We have finally reached the last step of the customer development model, company building. According to Steve Blank, there are three requirements in the company building step:
- First, building a mainstream customer base beyond the earlyvangelists.
- Second, building the company’s organization, management and culture to support a greater scale.
- Third, creating fast response departments to support learning and discovery which got the company to this last stage.
Building a mainstream customer base beyond the earlyvangelists
The most apparent difference between a startup and a large company is the amount of customer revenue. A linear sales graph cannot always represent the conversion of a startup to a large company. The growing sales revenue requires a broader group of customers beyond the earlyvangelists who are the mainstream customers. Building this mainstream customer base necessitates shaping sales, marketing and business strategies based on the market type in which you compete.
Thus, market type is always necessary. Just as the other steps in the customer development model adjusted your ways of finding and approaching earlyvangelists, it will now shape your company’s growth and how you should allocate your resources. This is because each market type has a different sales growth curve based on the difficulty in converting sales from the earlyvangelists to mainstream customers. The sales growth curve is different when taking a new and existing market. Even after you successfully find and sell your product to earlyvangelists, the degree of sales differs in subsequent years due to the different adoption rates of the mainstream customers. This means that company building activities in earlier steps of the company building model depend on the market type. Most startups think that just because their company has reached this step, their job and hard work are finally over. Since they have discovered their customers and created a repeatable sales roadmap, all they must do now is hire more sales staff. This is wrong! The most common mistake that startups make is a lack of understanding of the market types. Market types not only predict how the transition of a startup to a large company will occur, but they will also predict the types of staffing, hiring and spending needed.
According to Geoffrey A. Moore, the earlyvangelists are not bulky mainstream buyers. Thus, being successful in early sales doesn’t provide the sales roadmap for subsequent mainstream buyers. Moore presumes that a company should consider new sales strategies to bridge the chasm. Customer development is on the left in the technology life cycle adoption curve. The chasm is the gap in sales revenue when the sales to earlyvangelists are not smoothly transitioning into mainstream sales. The width of the gap significantly differs with each market type which justifies the different sales growth curves for the market types. This begs the question, why did we spend so much time on customer development when most of our customers are in the mainstream market? Moore’s chasm crossing strategy develops based on what we learned from the earlyvangelists to build to a larger mainstream audience.
Building the company’s organization, management and culture to support a greater scale
Since a company scales its revenue and transitions from earlyvangelists to mainstream customers, it needs to develop and be subject to change. The most significant changes are:
- The whole corporate management and culture.
- Creating functional departments.
We will now go through these changes one by one.
Corporate management and culture
Most startups don’t think of organization and culture as they should. Startups and their investors end up assuming that success means that they should transform themselves quickly into a large company with all the equipment necessary to form a large company organization and culture which is a hierarchical, management which is command-driven, decision making, which is process-driven, an employee handbook which is HR driven as well as an execution mindset. The usual outcome is a bureaucracy which is imposed too early.
In company building, the CEO, executives and board must understand that with the uncertainty of the mainstream market, which is still ahead of the company, simply copying a large company’s organization and culture can be the start to the end of a potential startup. Steve Blank put forward three different stages to a successful startup in terms of its growing organization and culture into a large company:
- Stage 1 – which surrounds customer discovery, customer validation and creation, is focused on the customer development and product development teams.
- Stage 2 – focuses on company building. The company becomes mission-centric to scale up and cross the chasm between earlyvangelists to mainstream customers.
- Stage 3 – As the company becomes more prominent, it’s process-centric, which builds repeatable and scalable processes.
Only experienced executives understand this process, but few understand what it means to be mission-centric. Your startup should become a clever company if it wants to transition to a large company and cross the chasm. This requires a written and clearly understood corporate mission that manages the daily operations of the departments and their employees. We will also see that in phases 2 and 3 of company building, the mission-centric motto should affect the entire company’s culture.
Creating functional departments
If your company has followed the customer development model to this point, you have already built your first mission-centric team. In phase 3 of company building, you will convert the customer development team’s mission-oriented culture into departments organized to execute and assist the company’s mission. You shouldn’t mistake this as building departments that later invent missions to justify the existence of those departments. The next step is to add more management and organization focused on the customer-centric goal, not just developing departments and headcount. After all, you aim to achieve a management system and departments that meet and assign strategic goals to the staff to work without being controlled daily while pursuing the same goals. This can only be achieved if executives are selected as they share similar values and not only because they share similar experiences. Meanwhile, the management needs to consist of individuals who possess independent leadership. As leaders, they need to spread the company’s vision to everyone who is helping to make the company successful.
Creating fast response departments to support learning and discovery which got the company to this last stage
Customer development and a mission-centric company require different things regularly because, in learning and discovery, change and the response to change are always consistent. On the other hand, a process-driven company is built on repeating things that have been discovered to work with minor modifications. A process is essential to set measurable goals and implement repeatable procedures that don’t need experts. Process is how large companies can develop to become larger, how they scale departments and the company without hiring big shots. Large companies can instead employ thousands of employees to follow the rules and check if the business is sticking to the plan. Process here means procedures, rules, measurements, objectives and stability.
Having fast response departments provides natural growth from the learning and discovery stage to functional departments that a large company needs. Fast response departments keep the company graceful and prevent it from dying.
The phases of company building
- Phase 1 – reaching mainstream customers by matching a suitable sales growth curve to hiring, spending and continuous execution.
- Phase 2 – Review the current executive management and assess whether the team can scale. A lot of attention is needed to create a mission-centric organization and culture to scale the company.
- Phase 3 – By capitalizing on all the learning and discovery the company has done till now, the customer development team reshuffles into departments based on business function. Each department has its mission to support the overall company mission.
- Phase 4 – creating fast response departments for scale, speed and agility. Here the military concept of OODA (observe, orient, decide and act) is used to move and respond to competitors and customers at a speed which is faster than the competition. In this phase, each department must possess updated customer information and the ability to distribute that information in the company quickly.
Phase 1 – reaching mainstream customers
You need to understand the customer transition and sales growth based on the market type, which will allow your company to predict the timing of mass-market adoption, hiring, cash burn requirements and the other essential factors for the company growth. The sales growth curve describes the how and the chasm explains the why. In phase 1, you will:
- Manage the transition from earlyvangelists to mainstream customers by understanding how the transition is different to each market type.
- Manage the sales growth curve according to the company and market type.
The result of phase 1 is twofold – a chasm crossing strategy which suits your market type and a revenue/expense plan, and cash needs plan which suits your market type. We will now explore the transition from earlyvangelists to mainstream customers and the sales growth based on each market type.
The transition from earlyvangelists to mainstream customers in a new market
The earlyvangelists targeted in customer validation wanted to solve some immediate problem, or in terms of companies, they wanted to achieve a large competitive advantage by buying a revolutionary discovery. Most customers in a new market are, however, not earlyvangelists but are pragmatists. They want evolutionary change. Later, the effort that was put into making a repeatable and scalable sales process for earlyvangelists will not take you to volume sales. Visionaries will have to accept a product that doesn’t work, pragmatists require something that doesn’t need to be used by heroics. Moreover, pragmatists don’t trust or care about the visionaries as references as they want references from other pragmatists. The chasm between earlyvangelists and volume sales to mainstream customers occurs due to these two types of customers, which have very little in common.
The gap between the visionaries and the mainstream customers is broad in a new market. There will be small revenue for a short time in the first year or so from sales to earlyvangelists. Then there will be a long, flat period until the sales team discovers how to sell to a new audience and the marketing team encourages pragmatists to buy your product.
Moreover, to the long pause until sales progress, a new market has the most severe sales risks on both sides of the chasm. On one side, searching for a repeatable sales process for earlyvangelists might succeed very well. The sales team might become happy with the low level of repeatable sales. On the other side, the risk is that the company might not reach it. Pragmatists in a new market might see no reason as to why they should adopt your product, especially in a dire economic crisis. Another risk is the competition. After investing in educating a new market on your product and its benefits for years, your startup can get defeated by a “fast follower”, which is a company that enters the market, piggybacks its way to all your market education, crosses the chasm and steals the rewards that you deserve. Unfortunately, this risk is common. These risks don’t have to be disastrous as they sound. The biggest mistake isn’t based on not understanding the features of the customers of a new market or discovering them. However, it’s based on refusing to change the sales model that has produced earlyvangelist sales to chase the volume customers.
To reach mainstream customers in a new market, your startup should form selling and marketing strategies different from those used in an existing or resegmented market. Two strategies include:
- “Crossing the chasm” by discovering niche markets – focusing on little sales efforts on earlyvangelists in a particular market, application or company type. You can use word of mouth as references and build whole products for the mainstream market.
- Creating a “tipping point” – focusing on individual sales until a massive pool of earlyvangelists is reached. After that, a small charge tips the customer base, and a significant outcome is seen. Viral marketing is an example of this kind of strategy.
It should be noted that both strategies haven’t been successful most of the time. Therefore, it should only be applied in new markets and not for all types.
Managing the sales growth in a new market
Venture capitalists have realized for years that startups in a new market take a long time to gain rewards. While there might be a blip in sales revenue from earlyvangelist orders, the sales in a new market can be near 0 during its first few years. After that, the revenue increases rapidly only when the company successfully educates its customers, creates new sales and channel roadmaps that reach mainstream customers and have the power to stay and have resources for the long term.
The sales growth curve for a new market puts forward essential parameters for a startup with no sales revenue:
- Capital requirements – how much does the company need to raise until revenue starts coming in?
- Cash flow/burn rate – how does the company manage its cash flow/burn rate?
- Market education/ adoption plan – how much does it take to educate the market, and how long will it take for the market to grow to a sufficient size?
- Hiring plan – if an infinite amount of money doesn’t affect market demand, when and why does the company need to have a marketing department? This also applies to the sales department.
These questions imply that in a new market, company building is about preserving resources, converting and growing the market until the market grows large for the sales revenue to occur.
Another risk in a new market is that the market alone turns out to be an illusion. This means there might not be enough customers than the earlyvangelists to support a large business. Worse, most companies don’t discover that they’re wrong for years when they go bankrupt! It’s too late to reposition the company by then. Therefore, startups need to look at the predicted burn rate and ensure that their investors and cofounders agree to take the same approach before selecting a new market.
The transition from earlyvangelists to mainstream customers in an existing market
The chasm between earlyvangelists and mainstream customers in an existing market is small or doesn’t exist as the visionaries and pragmatists are the same types of customers. In an existing market, all the customers will easily understand your product and its benefits.
There is no long gap as the sales team learns a new sales roadmap and a new group of customers gets educated about the product. The only hindrance to sales growth is the market share and difference. The lack of chasm signifies that the existing market is ready to be exploited and consistently executed. The challenge in an existing market is that while customers may understand your product and its benefits, they might not understand why your product should be purchased when they can buy it from a familiar company. This is when positioning and branding are introduced, and these two strategies are famous for differentiating companies and their products. Sometimes, these two terms are used interchangeably, which is a mistake as they are different, and the difference is essential.
In an existing market where market share is the goal, and there is little difference between competitors, the fastest and cheapest way to differentiate your company and product is to put forward positioning or value instead of pursuing branding. Positioning thus becomes successful when customers not only realize your product but memorize its features.
Managing sales growth in an existing market
In an existing market, customer validation and customer creation should have proven that there are eager customers who understand your company’s unique advantages. The marketing team has distinguished the product, creating end-user demand for it and driving it to the sales channel. The sales team is scaling to win the rewards. That being said, the graph of the year-to-year sales in an existing market should be a linear line. If you’re in this market, scaling means:
- Capital requirements – how much money is needed until the cash flow breaks even?
- Hiring plan – can the company scale quickly to exploit the market?
- Product lifecycle – the linear line is correct only if your product stays competitive. Are there any follow-on products in the sales pipeline?
- Competitive responses – what happens if competitors respond?
The transition from earlyvangelists to mainstream customers in a resegmented market
There are two risks for chasm in a resegmented market:
- The seductive nature of sales to early adopters. There are enough visionary customers to generate revenue, although on a small scale, to make the company believe it has built a scalable business model. The company is skimming a low sales volume from an existing competitive market. Crossing the chasm in this market type means alluring many mainstream customers who need to be educated on what’s new and unique about how you’ve redefined the existing market. These are some of the same issues in a new market, but instead of using niche and tipping point strategies in a new market, you need to use branding and positioning to reach mainstream customers in this market. Startups use these two strategies to distinguish their company and product from those companies found in an existing market.
- Resegmentation is expensive, and companies need enough capital to see polished marketing and positioning until it’s completed. Startups usually underestimate the cost of time and money required to make a long-lasting impression on mainstream customers in this market. Having a positioning strategy is essential to branding. Too many marketing VPs select a branding campaign when they cannot articulate a proper position. Branding is expensive, time-consuming and is built to obtain an emotion. You need to use positioning to establish the value of the new segment in the market and create product demand. After that, you can use branding to reinforce that segment’s importance and greatly create demand.
Managing sales growth in a resegmented market
Sales growth in a resegmented market is difficult as it combines new and existing markets. The good news is that there is an existing market for customers who will easily understand the product. This allows the company to produce sales even among the harsh competition quickly. However, early sales shouldn’t be confused with success. The requirements of sales growth that need to be achieved in a resegmented market are:
- Capital requirements – how much money is necessary until the cash flow breaks even?
- Market education costs – can the startup afford the continuous cost of educating and creating the new segment?
- Positioning and branding costs.
- Hiring plan – can the company balance early sales instead of hiring before the ramp appears?
- Market evaluation – what happens if resegmentation doesn’t work out?
Phase 2 – review management and building a mission-centric organization
Company building prepares the company to progress from an organization focused on learning, discovering and attracting earlyvangelists to one implementing all its resources into finding and getting mainstream customers. For this to occur, you need to ensure that your senior management can lead this severe transformation.
In this phase, you need to:
- Request the board to review the CEO and executive staff.
- Build a mission-centric culture and organization.
Requesting the board to review the CEO and executive staff
The board must review if the CEO and executive staff are capable people to scale the company. There needs to be a set of skills of the CEO and executives that the board can go through to decide this. However, the skill set isn’t based on what the CEO and executive staff have already done, but it’s a set of skills they can do. These predictions are what make executives fail.
As a result, there needs to be a table of CEO/executive characteristics based on each stage of the company. One of the most attractive features of founding entrepreneurial executives in the sales or product development teams is their personal contribution to the company’s success based on their achievements. However, as the business grows, it needs to be more about a mission and goal-oriented leader. This stage requires 24/7 commitment from the CEO.
Planning is another crucial difference. As the company grows, it needs leaders who can possess a larger team focused on a single-minded goal. In this stage, hierarchy is implemented, but responsibility and decision-making become more broadly distributed as the span of control increases than one person can manage.
Regardless of the market type, it’s certain that the company will face a challenge in three years. The challenge may come from small competitors who have grown more extensive from large companies that now find the market large to enter. To face this competition, the resourceful, creative and entrepreneurial skills that the company needs as a startup are required.
Build a mission-centric culture and organization
The company must have a common mission where the founders, board and executive staff share the same vision. Executives in different departments should be hired to ensure they share the same mission, not because their resume shows they are experienced.
Stating the corporate mission
A mission statement is needed to state the corporate mission. The goal of the prior mission statements was to help customers understand how the company and its products are different. The mission statement in the company building stage is not for your customers but for your company. It includes a paragraph or more than a paragraph which tells you, the board and employees how you will cross the chasm from earlyvangelists to mainstream customers and manage the sales growth curve. It specifically tells everyone why they come to work, what their job is and how they will know they have been successful.
Preparing a corporate mission statement
Most startups spend a lot of time preparing the perfect mission statement for external purposes but don’t do anything internally to put their mission statement into practice. You should note that the corporate mission statement built-in company building is for internal use. Some of them may be used to make customers and investors satisfied, but that is not what they’re used for. The mission statement is action-oriented. It’s prepared to be used as a simple guideline for all the employees. Therefore, it’s focused on implementation and the goal of the company. If you do it successfully, the mission statement will help employees decide and behave while being guided by an overall understanding of the company.
The CEO will use the corporate mission statement to get commitment from all the executives and can bring other employees to ensure that the statement is shared and established, if necessary.
The mission-centric organization culture should embrace the whole company, not just the departments dealing with customers. Thus, the executive team needs to make a lot of effort to ensure that employees from all the departments feel they share a common purpose. This requires continuous communication across the company.
Phase 3 – transitioning the customer development team into functional departments
Based on the continuous interaction with earlyvangelists in steps 1 –3, the customer development team has identified how to build repeatable sales and channel roadmaps. By completing this, the focus of the customer development team shifts to acquiring mainstream customers. Unfortunately, if a customer development team doesn’t have a functional organization, it cannot scale. To rectify this, the startup needs to organize itself into departments that combine business functions that would have been pointless in the earlier stages, such as sales, marketing and business development. Afterwards, organize these functions to match the company’s needs based on the market type.
In this phase, you should:
- Craft departmental mission statements organized for business functions.
- Define the departmental roles based on the market type.
Craft departmental mission statements
Before establishing sales, marketing, business development and other customer-focused departments, the company should understand what these departments do. This is because the goals of each department are different based on the market type. The executive team should therefore articulate each departmental goal in the form of a departmental mission statement. This is because, before the company starts to hire and staff, the existing departments try to justify their existence and activities.
In phase 2, your company had assembled a corporate mission statement that suited your market type. You should now translate the corporate mission statement into departmental mission statements with department and task-specific goals.
Define the departmental roles based on the market type
As you have departmental mission statements, you can organize the departments. You should note that it’s essential to establish departments by their functions, and each department should consider how its roles are based on the company’s market type. We will go through them one by one.
Departmental roles in an existing market
Till now, the role of the sales department as a part of the customer development team was to confirm the product/market fit, discover repeatable sales and channel roadmaps and secure earlyvangelists and orders to prove the roadmaps and business model works. Since your company has a massive bunch of earlyvangelists, the role of the sales department is to get more customers to scale revenue and the company. This is because, in an existing market, the earlyvangelists and mainstream customers are quite the same. Thus, it’s essential to have a sales team that can continuously and correctly execute from a familiar roadmap.
Till now, the role of the marketing department as a part of the customer development team has been to learn and discover new customer segments and niches, testing the positioning, pricing, promotion and product features. The marketing team’s role transfers from creativity to execution. As the sales department prioritizes repeatability and scale, it merely wants the marketing department to provide materials that will help get more customers. Thus, the marketing department needs to drive demand into the sales channel by giving qualified leads, competitive analysis, customer case studies, sales training, channel support and so on. This transfer can be horrible for an individual marketer or a small marketing team leading customer development. Still, it should be achieved if the sales department is to accomplish market share.
Since the sales team requires execution from marketing, there is a potential risk that the creative efforts of marketing will move to marketing communications or product management. In marketing communications, marketing might confuse its new role with just being a marketing communications department, hiring PR agencies and branding the company etc. On the other hand, if the marketing team is more technical-oriented, they might behave like product managers and start developing the marketing requirements department for the following product release. These mistakes are made by creative individuals who no longer have a creative jobs. These mistakes mostly happen if departments don’t understand their mission connected to the corporate mission.
The function of the business development team is to build strategic relationships that are important to build the ‘whole product’ through partnerships and deals to ensure that the company can sell to mainstream customers. The whole product is a concept established by Bill Davidow. According to this concept, mainstream customers and late adopters of the technology lifecycle adoption curve require an off-the-shelf, safe and complete solution. In an existing market, your competitors define how complete your product offering should be. If your competitors possess whole products, you should have the same.
Departmental roles in a new market
The lessons learnt in customer validation cannot be transferred as the mainstream customers aren’t the same as the earlyvangelists. Thus, even with an infinite number of salespeople, the sales revenue won’t scale without a strategy change. There is an actual risk of the sales team believing that earlyvangelists represent the mainstream market in a new market. At this point, earlyvangelists shouldn’t be avoided at this point, but they should be considered a segment that the sales team has to surpass if the company wants to be successful.
The marketing team’s role is to discover potential mainstream customers, understand the difference between them and earlyvangelists and think of a chasm crossing strategy to approach them. The problem is that the marketing team believes they are in an existing market and begin heavy demand creation spending or thinks it can increase customer adoption through branding. However, there is no demand in a new market. So until you discover mainstream customers and a plan is made to impact their behaviour, spending so much money isn’t change the sales revenue! Marketing is, therefore, a strategic function built to help the sales team find the mainstream market and not demand creation activities.
The business development team must assist sales and marketing bridge the perceptual gap between a company that makes the earlyvangelists interested and a company that makes sense for mainstream customers. They do this by establishing relationships and partnerships that agree with “beachhead” markets targeted by the sales team. The goal is to keep the company looking more pleasing to mainstream customers by making the whole product.
Departmental roles in a resegmented market
A resegmented market needs strategies and departmental missions that connect the features of different departments in existing and new markets. Due to this reason, departments in resegmented markets may sometimes feel paranoid. You need to start competing in an existing market where the competition is violent to distinguish the product in a space where no one currently belongs but where you believe many customers will come in. Sometimes, the sales team might behave like it’s in an existing market while the marketing team plans new marketing tactics.
The sales team must sell to customers in an existing and competitive environment while trying to find new customers. However, unlike a new market where the move towards mainstream customers was seen on chasm crossing or tipping point strategies, the sales team in a resegmented market relies on the marketing team to position and branding to “peel off” a considerable number of existing customers by creating a different segment. Continuous low-level sales to approach these existing customers is a part of the sales strategy.
The business development team must find unique partnerships and relationships that form the whole product, which is necessary to differentiate the company from competitors.
Phase 4 – building fast response departments
In this phase, you need to:
- Implement mission-centric management.
- Implement an information culture.
- Build a leadership culture.
Making fast decisions in a business has terrible consequences for the idlers who do nothing. To sell to mainstream customers and build long-term success for your company, you need to establish an intelligent organization that responds to customers, competitors and market opportunities as fast as possible. After organizing departmental roles, your job is now to convert those departments into fast response departments. To do this, you need to carry learning and discovery into the functional departments. Decentralized decision-making and the OODA loop (observe, orient, decide and act) will be the foundation of phase 4.
When you transition to functional departments in a company building, you should decentralize decision-making to ensure each department can respond to changes in customers, markets and competition. The OODA loop is essential when trying to grow and maintain speed and agility in a company. In an existing market, it’s the speed connected with the competition and customers. In a new or resegmented market, it is speed related to the cash flow and profitability. The goal is to be faster than your competitors or cash burn rate and respond quickly to customer needs or opportunities. Even a slight speed improvement can lead you to great results.
Implement mission-centric management
Implementing mission-centric management is the foundation on which intelligent companies build fast response departments and deal with the uncertainty and time that a startup continuously faces. Perfection and certainty are unachievable by most startups in competitive or customer situations. Thus, the company and its departments should achieve speed and agility consequently. Mission-centric management provides the flexibility to handle quickly changing conditions and use customer and market opportunities.
Mission-centric management supports decentralized decision-making. This makes the decision-making process ensure that the company is flexible, cohesive and responsive.
Implementing mission-centric management necessitates a conscious shift in thinking from managers and employees. Mission-centric management has five parts:
- Mission intention.
- Employee initiative.
- Mutual trust and communication.
- “Good enough” decision-making.
- Mission synchronization.
There are two parts to any mission: the tasks that need to be achieved and the reason for implementing those tasks. A task statement tells what measures need to be adopted, while the intention means the desired result of the action. Out of the task statement and intention, intention is more important. Although the change in circumstances may result in the task being useless, the intention doesn’t change and continues to guide the company’s actions.
For mission-centric management to work, you must ensure that the intentions of the corporate and departmental missions are understood and not only by executives. While mission-centric management depends on the executives to explain the primary intention of the corporate and departmental mission, it leaves the employees alone to decide how the missions should be achieved. By keeping the intention known throughout the company, the CEO and departmental VPs implement their leadership not by issuing directives and directions but by giving broad guidance. Based on this management style, all the executives and employees have the potential to implement complete control and apply their judgment and imagination, as stated by Spenser Wilkinson in his book, ‘The Brain of an Army: A Popular Account of the German General Staff’.
A startup’s success is based on searching, finding and using temporary opportunities. This can be done if all the employees and founders take the initiative. Employees should know that taking the initiative and acting on their authority is part of their implied employment contract. However, this doesn’t mean that employees can behave however they want. It only makes the employees:
- Always remember the mission and intention.
- Coordinate their actions in their own departmental and corporate missions.
Making a culture of employee initiative heavily depends on selecting, hiring and preserving employees who work better in an environment with an initiative. You won’t have a fast response department if you hire employees or executives who wait to be ordered, feel they should play according to the rules, never tell the boss anything that might make them uncomfortable or are used to being big shots who do everything alone. At this point, your competitors will make you go bankrupt.
Mutual trust and communication
A successful mission-centric organization requires mutual trust and confidence in the employees’ and executives’ capabilities and judgment. Executives trust their employees to work properly and without much supervision, to comply with the overall intention and to communicate information about customers, competitors, success and failures between various departments in the company. At the same time, employees trust executives to provide leadership and wholly and loyally support them even if they make mistakes. That being said, mutual trust and communication cannot exist in a company when failures or asking for help are seen as career limitations. To ensure cooperation, the company should quickly remove employees or executives from the company who aren’t respected and trusted by their colleagues. However, there is a flip side to trust. It should be earned and given. As a mission-centric department is decentralized instead of centralized and coercive, discipline is executed from above and should also be made from within the department. To earn the trust of executives, employees should be self-disciplined to achieve their mission without much supervision and behave according to the mission’s intention.
“Good enough decision-making”
According to Gen. George Patton, “A good plan violently executed now is better than a perfect plan next week.” This statement applies to all startups. Most of the decisions need to be made with uncertainty. As most situations are different, there is no perfect solution to any customer or competitor problem, and you shouldn’t worry about finding another solution. Thus, the company must quickly implement decisions to achieve tremendous, decisive, competitive benefits.
Even with well-written mission statements and good intentions, a mission-centric procedure can be unsuccessful if there is no way to keep departmental missions synchronized formally. Mission synchronization is like what the customer development and product development teams had employed in customer discovery, validation and creation. Both teams updated each other regularly in those steps about what’s happening in the market, the product schedule and features.
When you move to the mission-centric process, all the departments must sync and move according to the corporate mission and intention. This means synchronization meetings have three functions:
- First, to ensure all the departments still understand the corporate mission.
- To ensure all the departmental missions are mutually supportive.
- Ensure that the CEO understands and accepts how each department will exercise its mission.
Implement an information culture
A fast response department requires constant information. In this stage, executives need three views on information to understand what’s happening:
- First-hand knowledge.
- Overall view.
- The view of customers and competitors.
First-hand knowledge has been used till now by getting out of the building and talking to customers in discovery, validation and creation. Executives must continue this even when the company is growing. A summary of everyone’s views should be circulated widely in the company. Any executive who talks to customers and the sales channel needs to communicate to the whole company at least a week concerning both good and bad news.
Regarding the second view, it’s like a bird’s eye view where you need to collect information from everywhere like sales data, win/loss information, market research data and so on. This information needs a formal market and customer intelligence function in every department. This doesn’t mean a dedicated 24/7 employee is required if there is someone who understands their job. Your customer intelligence team needs to collect first and secondhand data and provide reports daily, at least monthly. Intelligence reports shouldn’t be influenced by political agendas and focus on facts.
Regarding the third view, you need to understand your customer and competitor’s point of view. Out of all three views, first-hand knowledge is the most detailed, but a narrow vision is needed since the company is getting bigger. The overall view lacks necessary detail, and if executives focus only on this image, they lose touch with reality. The third view is significantly a mental exercise which is limited to the fact that executives can never be sure of what the customers and competitors are up to. Combining all three views helps executives create a correct picture of what is happening in their business. From all three views, executives and managers should understand two things:
- There will never be sufficient information to make a good decision.
- The individual should make decisions at that time when direct observation of the situation is being made, whenever possible.
What happens next after you collect information? Some startups reward executives who provide information or hide bad news. It’s important to dissect, understand and act on bad news as sales losses are more important to understand than understanding sales wins.
Building leadership culture
It takes more than preaching responsibility and initiative to build a leadership culture. The company’s leadership philosophy is based on what you do or don’t do to impose responsibility in the organization. Trying to implement orders on how a departmental project is achieved shows creativity and leads to a formulistic approach to company problems. Requiring certainty and all the other facts before you act forces you to miss out on opportunities and creates a no-risk culture. Hanging on to the current business plans that have surpassed its worth destroys the company’s capabilities to adjust to the changing situations and use opportunities as they emerge. Instead, you need to make your employees know that you want them to possess leadership and support them when they do. When you guide your employees on achieving a task, you only need to do it to a degree when coordination is required, which cannot be achieved in any other manner. Guidance should be simple and short. You must always be open to opinions if the plan isn’t working and needs to be changed.
According to Steve Blank, executives should always begin to delegate work with a “trust but verify” philosophy. The first few times a job is assigned to an employee, they need to check if the work has been done according to their standards. If the job has been done successfully, reduce the number of times you verify until it becomes a part of the synchronization meetings. If the job wasn’t done or done correctly, provide guidance, training and direction to ensure that employees have the knowledge and understanding to perform the job. After that, leave them alone to do their jobs.
Another essential feature of the leadership culture is being close to the team. The leaders should strengthen the common values that make employees feel good about their company and a supportive workplace atmosphere where their initiative is encouraged and rewarded, keeping in mind that it shares the team’s mission.
A leadership culture is also based on developing employee maturity, encouraging employees to implement initiatives, act wisely, and be responsible. Maturity in this context is not based on the age or levels of the employees in a company. One way to preserve maturity is by transforming the best-performing employees into coaches and role models. When the company was a startup, it searched for top individuals who were ten times more productive than an average individual. Now when the company must scale and grow, there will not be many market superstars to match the present staff’s quality. As processes, procedures and rules begin in a startup, jobs are reevaluated so that average employees can do those jobs. The top-performing employees look at this disappointingly and feel it’s time for them to leave the company. Therefore, you must put these top-performing employees in larger teams as role models and coaches. The ultimate tests of building a leadership culture are the long-term success, motivation and contribution gained from top-performing employees who are your company’s superstars.
Fast response and agile company
The outcome of building fast response departments is an agile company. By the time company building ends, you have collected a company and management process that could scale and is more responsive than the competitor’s one and is constant and cold-blooded when executing it.
Iterate and grow
Your company building phase is not the end of customer development. It’s the end of the beginning, as Steve Blank quoted. At the end of this phase, your company has faced severe and permanent structural changes. After going through all four steps of the customer development model, you should access:
- If sales have crossed into the mainstream market and hit the jockey stick, or if each order is still a brave effort?
- If the company is on its revenue and expense plan?
- If yes, is there a viable and profitable business model?
- Is there a management team that can develop and build the company?
- Is there a mission-centric culture in terms of departmental and companywide?
The company building phase of the customer development model consists of four phases. To succeed, you may need to iterate parts of the company building phase again. Usually, it’s hard to find mainstream customers for the first time in new and resegmented markets. Discovering the correct positioning and branding mix is complicated; if the company gets it wrong, sales won’t be successful. However, if the customer development model were correctly followed, the outcome would not be wrong. If the expenses and headcount have been kept low, you can afford to try again. Similarly, the shifts in changing cultures can be terrible. This is why the company should be agile and implement a mission-centric company and fast response departments, which can pay off for successfully implementing the company building step.