in startups, when you are moving so quickly.  You need to make certain that your employees, investors, and the outside world is caught up with what is happening with the business.  I recommend a weekly update to your company and your Board.  This doesn't supplant the need to manage by walking around but it does enable you to scale in your communication effectiveness. 

Here is a sample flow of how a weekly communication should be framed:

<Your Company Name Here>

Summary
<Brief summary of the business highlights from the last week>

________________________________________

Performance:
•    Show week-over-week (WoW) performance in impressions, revenue, market share, or EBITDA.  Make sure to explain why there are variances to plan that are either positive or negative.   Also, make sure to include P&L summaries at the end of each month.  Your entire goal here is to not surprise your investors.
•    Examples: 

• April WoW gross revenue increased by 10%.
• MoM, April revenue increased by 24% over March.

P&L LINE     Jan  '08      Feb  '08      Mar  '08      Total
Net Revenue               
Total COGS               
Gross Profit               
OPERATING EXPENSES:               
Development               
TAC               
Other S&M               
General & Administration               
Total Expense               
Net Ordinary Income               

Operating initiative(s):
•    Note:  you want to include several of your agreed upon initiatives in you operating plan.  Examples:  marketing programs, market share programs, etc.

Sales/Business Development:
•    Include a high-level sales pipeline for B2B businesses and/or new deals that greatly impact your demand.  In addition, you will want to flag any account management issues that you have with current accounts. 

Product:
•    In technology, you will want to include updates on key features and product updates;  make sure to include projected ship dates versus actual ship dates

Spend no more than 30 minutes compiling your weekly update.  You will also want to cater your updates differently between the Board and your company.  You will be surprised how happy everyone is that you've been transparent about what is happening with your business.

Eat What You Shoot

I have a proclivity for enjoying (and remembering) random business quotes.    I used to get a kick out of the quotes from Jim Barkdsale (former Netscape and AT&T CEO).  He had a great way of stating the obvious but somehow making it seem profound.  A great example,
    "Of course, nothing happens until somebody sells something." - Jim Barksdale

I am a firm believer that startups CEOs should do their own business development.  It is hard to enough running a startup.  You are constantly juggling between hiring, raising money, providing strategic direction, washing bottles, or whatever.  But, nothing gets a CEO focused on closing business and feeling the progression of your business as building your own sales pipeline.  The immediate feedback you get with a win or a loss is immeasurable.  I know too many CEOs that manage their startups from spreadsheets.  There is no better way to get feedback on your product by being in the front lines.

When you in the early stage of your startup, you don't have the luxury of having a world-class product management team supporting you.  Being your own salesperson, allows you to think through the real challenges that your own salespeople may be having, too.  An additional benefit is that it makes you sharp.  It makes you smart as an operator and also as a strategic steward to your business.  It will expose things about what you are doing that you simply do not know or understand.  This is helpful for other areas of your operating repertoire like presenting to investors and your Board.  I ran across this great post from Josh Kopelman about how entrepreneurs have a hard time with admitting that they don't know something.  It is also good practice to be in-front of a customer that simply is smarter than you.  Be willing to say, "I don't know." 

I recently was in a sales situation with a large potential customer;  I was explaining how our contextual algorithm worked.  The SVP that I was talking to is a truly bright ad rock star and didn't want my "Fisher Price" explanation, he wanted to know some specific information on how well our system would work thru their ad server against their own Fortune 50 clients.  I got our CTO on the phone and we got the questions answered but it was a stark reminder that I needed to bone up on some technical information.  In the process, I started to think thru how we could better work with exchanges and ad networks by pre-tuning our system to specific clients.  It got me thinking like a brand marketer not just like a performance marketer. 

Write It Down

I have this penchant for writing things down. Everything.  I have what a friend affectionately calls, "FOMS" Disease. FOMS stands for the "Fear Of Missing Something."  For startups (or really any size organization), you need to write things down.

Some things that you should codify are:

• notes on important business meetings - email, cheap CRM software (aka Salesforce), or even an excel spreadsheet

• Take notes after each staff meeting - write down the action items and the key decisions in the meeting;  forward them every week and keep track of your progress.  It is the no dicker sticker for the team.

• Strategic planning sessions need notes and easy-to-follow plans out of them.  One slide should be able to some up your Objectives, Goals, Strategies, and Tactics.

• Remark your code and if you don't have time to write specs, at least document UI specs

• Keep a KPI (Key Performance Indicator) scorecard that is circulated to your management team, employees, and Board every week

I love the Bossidy book, Execution.  It was published 6 years ago and I find it extremely pertinent.  It is jam packed with no-nonsense blueprints for running a company.  I imagine Larry walking into a meeting like the dime store detective, Mike Hammer.  Noir-like and hard-nosed getting right to the facts.  He devoted a lot of time in the book about the importance of follow-up after meetings and constant attention to decisions that are made. 

To be honest, I use notepad as my planning tool and I use Excel for planning product launches.  I am what is called "old school."  There are certainly fancier tools that are no doubt more elegeant like 37things and LiquidPlanner.  As your company grows, you will develop management procedures and processes as you scale.  Setting an early culture of execution via deliberate attention to writing down decisions (and sticking with them), is a wonderful way to keep your fast mover advantage as a startup.