Author: Stephen Giese
July 8th, 2019
The two core objectives of an organization are to maximize profit while supporting innovation.
This is true for organizations of all sizes, whether an early stage startup, a mid-market player, or an enterprise firm.
What’s constantly changing is how businesses set-up operations to achieve these core objectives. It is a process in continuous update mode. The emergence of cloud computing, automated analytics software, agile workflow methodologies, and remote work – not to mention blockchain and the range of other software innovations – are all fundamentally changing the cost-structure and processes of running a business in 2019.
Depending on the business, some of these technologies and processes have only become apparent in the past year, underscoring how different the definers of operational success are for each business year in and year out.
And while it is possible today to achieve more than ever with limited means, there is still a great performance divide between firms that holistically integrate technological and social evolutions into their organizational design, and those that do not. Innovation without strategy is an aimless endeavor – like going for a walk without a clear destination and expecting to get somewhere pleasing. Organizations that have set a long-term operational strategy tend to be the ones who maintain alignment and stay one step ahead of the pack.
Here are my thoughts on what defines operational success in 2019, broken down by the three critical resources every company has at their disposal: its people, processes, and technology.
What is burn rate?
Burn rate – or more simply referred to as ‘burn’ – is a business performance metric that reveals the rate at which a company is losing cash. Often measured on a monthly basis, burn helps founders keep track of the bottom-line and, in general terms, understand how sustainable the business model is over time.
Measuring burn rate is common for startups because early-stage companies without an established customer base often dip into deficit to identify customers and build a repeatable customer acquisition process. Most startups wind up highly undercapitalized in pursuit of product market fit, creating a lopsided cost-structure that increases the risk of failure and/or massive success.
In a situation where burn rate is increasing faster than revenue, company leaders need to have a precise plan of action to prevent a downward spiral. While every solution is problem specific, here are three tried-and-tested directions to take your startup when the burn rate is growing:
How do people in your organization operate? Do you have remote employees? How are teams set-up, and how interrelated are departments (like sales and marketing with product development)?
Keep Silos from Developing
The first definer of operational success for managing people is implementing a horizontal model that eradicates department-based silos. While there should certainly be leadership teams within each discipline – a sales manager or a product lead – there should not be a proverbial wall between the sales and product teams. This is easier to achieve when the team is small and everyone needs to band together to ship a beta product. It becomes much harder to sustain interdisciplinary communication channels as the team grows in size and complexity – especially with remote teams. This is one of the core challenges of building a startup from the ground up.
An effective way to keep silos from growing is to develop a horizontal operating model that keeps teams small and encourages high achievement through accountability measures and performance benefits. An excellent case in point for 2019 is Haier, the leading Chinese appliance maker, an enterprise firm that has organized employees into micro-enterprises of roughly 10-15 people each.
There is no single model that works for all teams, but organizations that find a way to keep information flowing horizontally and vertically are primed to innovate faster. They are also primed to maximize profits because of a deeper, more responsive understanding of their customers needs.
What platforms does your team use to track progress? What cadence of reporting does your sales team use, and is it working? How are projects and tasks allocated, tracked, and measured?
Mapping the Sales Process
Process encapsulates the way employees work together and how work is documented, measured, and presented. Although a company has a general set of processes for engaging and reporting on quarterly performance, internal processes differ greatly between sales, marketing, product development, and financial management teams.
(Side note: An excellent tool for tracking operations between systems is Zapier, which makes it possible to integrate work done in different systems into a single platform.)
In terms of sales, the area in which I have most experience, the biggest differentiator between a sales team that achieves consistent results and one that does not is the quality of the team’s processes. A properly mapped sales process is a rigorous methodology delineating specific steps and action items from pre-sale to post-sale. Once the methodology has been built, the more data it collects the stronger it will be. A certain amount of trust in the process is needed to achieve consistent results, but all too often, even in 2019 this trust is lacking in the efficacy of sales methodologies to get the job done.
Organizations that can integrate a meticulously designed sales methodology will outperform companies that lack the structure or diligence around selling. The CRM can vary, but the commitment to mapping cannot.
What automation systems are you deploying? Are you effectively leveraging cloud storage to cut costs? Is your product serving a critical customer need?
Company technology runs the gamut from the IT used to build your products, the automation tools you use to track performance, to the myriad ways in which the data you collect informs your product specs and company strategy. In 2019 there is growing importance on the way in which data is collected and used to transform business processes. This trend will continue to rise in importance because well-collected, well-analyzed performance data can be a competitive advantage; building better products and managing higher-performing teams stem from analyzing performance data and understanding how to improve.
In terms of project management, there are a number of excellent platforms that are worth the investment for most businesses. Resources like Airtable, Notion, and Ryke all make it easier to coordinate multiple projects at once and document results for all stakeholders to see. Companies that become experts at one of these project management tools are collecting more accurate data about their teams performance. This quickly becomes a competitive advantage.
Uncover the Drivers of Operational Success
Operational infrastructure continues to be a primary difference maker between industry leading firms and those that have lost their edge. In 2019, organizations that focus on the operational side of things will uncover drivers of success and keep costs low – all while opening up new opportunities for growth.
ABOUT THE AUTHOR
Stephen Giese is Head of Morgan Hill Partners’ Minneapolis / St. Paul advisory and consulting businesses, working with client technology and tech-enabled companies and investors to help maximize value. Stephen has 20 + years experience working in senior management positions at technology-enabled companies, including Account Management, Global Sales Management, Sales and Marketing Strategy, as well as CEO and COO positions. With a particularly keen eye for sales strategy and operational management best practices, Stephen has a proven track record of unlocking value and propelling growth within a company. Learn more about Stephen.