“Execution”: what does it mean in startup / business language?
Why Amazon has been able to become so successful with an idea (selling books), which is so basic? Because they did a good execution. Execution means how you do things and how fast you do them. But let’s explain some preliminary notions before, like barriers-to-entry or the value of business ideas.
What are “barriers-to-entry”?
A barrier-to-entry is something that a company has, and which is difficult to imitate. That can also be called a competitive advantage. Let me give you 4 examples.
- Patent: Imagine that you are the CEO of Pfizer, a pharmaceutical company, in 1996. The company discovers the Viagra and has a patent this medicine during 15 years. If another pharmaceutical company wants to commercialize the same medicine, it will not be possible. So patents are an example of barriers to entry.
- Technology: Some technologies are not protected by patents but hard to copy. Parrot was the first company to commercialize drones for everyone. The Parrot AR.Drone was released in 2009, 2 years after the first iPhone. It had multiple technologies that made it unique like a control from an iPhone through WiFi (it was iPhone 3Gs at that time) and a stabilization through multiple sensors including cameras. Parrot technology was several years ahead of competition. DJI, a Chinese drone maker, has worked a lot on technology and beat Parrot. Today DJI is the strong market leader of consumer drones.
- Network effect: Now imagine you want to launch a social network for professionals. You will be in competition with LinkedIn, and it will be really hard to make professionals move from LinkedIn to your new social network, even if it is better. That is what happened to Google+, which wanted to compete with Facebook. Even if there is a new social network is better than Facebook, it will be hard for users to move to another network where at the beginning there will be fewer members. That is called network effect, and it is also a strong barrier to entry.
- Brand: Let’s say now that you have found a new recipe for a cola, which has a better taste than Coca Cola. That will be really complex to become popular on the market. Why? Because Coca Cola has a strong brand, and that is very valuable in the world of consumer goods. People are used to this taste, they trust the quality of the product, and they can find the beverage in many shops or restaurants as it is distributed nearly everywhere. At launch, you will not have this and it will be hard to imitate. This is also why it is rare to see new brands in the supermarket. One of the few recent examples is Michel & Augustin, a French brand of cookies and yoghurts, which has then been purchased by Danone. Another example is Ferrari. Even if a company creates cars which are faster, it will not have the prestige and the history of the Ferrari brand.
Idea of a business has no value
This is something super important. If you want to create a company, finding a good idea is just 0,1% of the job. The rest is called execution, or in other words, how you do things. Oussama Ammar explains it well in this video about startup ideas.
Of course there are bad business ideas, and really bad ideas. There are many bad ideas, like a product with a market, which is so small that you will never cover your fixed costs even if you have 100% of the market.
Here are some examples of companies showing why the idea has no value. But all of them have been excellent in execution:
- Amazon was not the first website selling books ;
- Google was not the first search engine ;
- Blablacar was not the first carpooling platform ;
- Facebook was not the first social network ;
- Michel & Augustin was not the first brand of yoghurts ;
- Xiaomi was not the first brand of Android smarphones;
- And mobile apps doing food delivery have all had the same idea.
There are also companies have also industrialized the process of copying ideas of other companies, like Rocket Internet.
So if the idea of a company is 0,1% value, 99,9% of the value is in the execution.
How to be good in execution?
“To execute” is a neologism as the verb is intransitive. We can say “we need to execute faster”, while the dictionary still says the verb is transitive. Now let’s see how to be good in execution.
The key to a good execution: Be fast & agile
When you want to launch or grow a business, you need to be fast, because time is super precious and you have nothing to lose. You also need to be agile, because everyone takes bad decisions at some point. So you need to be able to change your plans quickly.
This process is not so natural, so you will need to push your limits to become excellent in execution. I have identified 5 potential causes preventing you of being fast & agile.
1) Lacking know-how
That is the first barrier. When you are an entrepreneur, you need to be able to do things you have never done, and it can be quite uncomfortable.
Let’s say you have a website and you want to do advertisement to get more traffic. In 2019, one of the best option is to use Google Ads. But actually the tool is quite complex, and you have never used it. So what should you do? At the beginning, you just need to get your hands dirty and do it.
Is it hard? Yes. And the most difficult thing is to start. But keep in mind 2 things:
- Nearly everything can be learned online.
- As long as you go step by step, you can progress. Just divide your project in small steps.
So for a good execution, you need to be able to learn by yourself fast.
2) Not being comfortable with the act of choosing
That’s something which depends on your personality. In French we say : “to know how to choose is to know how to give up”. You need to be comfortable with making a choice, and abandoning the other option, because the cost of not choosing is higher than the cost of a wrong choice. As long as time & money spent are reasonable.
3) Having long decisions processes
In business, information we have is never complete and perfect. So we need to deal with partial and incorrect information. And yes, sometimes, we need to go deeper and get more information before taking a decision.
But you need to decide fast, whether you need to hire/fire someone, to start/stop a technical project, looking for investors, or to launch a new acquisition channel.
For example, if you want to launch a website selling bus tickets like Kombo, you should not bother too much with the first version of the design, nor having a long internal debate about which marketing plan you must launch. Launch, and adjust. That’s the principle of Lean Startup.
As a consequence, the management team must have a great fit together. They must trust each other so that when one of the managers takes a decision, the other are fine with it. That removes all the friction that could happen from long decision processes.
4) Being afraid of the risks
In startups, it is often less risky to take a wrong decision than no decision. There is 1 limit : do not put all your time and money in something without being able to see the results.
It is also a good idea to reduce risk by doing tests. For example, you can ask a test to a PR agency with a minimal cost (writing a press release) before committing into a 1-year contract.
5) Not being able to judge the results of your decision
When people talk about “Test & Learn”, there is a “Learn” part. If you add a new feature on your website, it is really important to monitor the impact of the feature: does it improve the conversion rate or the average sale? What is the proportion of the visitors who use it? Is there any side effect that you did not anticipate? You need to make your business data-driven to be able to track this.
This way, you can be agile and correct fast the tests that do not work well. So if you do a new type of advertisement, it is good if you can know very fast if it is efficient.
Regarding execution, I will leave you with this sentence :
Being wrong is better than being slow
(As long as time & money spent are reasonable)
Why? Imagine you can do 1 test per week. After 3 months you have been able to do 12 tests. You will probably learn a lot and find good ways to improve your business. But if you have not been able to decide about which test to do in 3 months…
