EMPIRE BUILDERS — ON OPERATIONS EPISODE #5: From market fit to market traction
No matter how great the original idea, building a steady, healthy small/medium-sized business, a beautiful small start-up or a giant unicorn is a real job that can be learned. Most founders, like me many years ago, are first-time founders: this series of posts is for them.
Previously, in episode #1, I summarized the areas of focus for both the company and the founding team at each development stage to give you a brief overview of the upcoming posts before taking a deep dive into each step. I’d advise you to read that 5-min. post before continuing, if you haven’t already :-)
Stay humble: it’s just the beginning of the journey
At this stage, there are two big deadly risks for your startup: either the founder not evolving from a doer to a manager, or not having infrastructures put in place early on (or maybe both!).
I would say this specific stage is perhaps the most neglected of all. Why? Because you have market fit, traction, some success, everything seems to be working well (acquisition, usage, revenues, etc.), so why bother? The magic is happening, you’ll be able to raise money, recruit more people, grow the business, work the metrics, and … voilà :) Unfortunately, it doesn’t work that way. There are so many companies, and very promising ones, that successfully pass the MVP / POC / MARKET FIT tests, raise money, grow 10x in a matter of months and… boom, crash into the wall.
So please:
- keep calm and stay humble,
- stay client-focused and data-driven,
- build the foundations of growth BEFORE acceleration,
- bear in mind that the economics MUST work, even at the lowest scale, or at the very least you must have a plan to make them work as quickly as possible,
- be really cautious and serious about recruitment,
- spend a lot of time with the people in your team,
- drive your business (I mean really drive it, no pretending). That means KPIs, KPIs, KPIs, KPIs :-)
Evolve from being a great doer to a great manager
Your role as a founder must evolve drastically at this stage.
From Day 1, you got used to handling (or at least being involved in) pretty much all topics related to your startup, from the overall strategy to the day-to-day operations, top-down and bottom-up, whether it was tech development, customer acquisition, selling and care, delivery, partnerships, hiring, etc.
Now you will have to rely on others to handle operations for you: this is one of the biggest differences between “starting a business” and “running a company”. You have to build a resilient business where every single operation happening on a daily basis is
- automatized if it can be,
- taken care of by someone other than you.
Your role now is to set the direction, recruit, train, manage, and keep people aligned.
As of now, the transition period will consist in on-boarding new people and transmitting your knowledge. And believe me, it is difficult, even for the greatest managers on earth. That’s because you have to:
- pay it forward (invest in people regardless of what they may bring back to you over the short term),
- accept mistakes (there will be many, it is part of the game),
- accept that you’ll recruit people who may well turn out to be (way) better than you (that is often a pain, even at the unconscious level).
This phase is particularly tricky, as many great doers never manage to turn into great managers. It is one of the reasons why, sometimes, changes in management (whether simply shifting roles or people) may occur for the greater good of the company.
Set your Minimum Viable Infrastructures
Together with evolving towards more managerial roles, the founding team has to set up the proper infrastructures on which your company will thrive…otherwise, it will die. Infrastructure is a big word to describe a very simple set of procedures, processes, tools, skill allocations, project management, KPIs and objectives (weekly or bi-weekly).
You do it because it is more scalable, lean, efficient, and stable. Because it will enable you and your team to track and measure performance and constantly improve, replicating what works well and quickly getting rid of the what isn’t working so well. Your company is so fragile at this stage that you have to find a way of to automatize your handling of operations; infrastructures is the way.
Infrastructures are also critical because you will be able to recruit with the end in mind: for example when you have a pain in some area of your business that desperately needs a particular skill you do not currently have in house. You will be able to easily see any mismatches in the organization, train people, help them focus, improve etc. You will be able to differentiate between the necessary and the unnecessary. You will be able to play your management role at 100% power.
It is really a moment when you have to test and learn each and every part of your infrastructure, just like you did with your MVP. This is an MVP for your infrastructure.
I know this can be really frustrating because nobody besides you or your team can see the amount of progress you are making underground: not the investors, not the clients. But it is critical to ensure future success at a larger scale. It will require a lot of time (sometimes months), but it is critical to really reach operational scalability and drive… and it lets you sleep better at night :-)
Practically speaking, my advice is to:
- map all operations by cluster (sales, delivery, tech dev, CRM and customer care, partnership management, etc.),
- divide each cluster by main procedures (for sales, procedures titles may be “acquisition”, “conversion to free trial”, “conversion to paying”, “retention”, “upsell”, etc.),
- for each procedure, write a set of processes (for acquisition, processes may describe in a few words how to manage SEO, referrals, organic, payable, etc.),
- for each process, assign a specific set of tools (whether homemade or external), that could be as simple as “Excel” or “Slack”; otherwise,
- for each process, assign specific skills needed (proficiency in certain tools or a specific background) that is required to master this process, independently from the skills that you already have internally,
- for each process, decide which related KPI is relevant and set weekly or bi-weekly objectives.
You have to see this “masterpiece” as an operational roadmap. Begin with the end in mind: draw the optimal infrastructure that you need in the coming months or years to drive your business properly. Then you will be able to see the mismatches with the current organization, internal skills, etc. From there, tackle the topics one by one :-)
This infrastructure will enable you to master a critical component of your future success: operational drive. Once you are at ease with every single part of your operations, you will be able to organize your team properly and communicate with everyone more easily and clearly. You will be able to set proper objectives with each employee buying into a certain set of KPIs, and you can interact with them on a weekly basis thanks to those KPIs, which will keep everyone more focused.
Put simply, “having operational drive” means: “being able to discuss KPIs on a weekly basis with each employee, related to his or her set of competencies that have been allocated to certain processes”. In an organizational 2.0, you do not assign people to a function in an organizational chart, but to different roles that may change over time in relation with specific projects. See your operations as a never-ending flow of projects where you need to set the direction and allocate internal talents or skills properly. Of course there is an ongoing test-and-learn spirit regarding infrastructures and competency allocations, just like there is for your solution. People gather skills around a specific project for a specific period of time.
With that, you will be able to:
- set your operational priorities with a clear mind,
- hire properly to fill the gaps, not just to get more people because you recently raised money,
- be able to really have operational drive in every part of your business,
- communicate properly, whether internally or externally.
Key takeaways
- Do not just be one of the team players anymore — act like coach instead. Your responsibility is getting the best out of your team, so whatever works
- Build rock-solid infrastructures: you are the architect of the house, so build the finest internal operations
- In the meantime, catapult your solution to the next level: features, interface, experience, etc.
- Work on core metrics along the way and fight for excellence in all customer-related topics: consumer journey, account manager, customer care, etc.
- Optimize your business model: pricing sophistication, average spend, upsell initiatives, etc.
- Pivot or keep going :-)
Key elements / metrics
- Same as in the previous episode
- Objective: 0% directly handling operations :-)
- Operational masterpiece (goal) and roadmap (path) up and ready
- Customer acquisition, adoption, conversion, engagement, repeat, stickiness
- Cohorts
- Virality and referrals
Did you enjoy this article? Please spread the word: recommend, comment, share :-)
See you soon in #EmpireBuilders!
PS: Below you’ll find the schedule for the series
FIRST STEP: DOING AND LEARNING // PRE-SEED PHASE
SECOND STEP: BUILDING A COMPANY // SEED PHASE
EPISODE #7 — From local scalability to international expansion
THIRD STEP: BUILDING AN EMPIRE // SERIES A, B…
EPISODE #8 — From international expansion to international scalability
EPISODE #9 — From international scalability to M&A activities
EPISODE #10 — A final word: ongoing restructuring
