STARTUP MINDSET: what is it and how much you and your company possess it?
I often participate in events to talk about startups. Of course, must are events of the genre, so there is not much need to talk about what seems “obvious” to those who are already in the métier. In another opportunity I will go into the merits of what really should be considered obvious, as well as what myths and fallacies exist in this world. Today I’m going to talk about what I understand to be the main reasons for the “startup mindset”. Therefore, today’s post aims to bring understandings that are not so obvious, but also unscientific, about what a startup means and, mainly, about how to be someone who thinks like the “owner” of one.
Since the early 2000s, startups have gained more prominence in different media, as well as in conferences or conversation circles existing in happy hours between professionals. It’s important to remember that these startups have been around for a long time. Since the 1980s we have noticed the existence of many. However, what is a Startup? There are many definitions of what a startup is, and I’ll start with the most famous ones, from some most famous authors:
● Steve Blank: “a startup is a group of people looking for a repeatable and scalable business model, working in conditions of extreme uncertainty, which addresses the main characteristics and challenges of this type of business.”
● Eric Ries: “A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.”
● Paul Graham: “Startup is an organization designed to grow quickly.”
● Gabriel Weinberg: “A startup is a company designed to grow quickly, and you grow quickly by getting traction. Looking for traction early can counterintuitively accelerate your search for PMF.”
Note that many of these definitions touch on common subjects that suggest possible characteristics of startups, such as: “extreme uncertainty conditions”, “repeatable and scalable business models”, “human institution”, “create a new product”, “grow quickly”, as well as the so-called “PMF” (product-market fit).
It is also worth remembering the many other terms that this world of startups includes and that are on everyone’s lips, such as: “MVP”, “pivoting”, “persevere”, “disruptive”, “canvas” etc. Unfortunately, I will not pay much attention to this at this point, but I will make sure to cover some points that justify them in a next occasion. On the topics mentioned by the cited authors, many are important and very characteristic of Startups, however, it is necessary to clarify their meanings and differentiate them from other business behaviors. So, let’s go ;)
When it is mentioned that a startup is a “human institution”, there are two points to be clarified. First, because it depends on people to be able to do its job of discovering a need / way to solve a problem for its client, especially during the customer discovery. The second is that perhaps the term “human” could refer to the customer that, as much we are adding more AI in our daily lives, we are still calling the shots when it comes to be a customer, right?
What about “conditions of extreme uncertainty”? In this case, we need to elaborate the answer a little more, because such conditions exist for one of the reasons of the very essence of a startup: to solve a need of a group of people (clients). To be successful, they need to generate or add value to what already exists, i.e., the startup needs to solve one or more problems that already existed in the lives of these customers in a different and better way. However, how to ensure that this way is better? Voila! This “conditions of extreme uncertainty” deals with the work that every entrepreneur needs to do to validate the different and better way he/she decided to solve such problems, whether from a social, emotional or market perspective.
Now let’s go to the point of the “repeatable and scalable business model” and understand the difference from one to the other, how organizations deal with each of these characteristics and the meaning of the sum of both. Being “repeatable” is a fight as old as it is constant for any organization to survive, i.e., to seek operational excellence in what it is understood as a market opportunity, generating a competitive advantage over its competitors, largely due to these achievements made at each operational level. Imagine that a company manages to be repetitive, however, the great challenge for startups goes beyond their ability to repeat what brings competitive advantage, they also need to do it in a way that does not increase their cost structure in the same proportion of their revenues. The great truth is that startups seek “exponentiality” in the relationship between their increased revenues and operating costs. In another moment we will talk about the concept of “exponential organizations” by Salim Ismail and Peter Diamandis (2015).
Following some great scholars such as Clayton Christensen (1997), it would even be possible to make a connection between these two characteristics — repeatable and scalable — and a company’s ability to always be able to innovate. We would be discussing Christensen’s concept of Innovation Dilemma. This can explain and validate the characteristics of startups and/or the value they can bring to the business world. Thus, according to the concept itself, the innovation dilemma is recurrent in large organizations that seek “operational excellence”. Precisely because these companies become capable of being repetitive, they lose their ability to create disruptive innovations, by expanding markets and/or building scale. Once again, I apologize, but I will go deeper into the innovation dilemma in another post.
To finish it up and not make this post even more boring, is a startup an institution made to grow quickly?
Yes and No. But why? As previously explained, some of these “repeatable and scalable business models” are the result of an innovative solution that aims to better solve an existing problem for an expanding group of customers and, therefore, generating an “environment of extreme uncertainty” for this “human institution”. As much as we have demonstrated that these characteristics lead to exponential growth, what is important to note in all of what we’ve talked about is that throughout this process, most of these business lives in the dark or without prominence in the eyes of observers.
What does that mean? It means that such a phenomenon may not be observable by many people and, only when these startups enter their moments of exponentiality, they really begin to attract everyone’s attention, generating a false sense of extremely accelerated growth. However, we already know many stories of businesses that spent years validating their businesses until they really grew.
It is worth mentioning that I have a “pub theory” which allows me to state that “the scale and market potential of a solution is inversely proportional to its ability to earn money at the time the analysis is carried out.” This statement has a certain relationship with what Gabriel Weinberg (2014) defends in his book “Traction: How Any Startup Can Achieve Explosive Customer Growth”, but more with a paradox related to the Value Proposition plenitude and the Revenue Models of a Startup. I swear I’ll write about it! I believe it’s something that needs more academic rigor.
Summarizing everything that has been said, when a long-time friend, at a barbecue confraternization between people who had not seen each other for a long time, asked me what is a startup? I had to summarize to the point of explaining something that has nothing obvious. So, I related to something that seems obvious to many: a traditional corporation. If I could cite the main difference between a large organization and a startup, I would say that the first creates a product and then finds a way to sell more and more of it, doing it for less. However, the second seeks to find a problem that needs to be better solved, designs a solution, tries to find a way to deliver it to these customers and continues to make a profit, preferably a lot.
I hope you enjoyed today’s post and, once again, I tried to get out of the obvious in this world that, the more complex it may seem, is so surrounded by “obviousness”. I finish this post with the feeling that I made to many promises :/
