Inspired by the popularity of video ‘shorts’, I’ve recorded a growing series of videos on a wide range of business subjects. These appear regularly on LinkedIn and are archived here. The very first one introduced Alliance Strategy Consulting in October 2022. The main themes are: Strategy, Product and Team.
Introduction
Strategy
Startup Strategy
A colleague once said “Our strategy is simple: Make money today. Make money tomorrow. That’s it.” This may sound simplistic, but it raises important points. Firstly, Strategy is not an end in itself. Unless you’re a Social Enterprise, then your main purpose should be profit. Secondly, balancing future growth against current profits is a continuous strategic challenge.
Story telling is an important way to explain your strategic aims to all stakeholders, including customers, investors, and employees. As a start-up, you may be lucky enough to exit before you deliver profits or even products, but you should aim for these regardless. Your strategy is the story which explains how you will get there.
Startup Funding
I’ve spent a lot of time watching start-ups pitch and talking to investors. For a new start-up it can be challenging to tell a compelling story while communicating a clear business plan.
This video summarises what I’ve heard many investors say they’re looking for.
Business Planning
I’ve worked on many plans for growing business with new products and learned some hard lessons along the way.
As Eisenhower famously said: “plans are worthless, but planning is everything”. It is the act of planning which helps us question our assumptions and prepare us for the future.
Planning always involves a mixture of informed choices mixed with subjective judgements. But there are frameworks available which help educated guesses become more intelligent estimates. Preparing a robust business plan will show investors that you have done your homework, and that your ‘strategy story’ is built on a ‘financial foundation’.
Business Models
Perhaps the most important decision a new company faces is which business model to choose. Peter Thiel said “A startup messed up at its foundation cannot be fixed”. I don’t completely agree, but I do believe that change becomes harder as a company grows.
The key to finding your business model is understanding how to create value for your customers. Capturing this value in the most competitive and efficient way should be your main goal of your model.
It’s important to identify which business functions are important for delivering customer value and which could be outsourced. Almost every aspect of a company’s commercial and technical operations can be bought-in these days.
At one extreme, licensing your technology lets you create value with a minimal business. At the other, some businesses choose to do everything themselves. This can deliver much higher revenues but need larger investments with greater risks.
Finding the balance between keeping control and accelerating growth is a key challenge in choosing your business model. You should focus on controlling the areas which create the most value for your customers.
Margins
I should be clear – I’m not a finance professional. But every director and senior manager needs to know how their business makes money. After 15 years on company boards, this video is my attempt to summarise the basics of profit margins.
Estimating the full costs of selling our products and operating our business is challenging, but essential for understanding our realistic profit expectations.
It’s important to separate your ‘variable’ costs of sales (COGS) from your ‘fixed’ overheads (SG&A). If your overheads scale too quickly, you’ll need much higher sales to break even.
There are many things to consider when starting and growing a business, but in the end it’s the numbers that matter most. Achieving healthy profit margins sooner will help grow your business faster and improve your chances of a good exit.
Returns
As consumers, we can see many examples of vendors maximising their return from our purchases.
A product sold at cost can lock us into a high-margin consumable. This ‘razor and blades’ model is used in many markets, such as selling ink for printing equipment.
Our first economy-driven purchase may lead us to a premium version later. Many manufacturers sell low-margin entry-level products to win our loyalty for when we upgrade later. A similar approach is used for selling additional premium features on a competitively priced base model. ‘Cheap’ phones with added storage are one example!
Vendors also use shared platforms to increase economies of scale and reduce their costs. For instance, VW share common chassis and engine parts between Skoda, Audi and their own brand. Apple and Samsung also share chips between different phone models.
As business leaders, we need to learn these tricks and use them to our advantage. This helps us accumulate greater margins over our products’ lifetime, increasing the returns on these investments. And these returns will then build the value of our business.
Growth
Learning to ride a bike is tough. Teaching my children how to do it reminded me of my own cycling lessons.
Sometimes it seems like everything goes wrong and you’re always picking yourself up. Other times you find yourself flying along with little effort. And then you’re on the floor again.
It’s not always easy to tell if you’re doing things right, or just getting lucky for a while. Either way, you need to learn what you can from the experience and find the strength to have another go.
Building a business often brings ‘growth experiences’ with similar ups and downs. You focus on the areas which appear to need the most help. Then you find something which didn’t seem to be a problem. Keeping all the ‘plates spinning’ can be daunting. But there are common challenges which all growing companies face and proven ways to deal with these.
Recognising and anticipating typical problems can help you become better prepared for them. There are many of us who’ve been there before – don’t be afraid to ask!
Product
Technology
I’ve spent most of my career leading R&D teams, working with very bright people and developing lots of cool technologies.
During this time, I’ve learned that successful products need a balance between ‘technology push’ and ‘market pull’. Sometimes it’s difficult to understand the needs of new markets, so it might make sense to innovate first. But mostly, it’s better to find potential customers so their views can drive your technology development.
It’s easy to become obsessed with developing ground-breaking technology and lose sight of what end users actually need. As an R&D leader, it’s important to become a bridge between your team and your customer’s world so you can align your product with user requirements.
To anyone who’s unsure if their technology fits the market – just ask your customers and listen respectfully. Then tell your team what you learned and remind them how important it is to solve a real problem!
Value Propositions
When thinking about product value, it’s worth considering what matters to us ourselves, as customers and consumers.
For example, if you own a car then is it only for your own travel? Do you take your family to their school or work? Do you bring your luggage with you?
These days there are even more ways to go from A to B, with electric scooters and Uber. We can purchase travel as a either a product or a service. Each choice has practical trade-offs, particularly between cost, speed and comfort.
Like everything else, we also buy transport for emotional reasons, because we like the product design or what it implies about our taste or wealth. These benefits can be the most valuable to a vendor but the hardest to quantify.
Many of us find it convenient to travel the same way for every journey, without needing to consider distance or weather when we leave. The ‘one stop shop’ solution is often compelling.
When estimating value, we need to consider the practical, emotional and convenience benefits our product provides, so we can maximise the value created and potentially captured. Understanding the whole ‘job to be done’ can help unlock more of this value.
Traction
Many of us who develop products are naturally technophiles. We are often the first to buy new gadgets and show them off to our friends. This means we are early adopters – a type of customer who is key to getting new products going, but in the minority of potential users.
To make an innovative product successful you’ll need to sell to ordinary people, not just other geeks! This means understanding how most of your potential customers will want to interact with your product.
A good model is to consider your customer’s journey around their ‘touchpoints’ with your product. This is best done during development, so the process helps your product become more customer centred.
There are many examples of companies who became huge on the back of technology-led innovation, but few that lasted against customer-led competitors.
Seeing the world through your customers’ eyes is the best way to achieve traction. There’s no better way to do this than spending time with them!
Product Timing
Having spent most of my career developing products, I’ve seen a wide variety of outcomes from their launches.
Sometimes you’re just too late, and a competitor brings out a better or cheaper alternative to steal the market away. Or you might have a brief window of success before this happens.
Other times you’re too early and no-one is ready for radically new products yet. But a few years later they might be – if you’re still in the game.
And once in while you get the timing just right and you have a money-making machine. In this case, it’s best to look carefully at what made it work – and accept that some of this is down to luck as much as judgement!
The reality is that your product timing will be driven by decisions which you’re forced to make too early and with poor information. But your competitors are in a similar position too. Watch them carefully and keep close to your customers – then you’ll have the best possible chance of getting your product timing right.
Team
Startup Team
Colleagues with a broad range of skills and experience have helped me to see the world from different perspectives. I have seen how this ultimately leads to better products and happier customers.
An open-minded attitude and a willingness to ‘pull together’ can make a huge difference to business performance, especially within a start-up. As your business grows, the tensions, especially between commercial and technical teams can also grow.
Your company’s success depends a lot on how your team copes with these challenges. The right leadership style can help create a culture of cooperation which resolves cross-functional issues faster, accelerating growth and profitability.
Company Culture
Peter Drucker famously said “Culture eats Strategy for Breakfast”. What I think he meant is that if your company’s culture is aligned with your strategy then it can accelerate the execution, but if not then it could ruin your business.
Leading an innovative company can be a lot easier if your culture supports your strategic aims, so it’s worth thinking about the values and behaviours you want to promote.
Leadership
It’s often said that leadership is about “making the right decisions rather than doing things right”. If you’re the one in charge, then you must take responsibility for your own decisions. But you should have help with making them work!
I believe communication is the key leadership skill – as part of both making and executing a decision. In my experience, this is often helped by asking questions rather than suggesting answers. This can take longer but leads to greater shared understanding and ownership of decisions.
People
The writer Max Frisch famously said “We asked for a workforce and what came were people”. He was talking about migration, but the same might be said for building an organisation.
It’s easy to imagine perfect employees when you’re planning resources on a spreadsheet. Hiring and managing real people is a very different experience.
I believe one of the keys to getting the best out of people is to try and see the world from their perspective. This isn’t to say that leadership needs to be consensual, but it does mean understanding what motivates and engages everyone.
As your people proceed on their journey with your organisation, from their recruitment, through individual contribution, growth and perhaps eventually moving on to new things, it’s worth considering how to treat them fairly and friendly as well as firmly when necessary.
As a business leader you’re responsible for delivering the company’s goals. Balancing this with the practical realities of your team’s lives can be tough. The best way I’ve found is to simply explain what needs to be achieved and give them the space to help find a solution which works around their personal needs.
Hiring
Hiring is one of those skills which remains somewhere between art and science. There are an increasing variety of automated processes available to save time finding and filtering candidates. But many appear to measure aptitude for online testing rather than the ability to work effectively with other people.
No candidate will fit your vacancy precisely, and in a fast-growing company the role may evolve quickly in any case. So in my view, key criteria include a candidate’s ability and willingness to adapt to the organisations’ changing needs and grow professionally as the company scales.
Each role has its own technical requirements, but every job needs communication skills to some degree. As a head of department doing final interviews, I asked candidates to explain their ideas verbally and visually. In this age of remote working, I believe the ability to convey concepts through the (virtual) whiteboard or improvised presentation is still vital. Many thoughts cannot be adequately expressed in an instant message of a dozen words!
If you find yourself learning to hire ‘on the job’, then don’t worry if it appears daunting at first. If you’re struggling to choose a candidate then that shows you’re taking it seriously. It’s always worth bringing in others for another opinion, and asking yourself the most fundamental question – could you work with this person?