More than Profitability: Understanding Startup Excellence

Chris Neels
Oct 26, 2016 · 6 min read

Published in MISC Magazine, Searching for Excellence, Vol. 24 2017.

Peters and Waterman (1982) wrote a book identifying patterns of excellence amongst corporate giants that demonstrated a high degree of current and expected continued success. While “excellence” is often a badge of honour for gaining and retaining dominant positions in markets, how might it apply to upstarts with ambitious products and uncertain futures? Measuring excellence amongst startups is surely a challenging task; startups often lack the years of financials, stable customers, and double-digit market shares that their larger brethren have already accumulated.

Perhaps the purpose of excellence is less about predicting the outcome attained — where mature companies have an edge over immature companies — but more about the intrinsic qualities that make an organization admirable and well-positioned to succeed. For this interview, Robert Merki from cognitiveVR sit down to talk about the organization, on identifying and building excellence amongst startups, and the characteristics of excellence he believes holds true.

Christopher Neels: What does cognitiveVR do, and what’s the history of the company?

Robert Merki: cognitiveVR is company that builds analytics-backed developer tools for virtual reality (VR) developers. In layman’s terms, we give people data to help them make better decisions to make better VR experiences. The company started out as a pure data solution for other visualization softwares, but moved into making visualization software when we realized that traditional 2D visualization techniques were insufficient to capture the nuances of 3D experience. Now, we display data in 3D to capture action as it happens in virtual reality.

Robert Merki, Director of Product

On the topic of excellence, there can be multiple ways of looking at it: perhaps either an outcome perspective (making great stuff) or a quality perspective (characteristics that procedurally enable making great products, services, and experiences). How would you approach defining excellence in the context of a small company?

It’s not really an outcome or a quality. When you’re very small, the forces required to change directions are small and less painful than large companies, say Google, pivoting their business. For us, excellence has been about being able to adapt to different demands and avoid anchoring current hypotheses and assumptions. We’ve seen several companies in the VR space that have pivoted their products, but not their philosophies and assumptions, which made them end up in the same place they started. Excellence is the fearlessness to pursue new products that are potentially perpendicular to previous assumptions about how this new space evolves. For startups, not moving is not just about excellence vs mediocrity, but life or death of the company. Many people think startups are flexible and agile. I don’t agree. I think only the startups that are successful turn out to be flexible and agile, and the ones that are not are dead.

“I don’t think there are any great painters, great musicians, or great writers who felt comfortable at the time about what they were making.”

It seems like then that excellence — the degree to which a company succeeds — requires very different qualities depending on whether a company is large or small. What is your philosophy on what the end goal should look like?

To me, the difference between being excellent and being mediocre is deciding what to do when you’re climbing a slope and reaching the local maxima. You’re on an upward trajectory, but to avoid mediocrity or middling as a lifestyle business, you have to make a leap of faith to an ever steeper slope. As painful as it is, that steeper slope is often the path to excellence.

Why do you think it’s important to make these leaps of faith when they often carry a large amount of risk and speculation?

There have been many companies that have made huge bets that haven’t worked out. I’m willing to say there are many more companies that have not made bets, and have remained exactly the same, that have faced the inevitability of time wiping them out. There’s the case of John Antiago, CEO of BlockBuster, rejecting the sale of Netflix for $50MM in 2000, thinking that their current business would never go away. That purchase would have been a leap of faith, but wouldn’t have been fatal if it failed. Making leaps of faith often require overcoming stakeholders and traditional analyses, but you need great leadership that’s willing to push the leaps forward. To be excellent is never comfortable. I don’t think there are any great painters, great musicians, or great writers who felt comfortable at the time about what they were making. It’s not a comfortable experience to make something truly great; no one has ever made something great working at it 9–5 and going home not thinking about it. To be excellent is painful and scary; if you’re not feeling those things when doing something you’re comfortable, and you’re at risk at being surpassed by someone who is fearless.

From an outsider perspective, if you were an executive or a venture capitalist wanting to do business with a startup, how would you identify the rare, great partners to work with, given startups statistically have a high likelihood of failing?

Most new companies are destined to fail because they have founders who are not high quality and not ready to be burdened with leading a startup. If you’re an executive at an established firm looking to work with, acquire, or have any relationship with a startup, you have to bank on that startup being able to solve a problem for you. A startup is, by definition, a hack, so any due diligence will uncover massive gaps in the architecture of the company, whether business or technology, that will seem scary since your company has an established structure. There’s a lot of faith you have to have, but the rewards can be astonishing if you select a startup with a belly full of fire that inspires and motivates your team, that creates something amazing despite their tiny team.

What role do you think empathy has in solving a problem in a different way than others were able to see?

The best startup idea is a pain that the founders have felt. If you work in an industry and feel a huge pain, you’re well-positioned to start a company that fixes that pain. Your job in a startup is to feel as empathetic as possible to make sure you’re building the right thing. To build empathy, you have to go out and truly experience what it is you’re solving for. If you start a drone company designed to move boxes in a warehouse without having set foot in a warehouse you’re building the product for, you’ve already lost. Experiencing empathy is critical to building the right things.

What was cognitiveVR’s approach to building empathy and confirming hypotheses?

Many members of our team have either built or tried things in VR, and we’ve found in many cases that 50% of our time is debugging performance issues. It’s a pain we’ve directly felt, and a pain we’ve been able to confirm with developers. We’ve been fortunate to have developers who could try out our betas that solve some of their problems. This approach has guided us into making our current set of developer tools.

What is your reaction to Peters and Waterman’s original set of qualities of excellent companies?

The list of qualities is very relevant to us, even today. One thing that our CEO, Tony Bevilacqua, does very well is listen to every idea and immediately act on it. If it’s a dumb idea he’ll tell you; if it’s a great idea he’ll mobilize the company to work on it. This makes the team not afraid to speak up at any time. The quality of being hands-on is especially relevant — it’s clear in the VR industry that there are some executives who haven’t immersed themselves in the technology — but have opted to invest because it’s the ‘next thing’ on Gartner’s hype cycle. With respect to staying lean, you can get a lot done with just a few quality employees — you can’t build a scalable solution but you can build out ideas quickly and kill the bad ones. It’s a great list that seems to have stood the test of time. I’d only add that companies should have the quality and courage to think perpendicularly and not ground themselves in established ways of thinking.

Chris Neels

Written by

STS, Strategy, and Futures. Currently at University College London. Previously Idea Couture and Deloitte.

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