My Lessons Learned: Part 1

This is the second part of the My Lessons Learned post born of my experiences at the first Startup Lessons Learned conference on April 23, 2010. The introduction is available at this link:

1. Introduction

Startups Aren’t Just Midget Companies

Security is mostly a superstition. It does not exist in nature, nor do the children of men as a whole experience it. Avoiding danger is no safer in the long run than outright exposure. Life is either a daring adventure, or nothing. -- Helen Keller

One of the first things that Eric did on Friday was to provide us with the working definition of a startup.

A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty. – Eric Ries

In other words, startups exist to figure out if there is a viable business in the wake of the founder’s brainstorm.

I can’t say that this was a totally alien idea, but I couldn’t have articulated it so clearly. Over the years I have worked with hundreds of companies in pretty much all stages of their existence; from startup to those in the terminal stages of their lives.

I never could figure out how to deliver real value to the few startups with whom I worked. I understood that I they weren’t ready for me; but I didn’t (until last week) understand that the reason I was not helping them was because they weren’t real companies yet. They were business models searching for a way to make money; they were on their journey to something sustainable. I was trying to lock things down for them way too early in their lives (usually with their leader’s active cooperation, since they didn’t understand what a startup was either).

Steve Blank helped me understand this with the following slide (which I have shamelessly lifted from his slide deck)

I have always understood that there is a dynamic in organizations between the imperatives of Change and Continuity. I have also always believed that you have to have both change and continuity in any healthy company ecosystem; though the proportions frequently have a non-obvious relationship to the current state of the organization.

What I hadn’t given much thought to, was the idea that there is a state in which the organization’s health depends upon it being all about change. That state is the startup. I see now that a key part of startup leadership is holding back the onset of continuity until the organization is ready for it; until they have real product-market fit and are ready to begin the “transition” block in Steve’s slide.

The timing of this transition is critical to the overall health of the company that emerges from the startup chrysalis. If you do it too early, the resulting company will languish or die because the “product” that it delivers is half-baked (if that) and has no real market. If it is done too late the company never finds a market beyond early adopters and tinkerers. It might continue to find new pools of early adopters, but it never finds the early majority, it never crosses the chasm.

A lot of my consulting has been with manufacturers of customized capital equipment. While this may seem like a weird analog to internet-based startups, it’s not as strange as you might think. Both types of organizations are loaded with engineers. Capital equipment manufacturers are frequently started by engineers and are born because he had a “better” solution to a specific problem. (This should sound really familiar to most of the people reading this.)

It is interesting to work with these companies, in large part because most of them biff the transition from startup to company. They never really move out of startup stage, it is as if they are still looking for product-market fit even while they masquerade as a real company. To borrow from Harry Potter; they are squibs.

A key component of their sales cycle is “how can I customize this for you?” It is a question that delights early adopters and scares the hell out of the early majority who scream: “Whadda ya mean that it has to be customized? I don’t want some custom thing; just gimme something that works.”

The internal dynamics of these organizations militate against reaching true transition and reaching out to the early majority customer base that is needed to cross the chasm. Some of the engineers come to see their roles as continuing to innovate along the existing product branch (I hesitate to call it a product line) at the customer’s expense while others are content to slide into a role of repetitively shuffling paper and redrawing schematics. The company devolves into a hybrid-extended-startup rife with roadblocks that prevent it achieving the status of a real company.

I sure wouldn’t want that to happen to my (or your) startup.

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To keep things easier to read on-line, I have broken this post into 5 parts (including the Introduction). I will post these over the next couple of days. To keep up with postings, you can either check back, setup your RSS reader for this feed, or monitor the #SLLConf hash tag in Twitter (you could also follow me @KurtBCarr)