Business leaders really like the structure and execution focus Relevant IT brings to a company that embraces uncertainty and embarks on a digital transformation journey.
But there are some that feel they need less process guidance in their business to become more agile and better at emulating successful startups.
And they are right!! But not in the way they think.
It may be surprising, but Relevant IT actually provides as much guidance to startup businesses as it does to established organisations.
In this blog article I will show you how.
You will not only learn about the 5 business technology stages every startup should go through as it matures as a business, but you will also get powerful insights on how to incorporate startup principles and accelerate growth in a regular business.
But first, let's clear up some confusion and agree what we mean when referring to a startup business.
What Is a Startup Business?
Even though Xuviate itself is a startup business, it took me quite a while to understand that not every new business venture should be classified as a startup business.
Eric Ries, the father of the "Lean Startup movement" gives a brilliant definition:
A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.
There are three takeaways about startups that I want to emphasise:
- The business is not operating in an environment where outcomes can easily be predicted or where success is guaranteed as long as good business principles are applied. Stated differently: failure is a likely outcome for the venture.
- The business is creating something truly new and revolutionary and is not just improving on something which is already present.
- A startup doesn't have to be a standalone business and can be an organisational unit or another grouping within an existing business.
Applying this definition now to existing businesses is where it gets interesting.
First of all, since every business is faced with the threat of being disrupted, it follows that every business these days operates in "extreme uncertainty".
Similarly, to survive and thrive, businesses need to figure out how to continuously create "new products or services", thereby satisfying the second criteria for being classified as a startup.
If we now follow this argument to its conclusion, a startup entity can thus exist within any current business.
And in some instances, the transformation to such an agile state is so successful that an already existing business becomes a startup again!
I am not sure about you, but this was a big eye-opener for me and gave new inspiration for applying startup lessons to established organisations.
With this in mind, let's see how startup businesses can strategically apply the Relevant IT methodology while, in the back of our minds, we keep asking the question: "how can I apply this thinking to my existing business?"
Startups Implement Relevant IT in Reverse
Over the last few years you will have seen me repeat the following three messages over and over again:
- There are 4 unique Value Propositions information technology (IT) has for any business. We call these the Value Propositions (VPs) of IT.
- The best way to activate the VPs of IT in a mid-sized business is by following a bottom-up approach. In other words, implementation progresses from VP1 all the way to VP4.
- Best results are achieved when VP leaders focus on the 15 required BTM (Business Technology Management) competencies in sequence.
Until today Xuviate only worked with mid-sized businesses as we ourselves were a little bit unsure of how to apply the thinking to startup businesses. We strongly felt there had to be a way, but it just eluded us.
And then, one interesting evening, TOC Consultant Konrad Bartel mentioned something that should have been obvious from the beginning.
Relevant IT thinking is hugely important for structuring IT priorities in startups, but only if one reverses the activation of the Value Propositions!
Wow, that was powerful! Thank you Konrad!
Suddenly I understood how Relevant IT not only provides specific guidance to pure-play startup businesses but also to established businesses that want to accelerate their digital transformation journey by creating a startup entity somewhere in their business.
Ok, now that we have this mental construct, let's see how Relevant IT guides a startup through 5 major developmental stages.
Step 1 – Validate your World-Domination Thinking (VP4)
A new venture should start with one or more founders/entrepreneurs and a bright idea.
And not just any idea, but an idea that has the potential to "make a dent in the universe" as Steve Jobs so famously said.
Ok, you are right, not every idea needs to incorporate this level of Moonshot or 10 times thinking, but I strongly advise going down this route if at least one of the following is true:
- You intimately understand the problems of your industry and are really frustrated with the status quo.
- You want to be part of something worthwhile and have a purpose in life.
- You want to create something of real value (either to attract future investment or to have a worthwhile exit).
And if you tick more than one of these boxes then the argument for attempting something truly great is even stronger!
The reason why I can so confidently guide you down this path is because I know that the accelerating pace of tech makes more and more tools available that allow anyone to co-create the world of Abundance Peter Diamandis talks about in his similarly named book.
Just pause here for a moment and, if you have not already done so, follow the previous two links. It may very well change the way you look at the world!
Isn't it just fabulous to live in this incredible time with so much opportunity all around us?!
Ok, let's consolidate what we learned.
We have an idea and we know that we will want to apply technology to overcome current limitations in a way that is scalable.
What is required next is to take this technology-supported idea and further mature it into one or more viable business-models, all before we start developing any actual product.
Startups take note: Continue to improve the initial idea and create business model prototypes before writing a single line of code!
The Relevant IT methodology provides good guidance on what steps to take and in what order:
- Engage the right people, both internal and external, to gauge reactions and ferment the idea. Eliminate false assumptions and biases early on and save yourself a lot of time later.
- Create a business model for this new venture (the kind that fits on the back of a napkin) and uncover opportunities for monetisation. Eventually you should know how to track the progress you are making towards validating your idea.
- Next, draw up an action plan for selecting and validating the most promising model.
- Work with between 1 and 10 potential customers and rigorously test the model assumptions with a particular focus on trying to kill your idea in any way you possibly can. Paul Graham from Y Combinator fame also advises to "do things that don't scale", a perfect reminder to not start focusing on automation and optimization too early.
- If the results are not as expected, go back to previous stages in this process and make changes where necessary. Continue doing this until results are in line with your big picture, world-domination idea or you have successfully proven your idea to be a dud (and thankfully without spending too much money on building a product that nobody will ever use).
If you have not taken any short-cuts up to this point, you are now in a position to go to the next stage of your startup's evolution and figure out how to use technology to make all the magic happen.
This is where Value Proposition 3 and the roles of the CTO and CMO come into play.
Step 2 – Iterate Until Product/Market Fit (VP3)
Excellent, your startup has reason to believe it has a disruptive solution to a real problem.
This is also the first time where a second strategic leader, often called the Chief Technology Officer (CTO), becomes an essential addition to every technology-focused startup business.
In many instances the founder (and usually the VP4 leader) has the ability to also become the startup's first CTO.
But there is huge danger in this as VP3 and VP4 leadership requirements are very different from each other and the best course of action is usually to have two separate leaders.
Many startups also overlook the increasing importance of the Chief Marketing Officer (CMO) role.
Keith Jones of South African innovation accelerator sw7 sums it up nicely:
Building products is easy. Access to market is the BIG challenge.
Continuing on from leadership selection, the next steps follow the same pattern as already established for stage 1 and can be summarised as:
- Agree on what success looks like and develop a model and metrics to measure progress towards this goal. In startup circles this is called innovation accounting and one of its critical functions is to ensure product features continuously improve product/market fit.
- Next, the critical assumptions about the product and its market are identified and a series of experiments are setup to prove their validity in the shortest amount of time.
- Running an experiment involves creating a new feature and then carefully analysing user response to learn whether the original assumptions are correct.
- Depending on the outcome, a decision needs to be made to either continue with more experiments (and thus add additional features to further improve the product) or to pivot and start with a new set of assumptions and an altered approach.
In fact, these two approaches are very complementary in nature and align particularly well in VP3 as this is where most of the startup magic happens!
If a business is really successful during this stage, there will come a time when customer demand starts outstripping internal abilities, putting incredible strain on teams that just try to cope.
This presents the perfect opportunity to transition to the next stage where the focus will be on properly automating and optimising internal business processes that make this new machine really work.
The business is finally ready to enter the real "Growth" stage.
Step 3 – Focus on Operational Excellence (VP2)
The startup is now entering a phase of rapid growth and is equivalent to the stage between "channel/product fit" and "maturity" in a growth model developed by Morgan Brown.
With this stage also comes to the need to create yet another top-level position, that of the Chief Operating Officer or similarly operations-focused technology person.
Until this stage, the business did only what it had to do to keep customers happy and continue growing.
This has, however, resulted in a very complicated internal process architecture and there is growing appreciation for taking a step back and imposing some structure.
If done well, this investment in operational excellence will setup the business for a phase of rapid and continued growth as it reaches more mainstream customers.
Instead of seeing this as the growth opportunity it is, some startup leaders fight this necessary evolution tooth and nail as they are afraid they will lose their entrepreneurial culture and flair.
While the risks are indeed real, tech-companies such as a Google, Facebook and Amazon have shown an alternative way and we can learn a lot from studying the many excellent case studies about them.
There is even less risk for startups on a Relevant IT journey.
And this is because VP3 and VP4 leaders, who by definition focus on agility in pursuit of the big picture, continue to set the strategic growth agenda.
The final step is to get the sprawling technology platform in control and focus on traditional IT outcomes such as reliability, scalability and security of the platform.
Step 4 – (Re-)Architect the Technology Platform (VP1)
A COO of a successful startup business recently admitted, somewhat sheepishly, that they never considered the technology platform as important enough until now.
It came as a surprise to them, but they made the right choice by always focusing on the appropriate business technology capabilities as required by their startup.
If done correctly, Value Proposition 1 of IT (VP1), the domain of the traditional IT function, normally only becomes a focus after the previous three VPs have been activated.
By now the business has grown and employs anywhere between 50 and 500 people, making it impractical and often also downright risky to continue treating IT as an "ad-hoc" expense.
The strategic person in charge of VP1 is the Chief Information Officer (CIO) and this person's first priority is to increase security, reliability, scalability and performance of the IT platform from what has previously been a very haphazardly managed infrastructure.
The bad news is that this modernisation of the platform is a fairly expensive and time-consuming endeavour for the startup business that previously managed to survive on an almost non-existing IT budget.
The good news is that early successes will be very visible and everybody will say: "We should have done this a long time ago."
Step 5 - Fire on All Cylinders (All VPs), All the Time
A startup that has activated all 4 VPs of IT top-down should now be indistinguishable from an existing business that started out on its digital transformation journey by activating the 4 VPs from the bottom up.
But far from being able to rest on these achievements, the truly successful business will realise that it needs to continue to evolve across all 4 VPs simultaneously to thrive.
And if it learns how to do this successfully, there is a real chance that it could one day be one of the truly great and lasting companies of our era.
The Lean Startup movement has proven, beyond doubt that rigorous processes have value.
And this is even more true for an ambitious startup than many people realise.
Lean Startup and Relevant IT are very compatible with each other with the former focusing more on the actual principles and processes in small team environments whereas the latter provides a more holistic Business Technology approach suitable to any size business and at any stage of its maturity.
From a Relevant IT point of view, conventional business and startup businesses differ mostly in the order in which the VPs of IT are activated.
Xuviate has already launched BTM Mastermind group-coaching and support services for VP 1 leaders and we plan offer similar services for VP 2, 3 and 4 leaders in the near future.
Let me know if you want to be notified when we are ready.