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What is start-up?

Module 2: Stages of growth

Every company begins with an idea. But an idea is not enough. You need to determine how great the idea is, along with the commercial opportunity.

The start-up stage of your business will focus first on opportunity recognition, then opportunity assessment. It’s not that different from innovation in an established company. Whether it’s your first or 101st product, you need to keep spotting opportunities, identify the best ones, and then determine whether you have the capacity to produce something that will capitalise on one of those great opportunities. There are many ways to spot an opportunity:

  • Keep a close watch over colliding trends (e.g. when an aging population combines with a society that values living longer and looking younger, there could be a growing market for products that meet these needs.).
  • Listen to your customers as they tell you their needs and wants (e.g. we need secure, low-cost energy; I want a driverless car).
  • Develop a better version of a current product (e.g. a bespoke 3D printed knee versus reshaping bones to fit an off-the-shelf replacement product).
  • Testing new applications of disruptive technology (e.g. using robotics in manufacturing, then applying them to surgical systems, then prosthetics, then nanorobotics, etc.).

As the leader of a start-up company, you are the doer and the decision maker

What happens in start-up?

As the leader of a start-up company, you are the doer and the decision maker. This means you are the product developer, you deal with customers, vendors and suppliers, you try to recruit employees, you try to sell the first product, you negotiate with the bank, and you may even clean the toilets after everyone leaves for the day. Your business is small enough for you to know how to do most of the jobs that need to be done.

Start-up is like a giant beta-test – you’re testing various products and services, features, and prices with different customers, using different channels and marketing messages. You’re constantly trying to find the combination that clicks with a large enough set of customers to enable you to build a viable business.

As the founder and leader, you are the determining factor in what the company is and becomes. The company’s identity is very closely connected to yours, especially if your name is on the door. It’s very dependent on you: what you do, who you hire, how you sell, what kinds of customers you secure, and what kinds of customer service you provide. It’s not dissimilar to the parent that has to do everything for the newborn baby.

Some founders get “stuck in start-up” and unwittingly curtail the growth of their company

What does it mean to be stuck in start-up?

While most parents want to see their babies grow up and become more self-sufficient, some founders get “stuck in start-up” and unwittingly curtail the growth of their company. Some like to go with the flow and think they’re being entrepreneurial by reacting to every opportunity. Some like being the one to make all the decisions and are always telling people what to do or as called by John Collins as the “genius in the middle, with a thousand helpers”. Instead of thinking your role as CEO is to do everything and make every decision, you need to understand that your job is to figure out which opportunity has the most commercial potential for your company. In other words, you need to focus on moving the company through opportunity recognition and assessment, and out of start-up and into initial growth as quickly as possible.

It’s up to the CEO to make sure that the sales team probes deep enough to understand what prospects and customers value

Think of start-up as a necessary evil. It’s a phase that every company needs to experience while the CEO figures out the best growth opportunity. But rather than revelling in the freedom of start-up, a founder should understand that the clock is ticking, available funding is finite and the window of opportunity could be closing quickly. The founder needs to be curious, thoughtful, seek advice, learn from others, and focus on finding the best path to achieve company growth.

Moving from start-up to initial growth

In summary, in the start-up phase of a business, you’re the one to do almost everything, make all the decisions, and put out the fires. When one of your employees asks, “How much longer are we going to be in start-up?”, your response should be, “My job is to get us out of start-up ASAP. What we’re trying to do is collect evidence that we have a product or service that enough customers want, to create a viable business opportunity for us.” Work hard to figure out the product-market fit as quickly as possible. Design with customers, hire great people, focus on growing the business, then maximise the best business opportunity to achieve your growth potential.

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