Even the most casual observer of startup best practices is no doubt aware that the emphasis is on execution when trying to solve for a company’s chances of success.
Notice as well that I am using the term ‘company’ rather than ‘product’ because I believe that if you are already thinking in terms of the various interrelated aspects of running a company (rather than building a product) it is a useful exercise in framing. Companies have sales & marketing functions, they have finance and payroll, they (usually) have office space or physical premises, they have developers and product managers. But of course, none of this matters unless they have customers.
The value of ideas
I think it is dismissive and unhelpful to say that ‘ideas are worthless’ as many people do, because that underestimates the need for creativity throughout the startup journey, something which after all begins with the idea for a company.
Ideas are not worthless at all.
In fact, ideas are everything but they mean different things at different times and in different parts of the business.
I was reminded of this last week when the issue was raised about whether startups were dedicating adequate resources to strategy. Of course, I cannot say whether they are or not, but I can assure you that I am constantly thinking ‘strategically’ in the context of the startups with which I am involved.
And doing so requires having ideas.
Creativity is paramount when working with limited resources. Having ideas is critical in coming up with hypotheses to test. Innovation is at the core of startups.
The 3 Horizons of Growth
One of the most respected frameworks for strategy is McKinsey’s ‘Three Horizons’. It details the ways in which companies should act in the pursuit of innovation (or more specifically, the positive outcomes of innovative activity).
The framework breaks down activities into time stages: now, near-term and future and being from McKinsey it is considered and backed up by data.
- Horizon 1 (Now) ideas provide continuous innovation to a company’s existing business model and core capabilities.
- Horizon 2 ideas extend a company’s existing business/model and core capabilities to new customers, markets or targets.
- Horizon 3 is the creation of new capabilities to take advantage of or respond to disruptive opportunities or to counter disruption.
The problem with it is that it is irrelevant for startups.
It is not relevant for two reasons and is not a flaw in the study but rather a function of the fact that it is targeted toward corporations rather than startups.. The first is that shoring up a core business is unlikely to be a priority at a company still experimenting with business models, pricing, customer segments, marketing activities and more. It also seems more focused on the literal elements of Clay Christensen’s theories rather than the spirit.
The second reason is that in a startup, all these activities need to be happening simultaneously. Experiments and tests need to be occurring in the form of how to systematise the most mature elements of a startup’s operations at the same time as they are rolling out new products and testing for their value in the market.
Perhaps a more useful framework for startups is one of: Today, Tomorrow, The Future.
Returning to this point about the value of ideas, startup founders usually imagine their companies fully birthed. Bathing in the glory of ‘the way things should be’.
This is The Future version of their company
… but to get there, the need to have ideas on how to navigate the now and near term. They need to have tactics for today and tomorrow.
As an example, Uber’s version of The Future was always well publicised. It was robotaxis, For Uber, the future meant car ownership rates had plummeted and autonomous driving had become the norm. But such a future requires robust systems of payment processing, geopositioning, algorithmic demand forecasting, logistics, etc..
But today, robotaxis is not possible. So what version of The Future can be backward engineered for today? The idea that they had (or one of the ideas that they had) was to be able to summon a private car when you need it.
In doing so, they were testing versions of the future (their ‘Horizon 3’), they were building systems that would continue to develop an be used to underpin Uber Eats (a new segment, a la Horizon 2) and they were continuing to improve driver onboarding and demand forecasting (their Horizon 1).
And they were doing all of these at the same time.
Shrinking the space-time continuum … just one of the ways in which startups are different.