For startup founders, a lot is unknown.
You might have an understanding of the market and a deep expertise in a technical field, but knowledge about your own company – its size, revenue model, valuation cap and ability to consistently produce products customers crave – can be tough to view from an unbiased perspective when executing in the business, day-in-day-out.
In this uncertain environment, what startups desperately need to be successful is a foundation: a hard and fast framework to support the functions of the company as it evolves.
The only antidote to destabilization and uncertainty is structure and repeatability, and yet the push and pull between these two poles naturally falls on the side of chaos. It’s no wonder failure rates are so high amongst the most promising companies – they tilt to one side until they inevitably fall. Why? Because they do not have sufficient organizational pillars to support repeatable processes and, ultimately, deterministic growth.
At Morgan Hill, we believe this fundamental flaw in startups is an issue of process – where teams are not doing the right things, at the right time. To help rectify this structural issue, we have built an operational Path-to-Value Playbook around what we believe are the five pillars of startup success. These pillars encompass the entire lifeblood of a company, and the structural integrity is designed to help founders go from startup to scale-up in a logical sequence of steps. The five pillars are:
The company pillar details everything to do with company performance: market research, which drives a strategic roadmap that funnels into growth and investment strategies. The first stage of our engagement with a new company is to establish a baseline of where the company is at, and what it needs most urgently to accelerate forward. While every organization should have documented plans around each one of these points, the reality is that most have deficiencies in critical spots – holes that only expand as the organization evolves. Here is a breakdown of each component of the company pillar to give you a better idea of what is involved in each:
- Baseline and Alignment. Building a foundation means starting with an assessment of current state. Think of it like an audit of all company assets: a holistic update of the processes, revenue, finances, product specs, strategy and operations that define the company at the present time. From this starting point, Morgan Hill Operators pin-point critical issues and devise a tactical roadmap around KPIs that address immediate needs.
- Market Research. A winning strategy that feeds into a tactical roadmap is only possible after market research. Making sense of the landscape is critical before engaging, both in terms of a competitive assessment (who is out there doing what you do) and customer discovery (who is out there that wants what you provide). An understanding of the landscape will give you concrete, data-based answers to questions that so many founders fret on – like what product features to include, what position to target in the market and where to build strategic partnerships to accelerate value.
- Company Strategy. This is the North Star of the whole venture; your purpose for existence. It goes beyond mission statements and manifestos, though these creative initiatives are important parts of the whole. Strategic planning is crucial to every single action taken by your company. It sets the foundation for the energy, time and focus of your team – which is any company’s most vital resource – and as such, it needs to be pulled from the abstract into specific, short-term roadmaps and action plan
- Investment Strategy. Companies seeking venture support need to take this sub-discipline incredibly seriously. It is not the case that, simply because of incremental sales growth, venture investors will be knocking at your door. Founders that are serious about raising capital need to have an articulated investment strategy, targeting specific investors, with a curated pitch to each. Oh, and you need to be determined in your pursuit and proficient in negotiations.
It is often said that people are a company’s greatest asset, and we have seen this to be true time and again.
The talent pillar encompasses everything to do with the people in the company. This breaks down into your team culture, your recruiting process and of course people management. Each of these parts of your business need to be developed together, otherwise what could be a competitive advantage is turned into organizational lag.
Take team culture, for instance. The culture of your company is the aura around the workplace, the hours you keep, the activities you do together, the types of clothing you wear, the manner in which employees communicate with each other. These are not aspects that simply fall together. They need to be thought out beforehand so that when recruiting kicks into high gear, there is an established structure to ease new personalities into the company dynamic.
While getting culture right is incredibly hard, companies that strike the right balance between flexibility and formalism can use their cultural identity as a competitive differentiator in recruiting top talent. Professional people tend to prefer an established workplace vibe over a fragmented, disorganized one.
Every company has a product or service to sell, and there are a whole host of in-house activities that go into creating a winning product. Like the other pillars, we subdivide product into the following constituent parts (though we cannot stress enough how important is for cross-departmental alignment in processes and strategy).
- Product offering. On the surface, defining what a product does (or can do) for customers seems relatively straightforward. But that apparent simplicity is a mirage, only possible before the product hits the market. Once customer feedback starts pouring in, the initial vision for the product changes; and it never stops changing, even after product-market-fit is achieved and the company establishes a customer base. And since defining the core product offering is an evolutionary process, the tech and customer-facing teams must be aligned on process and strategic goals.
- Technology. The entire spectrum of information technology infrastructure and operations falls under the technology umbrella. And it is an expensive domain. While the cost of product development might be in decline, thanks to the plethora of software dev tools on the market today, it remains an expensive process to better meet the needs of customers.
- Services. Product development meets sales and marketing in the services domain. The product development team needs to be attuned to customer feedback, fixing problems as they come and applying process where possible to rapidly meet the needs of customers. Once a product is live on the market, the product team should be tracking and experimenting with product features and functionality to optimize customer experience.
Revenue details how a company plans to generate revenue. It contains the sales and marketing infrastructure of a company, including the channel strategy and digital identity that, taken together, communicate the company’s core message to customers.
- Sales. The sales infrastructure lays out the tactics and processes put in place to drive revenue. Every organization will set-up its own pipeline and customer engagement model, built from the ground up to nurture leads down the funnel from initial contact to recurring revenue.
- Marketing Strategy. The company marketing strategy (including traditional and digital marketing) is another arm of the revenue growth strategy. It includes all branding and communication efforts surrounding the company, including persona development and targeted outreach campaigns – whether in print, on the airwaves, or the internet.
- Channel Strategy. Developing an omni-channel strategy for businesses is its own revenue strategy. Research indicates that 65% of B2B organizations have a channel partner strategy in their go-to-market-strategy, but effectively executing on it requires patience and precision. We often see early stage companies with a limited to non-existent channel strategy, indicating either a misunderstanding of the market or an immature product. Over time these oversights can be rectified of course, bringing greater value to supply chain partners and a boost to the top line.
The fifth and final pillar is company operations. Operations covers a broad array of internal company functions, including financial management, legal and administrative responsibilities, and human resource management (HR).
- Finance & Ops. On a high level, the financial management revolves around managing cash flow to ensure the business can continue running. The interplay between financial projections and company strategy is critical, as it determines company valuation in fundraising negotiations, sets strict limits on marketing spend, and places growth benchmarks on the sales and product team that must be met. Financial assistance is also crucial in the preparation for exit, via M&A or otherwise.
- Legal and Admin. Decisions around the legal status and corporate structure of the company must be made early. Identification of proper legal resources to help with fundraising or an exit strategy is also critically important.
- Human Resource Management. Human resource management is centered around IT and automated tools to track hours and project completion. If managed properly, this infrastructure makes a company more efficient (from a technical perspective) and perform better (from a talent perspective).
From Pillars to Value Creation
The five pillars are the foundation around which all companies must be built out. They are of incredible value for any company looking to stabilize operations and find new sources of profitability. Startups that evolve into high-growth, capital efficient organizations do not do so through consistent failure and emerge out the other end by some random luck in the market. All companies – startups included – achieve success by building cyclical modes of operation on sound foundations.
At Morgan Hill, we built a roadmap around these five pillars to help high-growth tech companies transition from #StartUp2ScaleUp. Capturing a holistic view of the entire company, our Path-to-Value Playbook is a flexible, diagnostic tool that visualizes company strengths and challenges over time. Complete with assessments, roadmaps, and workstreams, Morgan Hill Operators deliver a strategic plan of action to align company disciplines and accelerate value creation through the twists and turns of startup evolution.
Ultimately, the Path-to-Value Playbook, and its five pillars, provide early stage companies with developmental options. Founders that focus on building these pillars, combined with an aligned operational team, will set the strong and scaleable foundation needed for hyper-growth.
ABOUT THE AUTHOR
Jim Barnish is Co-Founder and General Partner of Morgan Hill Partners, an innovative management consulting partner that helps startup to scale-up technology and tech-enabled clients innovate and grow through Strategy & Planning, Executive Leadership, Product Excellence and Revenue Creation – delivering the right executive expertise and strategic playbook, at the right time, for the right outcomes. Jim’s 15+ years of experience as a strategic change leader in global and integrated operations, sales, and marketing uniquely qualifies him to lead Morgan Hill Partners associate operations and affiliate partnerships. Over the course of Jim’s career, he has successfully worked with companies undergoing accelerated business development, process improvement, change management and operational transformation initiatives. Learn more about Jim