Strategy for Startups
If there is a word that gets bandied around endlessly in the startup-sphere it’s strategy. Everyone knows they should have one, but few can readily articulate what exactly it means or how to create one. I’ve participated in numerous company and team strategy sessions. These have often been painfully drawn out and not entirely effective…Having recently read Good Strategy Bad Strategy (highly recommend!), I now know many of these past misguided attempts would be deemed “bad strategy”. Below I dive into:
What is strategy?
Where do startups go wrong?
A step-by-step guide to creating a strategy in a startup
What is strategy?
Simply put, the strategy is the plan. It outlines the pillars/bets an organisation plans to invest in to help it achieve its vision. It’s directive but not prescriptive. It is not goal setting! In his book, Richard Rumelt states:
A good strategy has, at a minimum, three essential components: a diagnosis of the situation, the choice of an overall guiding policy, and the design of an overall coherent actions.
Strategy is about how an organisation will move forward. Doing strategy is figuring out how to advance the organisation’s interests. Of course, a leader can set goals and delegate to others the job of figuring out what to do. But that is not strategy. If that is how the organisation runs, let’s skip the spin and be honest - call it goal setting.
Rumelt goes on to state that good strategy is devoid of fluff and is focused. A good strategy requires an organisation to make decisions on which opportunities to pursue, and perhaps more importantly, which to forgo.
Lenny’s Newsletter includes great examples of strategies including those below.
Where do startups go wrong?
Startups range from not having any form of strategy to thinking that all strategies must be delivered in a management consultant style, with all factors known, before execution can begin. Neither extreme is the right fit as velocity (speed and direction) is critical for success. Other common pitfalls are:
Mistaking mission and vision for strategy: Creating a beautiful narrative that’s all style no substance. This may fool some investors and others not in the weeds of your company, but it won’t provide meaningful direction to internal teams building products and devising GTM strategies.
Mistaking goals for strategy: Hyper focusing on metrics, often disjointed and unattainable, some of which even if achieved wouldn’t move the needle. Goals detached from a coherent strategy offer the illusion of progress and control at the expense of making meaningful decisions.
Not eliminating options: The desire for something, anything, to work, leads to the spray and pray approach of attempting to solve any use case for any semi-relevant user. Keeping all doors open is often a way of avoiding admitting that there is low confidence in any particular path. It avoids admitting “I don’t know”, often disguising a more serious leadership or market issue that is not being discussed.
Inducing strategy whiplash: Strategies change so frequently that teams never get an opportunity to fully execute in a particular direction. This can lead to a loss of morale over time as teams question the value of investing in work which will be discarded or disrupted in a few weeks/months. This often occurs when a pre-PMF company scales prematurely, implementing the structures and processes of a post-PMF company which ultimately harms it.
Note pre-PMF your startup likely doesn’t need a solidified strategy. Instead it requires a vision and a set of hypotheses which when tested either support the vision as is or lead it to evolve. Once your startup has at least one product, a meaningful amount of users, some revenue, and sizable teams, you need a strategy. Written down. Known to all. Frequently quoted.
Step-by-Step Guide
A strategy should provide stability. The appropriate time frame will depend on the stage and growth trajectory of a startup but ideally it should outline a guided approach for the next 1+ years.
There is no one right way to draft a strategy. In my experience, the worst strategies tend to be formed either by a lone leader in isolation or else designed by committee. Not enough input from the business leads to strategies being fantasies which fall apart when they come into contact with reality. Too much input, and strategies become a multitude of compromises lacking a decisive approach.
Below is a recommended step-by-step guide for early stage and mid-sized startups (up to several hundred employees) to create a company strategy. It is written as a guide for founders leading entire companies, however, the process can be adapted for leaders managing orgs, and managers leading teams.
Step 1: Identify the Starting Point
This is a private exercise. The purpose of which is to be truly honest with yourself, and to acknowledge the uncomfortable truths up front which may impact decision making.
Assess your strategic ability: Ideally all leaders would be great strategic thinkers but that’s not always the case in startups that were born from grand visions or hustle mentality. If this is a weakness, identify someone who can help with the strategic process. They should be a structured thinker and an intellectual sparring partner who can think holistically about the business (likely COO, Chief of Staff or BizOps). This person can help distil your thoughts into a digestible written doc.
Reflect on previous attempts: Who drafted it? What worked? What didn’t? Why do you think that was the case? What has changed since last time? What will be different this time? Were previous attempts too ambitious or not ambitious enough? Were teams bought into it? How much blame have you assigned so far? Was the last strategy a set of coherent actions or a list of desires? These questions should help unearth areas that require particularly attention this time around.
Acknowledge reality: Write a list of all perceived problems, secret fears and prior agreements made that you believe may impact your strategy. These could include suspecting your initial target market may be smaller than thought, struggling to find the right growth channel, not having faith in a particular leader to deliver, promises made to existing clients about the roadmap, KPIs shared with investors. Some of these should shape your strategy. Some shouldn’t, and are instead problems to be dealt with once the strategy has been finalised.
Step 2: Assess Company Stage & Strategy Purpose
Form a strategy based on the company as is, not how you wish it was.
Assess company maturity: Do you have a fledgling product or one that has gained traction? How confident are you in your GTM approach? Do you have the right leaders and teams in place for this stage? If unknown, seek advice.
Determine strategy timeline & purpose: The strategy should provide a concrete plan to help your organisation move towards its long term vision. Decide what time period you want to consider. This will likely be influenced by your runway. You will iterate on the strategy as your company grows. Decide what the ultimate objective(s) of this particular strategy at this point in time is. Is it to meet a specific milestone or investment criteria? Rapidly capture market share? Build foundations for future growth?
Determine growth objective: Depending on company stage, the objective may be 1+ of the following: 1) grow existing product and/or market (e.g. grow Amazon in UK), 2) branch into new but adjacent products and/or markets (e.g. launch Prime, expand to FR, DE), 3) expand into new non adjacent realms that may involve a completely different business models and customers (e.g launch AWS).
Step 3: Initial draft and gathering inputs
Once a startup grows beyond the two pizza size, it is virtually impossible to know everything that is happening within the business at a granular level. Consider this step as a fact finding mission, completed over 1-2 weeks.
Write down initial thoughts: Do not share these. Start collating your ideas and views on possible opportunities. What questions do you have? What perspective are you missing? Do not get too attached to this version.
Schedule 1:1 with each leader: Ask each leader to come prepared with a list of what they believe are opportunities and imperatives in their orgs. The session can be informal but it’s essential that everyone prepares to avoid recency bias. Solicit their opinion on company direction more generally. What are they concerned about? Ensure they discuss the user perspective where applicable. This exercise is not to define the strategy for their specific orgs, nor should it focus on org asks (e.g. budget, headcount). Rather it should be an honest discussion on the current state of the business and potential opportunities.
Gather insights from makers: Leaders are rarely in the weeds of the product, support queries or more minor customer requests. Schedule time with senior ICs to understand their perspective on issues and opportunities within their domain. Schedule group sessions with front line employees (e.g. CSMs, support agents, sales reps) without their managers present and ask them what they are hearing from customers.
Note: I have assumed that there is a regular feedback loop with users both at a quantitative level (e.g. reviewing feedback requests) and qualitative level (e.g founders and leaders speaking with users directly). If this is not the case, fix this immediately.
Step 4: Feedback & Leadership Workshops
Now is the stage to solicit more formal input and get leadership buy-in.
Draft the WIP strategy to an 80% readiness state: Outline what you believe the strategic pillars/bets will be and why (see templates). Outline what success looks like at the end of the strategy period. Highlight what you are not going to focus on as a company. List any open questions. This version is subject to change but possesses a certain degree of confidence.
Share draft with leaders: Ask them to provide feedback and comments in the doc. Discuss the plan with each leader individually. Allow them to air concerns or grievances in a 1:1 setting. Update draft based on any feedback which has changed your understanding of the opportunities.
Finalise in a leadership workshop: This may take place in one day or over several days across several weeks. Do not rush the process but do not let it drag on. Discuss any remaining open questions or points of contention. Evaluate each pillar/bet and success criteria. Collate feedback on each and adjust where necessary. Disagree and commit. Circulate the finalised doc post-workshop.
Step 5: PR Tour and Planning Process
Now that leaders are bought in, it’s time to get the wider company excited about the strategy.
Unveil the strategy like it’s a big deal: Discuss it at all hands. Ensure everyone can access it on the company wiki. Ask leaders to discuss it with their orgs. Incorporate it in onboarding. Everyone should know the strategy and refer to it frequently in their decision making.
Kick-off the team planning process: Now is the time for teams to translate the company strategy into org strategies, execution plans and goals. There are many methods to do this. I’m personally fond of the W method. Again, do not let this process drag on. Speed of execution can make or break startups.
Facilitate momentum: The aim of the strategy is to provide a direction which allows teams to execute effectively. A good strategy helps generate momentum. It provides guidance which fosters cohesion and limits analysis paralysis. Once plans and goals are agreed, unblock issues quickly. If there is dissent or apathy, determine if this is a comms issue or if it highlights a blind spot you weren’t aware of. Deal with this asap.
Step 6: Execution and Iteration
Creating a strategy isn’t a one and done exercise. It should inform all of the activities going forward.
Schedule checkpoint cadences: Schedule leadership sessions to review progress against strategy every quarter. Review this personally on a weekly basis. Readjust company activities to ensure they are aligned with the strategy as necessary.
Regularly review metrics: These should be a combination of leading and lagging indicators which illustrate if teams, and the company as a whole, are on-track. Beware, not everything can or should be quantified. Speak with teams to understand progress.
Iterate over time: Black swan events happen. Unforeseen opportunities arise. If there is a need to completely revamp the strategy based on new circumstances then do it. Otherwise, the strategy should provide stability which may be iterated on in minor ways until the end of its initial period.