Chapter 3: Startup Thinking
I’d like to look more closely at just how small you can go. I think the most interesting example of this is found in startups. While many companies are small as a result of circumstance, startups are a little different. They are abundant in the tech space, as it’s so easy to start one on a shoestring budget with just a couple of founders and some sweat equity. These operations tend to run extremely lean in order to extend runway (the amount of time you have before your cash runs out). Many founders even abstain from basic comforts like independent living, proper nutrition, and family life just to make it work.
The potential benefit of all this sacrifice comes to a lucky few who experience meteoric success in their operations—sometimes to the extent of becoming internationally recognized brands within just a few short years. Startups are risky and are often headed by those just out of college. With little to lose, these people make perfect candidates for dropping out of the mainstream for a while and making a big bet. For the sake of this book, we’ll look at how these groups approach their operations with the notion that we might find something to borrow and apply to our own companies.
Looking for role models
When we start our companies we often lack role models; unfortunately, we often pick the wrong ones. I can’t speak for you, but I readily admit that this was one of the greatest mistakes we made in starting our company. As two guys in their early twenties with little business experience, we became fixated with looking like a business. (We should have just concentrated on running a good business.)
In spite of limited funds, we still tried to buy a phone system, conference table, set of desks (for our seemingly inevitable expansion), enterprise-level software, suits, presentation folders, and all the rest. To this day, I still wish that we had taken my dad’s advice on the topic more to heart. He suggested that we concentrate on our service and clients, and not worry about other stuff until it became absolutely necessary to do so.
It’s not like we didn’t put adequate—or exemplary—effort into doing good work. For the first five or six years we rarely clocked less than 80 hours a week. And it’s not as though our interests in “looking like a company” were intended as a substitute to doing a good job. It’s just that when we looked at every company we admired, all of them seemed to “look” like big companies.
The simple fact is, we mimic the behavior of those who have achieved a position we too would like to reach. The challenge with this is that we confuse the affectations with the cause. Although a wealthy person might have a Bentley, it’s unlikely the car made them rich. Similarly, a big company may have really nice offices, but it’s a mistake to think they are successful because of those offices.
My one caveat
You might think I’m asking you to ignore how your company is perceived. Allow me to stress that this is the furthest thing from the truth. For small companies these concerns are often more vital than they are for their larger counterparts. Committing to a purchase from a large company is generally more reassuring for buyers than taking a chance on a lesser-known option. As a small business owner, it’s your job to ensure that your offering is seen as different and in some way markedly better than those of your more established competitors.
My suggestion is twofold: first, you have to act smarter than the big guys in order to get the most bang for your buck. Second, trying to look like a big company when yours is small will only result in you looking foolish. (Imagine: a gangly adolescent in a pinstriped double-breasted suit.) Most small companies just don’t tailor their messages and marketing to fit their “body styles.” Is there anything more ridiculous seeming than meeting someone from a three-person company who introduces himself as the CEO?
Sure—for the buyer, there’s a sense of security to be had by working with a company that has a large number of employees. Still, I say it’s wiser to openly state who you are than later be found out an imposter. There’s nothing embarrassing about being small, and there’s certainly no need to hide this fact. Instead, embrace it, use it as a strength, and look fabulous in it. If you’re a three-person company you can likely offer more personalized service and access to higher levels of expertise than a company of 500 can. Being small isn’t a bad thing by any means; that said, it also can’t serve as an excuse for offering a product that isn’t better than that of the dominant players in your market.
The purest form of business
As businesses get larger, it’s easier to hide bad people in them. This is because there are so many things going on, alongside numerous coworkers who can shield one’s dismal performance. Toss in some memos, meetings, office politics, and it gets harder to determine whether a staff member is kicking ass or just great at kissing it. In a company of one, there’s little room for any of this. When you’re that tiny, you have little choice but to be exemplary.
Most startups have limited time before their money runs out. I don’t know why—perhaps I’m a compulsive gambler at heart, but there’s something about this notion that excites the bejesus out of me. Without funding or a wealthy family, this means you just have to do it. Sink or swim. Hunt or starve. Succeed or get a job.
Anyone’s singing voice can sound great once ample processing and effects are applied in the studio. Put that same person in front of twenty listeners with nothing but a crummy microphone, and see what happens. Startups are like this: business unplugged. This makes them wildly exciting, and often terrifying, but the notion of anything else seems a little lame after you’ve felt it for yourself. Every move matters and the only person handling the controls is you.
Kodak didn’t think like a startup
When I grew up, the name Kodak was synonymous with photography. Their bright red wordmark surrounded by a warm yellow backdrop is etched in my mind, and I don’t think it will ever be shaken. Sadly for Kodak, the same can’t be said for the company.
Kodak fell into the same trap that many other successful companies have. They had dominated photography, and dabbled in other areas as well. They concentrated largely on film, and until the late 1990s this worked well. As a 2005 BusinessWeek article notes, “...Kodak was in denial. The company had supposedly been on a decade-long journey to digital technology, yet very little had actually been done. The pressure to rethink the business didn’t seem that great.”24
Being an amateur photographer at the time, I found it difficult to imagine the quality of digital photography ever matching that of film. I doubt that any of us could have predicted the speed with which this actually did occur. Digital cameras initially seemed like a novelty, hardly worth forsaking a time-tested standard for. At the time, I reasoned that if it took 17 years for us to get from DOS to Windows 95, we could expect it to take equally long to move from these low-quality photos to ones that matched a professional-grade camera. At the time I’d go to photo shoots with our shiny new digital camera and people would gather around me exhibiting an almost childlike fascination. Within three years no one would have even batted an eyelash around that same device.
My guess—entirely unquantified, but probably right—is the people at Kodak did anticipate the imminent succession of digital over film. They just didn’t think the change would come barreling at them so fast. Kodak was hit by a surprise left hook before the fight even started.
I say the bigger problem for Kodak was their size. They had built a juggernaut that was film. They conceivably had complex systems, refined processes, and massive infrastructure. Changing that wasn’t going to be cheap or easy. Few there were initially ready to accept the kind of change at hand, and this left them slow to adapt. By the time they did, they learned that their new direction simply wasn’t profitable enough. At around the same time, film sales dropped off faster than anticipated. To adapt again would force a massive rethinking of their business model.
They’ve since done bold and ambitious things, but with seemingly little success. By early 2009, the company’s stocks had lost 76 percent over the prior 12 months. They planned to cut another 14 to 18 percent of their staff, after already having reduced their workforce by 50 percent two years earlier.25
Big companies do well with certainty. In the face of change, all of those systems, people, and infrastructure can get in the way. If you think about it, Kodak should have been years ahead on this one. They had the money, knowledge, and reach to lead the pack when it came to imaging. To their detriment, they lost sight of what they really offered (imaging) and got stuck in a soon to be antiquated technology. The problem is that technologies change. Kodak thought it was a film company and was unable to transition quickly enough—that will probably kill it.
Startups are easier to turn
There are plenty of failed startups out there, and I’m certainly not proposing that they are inherently better or run by smarter people than large companies. In my mind, people are overwhelmingly people: some good, others bad—some successful and others less so. It’s awfully challenging to put forth a single hard-and-fast rule for why some companies are successful while others fight to stay alive.
A certain number of things happen in companies that seem like laws of nature. The law that most relates to you, as a small company is that gravity exists in business. We like to fantasize about large organizations not having any problems, but that’s simply not the case. I suggest that gravity in business means that problems scale with the organization. In time, the weight of an organization becomes a burden. The crushing gravity felt by Kodak was one that most startup founders could hardly fathom.
Startups don’t typically suffer from baggage, bureaucracy, or legacy. On the other hand, they are hampered by a lack of consistency and process that might be assuaged by more experienced managers. In my mind, this is an acceptable trade off. Startups often make clumsy mistakes, but because they’re such “light” organizations, they are an awful lot easier to correct. They can move at lightning speed and quickly outrun bigger, more slovenly-natured titans of industry.
A startup might not have been as stuck in a “film” mentality as Kodak was. This is in part because a startup wouldn’t have spent more than a century building a hundred-ton machine and legacy. By only being in business for months (or perhaps a few years), a startup could easily cut bait and change direction when the writing was on the wall.
Small means fast
Small companies don’t have to contend with “turning the Titanic” at critical, game-changing moments. This leaves them more agile when the unforeseen occurs. Even on a more day-to-day basis, though, small operations maintain certain advantages.
Management is Hell. Sure, it’s often necessary, but it’s filled with waste. Let’s imagine the process involved in getting an ad campaign to press for a well-established brand. How about... I don’t know... a video rental shop like Blockbuster? Let’s pretend that they devised a partner program with Domino’s Pizza.
This is a completely hypothetical situation, but let’s run with it anyway. Suppose that a couple of young managers at their respective head offices came up with an idea to have your videos and pizza delivered by one driver, by making a single phone call. (Actually, this isn’t a bad idea. I’d use a service like this; wouldn’t you?) This is the kind of thing that would likely take an awfully long time to work out from a logistical perspective, so let’s skip past that and look solely at the associated marketing.
Each company’s marketing people would likely get together with their agencies and start to talk about strategy, creative, and all of that other good stuff. A batch of agency folks would put some deal of effort into forming a strategy, some smart ideas, and perhaps even examples of implementation. The companies’ marketing teams might then bring all of this back to their execs and internally debate the approach. Afterwards it goes back and forth from agency to client until everyone’s OK with the campaign. From there it will likely to go to legal departments, focus groups, production houses, media buyers, medium-specific teams (digital, broadcast, print, direct mail).
After likely months of exchanges between an ever-expanding number of parties, the campaign is launched. Millions are spent, and no one even knows if it’s a success for many months to come. It’s all terribly slow, cumbersome, and unforgiving. Just imagine the brouhaha that arises if the thing doesn’t work, or if someone’s made a mistake.
Small companies often complain that they don’t have the budgets to advertise like the big guys, but they really shouldn’t. A startup might also be frustrated by this exercise, but probably wouldn’t be quite as paralyzed. Startups know they’re up against the odds, so they change the rules. Let’s pretend that these two organizations are instead a local pizza shop and a video store (they don’t have to be startups to think like startups). They have the same idea, and have also worked out the operational logistics.
In a situation like this, there would be no ad agency, legal department, sound editors, media buying department, or any of that stuff. They’d be left with a very clear challenge: implementing a great idea that no one knows about. Given their limited funds and resources, they’d simply have to think their way around the problem. Perhaps they’d hire a few impersonators of film stars to walk around a local park, giving out free slices, and coupons offering discounts. If they did it well (and it was a slow news day), they might even get some interest from the local press and some free publicity. Maybe they’d call up some existing customers, tell them about the service, and arrange a free first order. They might even create an online contest, in which people could win pizza and movies for joining a Facebook group.
Clearly, I’m glazing over some big points here. (For example, the fact that some don’t even rent DVDs from bricks and mortar shops any longer.) While I generalize liberally, I hope that my point still comes across. You might not have the resources of a large company, but you also aren’t burdened so much by size. With a little ingenuity and elbow grease, you can get your message out an awful lot faster.
Adapt
If these little guys found their efforts weren’t working out, you know what they’d do? They’d change course, and instead of taking months to do so, they could alter their approach in days—or even hours. “Hey, no one’s joining our Facebook page. Want to try a small ad in tomorrow’s paper to direct people to it?” Without an executive team watching your every move, you can really change the speed with which you react. But of course marketing is only a small part of any company. Startups benefit from being agile in all ways.
One thing that drives me crazy about helping people with their marketing is that they put so much stock in it. While bad marketing can certainly damage a good company, great marketing can’t save a bad one. Blame is easy to place in a large company—sometimes I think it’s like a game of “hot potato.” (e.g., “It doesn’t matter how much I screw up as long as I’m not the one who gets shit for it at the end of the day.”)
The owner of a startup isn’t interested in who gets the blame; her single concern in such situations is how to adapt. If the product isn’t getting interest, she has to find out what’s wrong with their marketing and adapt. If people know about the offer but aren’t buying, she has to look critically and adapt. If they buy, but don’t do so again, she has to ask why and adapt. Like a traveller landing on an alien planet with few familiar reference points, the founder of a startup has to test, learn, and adapt until it works.
I don’t know your company. What I do know is that a lot of companies try to hide mediocre (and sometimes bad) products and services behind glossy and misleading marketing. Doing this when you’re up against the big guys is suicide. Startup thinking forces you to look past excuses and find the true problems with your business; it then asks you to sacrifice what isn’t working.
Why are you telling me this? I already know what small is about!
We had been in business for seven years before we really started to think in startup terms. For almost all of that time, we used larger companies as the benchmark for what we should aspire to, and mimic. We tried desperately to do so as we believed they had found some kind of answer. My guess is that you probably do the same. You check larger competitors’ websites, examine their methods, and secretly wish you could do it as well as they do.
Startups are the mavericks of business. They tend to behave quite differently than other small companies. Talk to someone in a startup—particularly at a hard time—and you tend to find a few common things: most startup founders are a little nervous and not terribly sure of how they’ll achieve their dreams. They also tend to be quick to act and adapt, and are burning with excitement and urgency.
Next chapter: Marketing is a Big Load of Bologna
