Doing right the few right things
Working at Brainly — one of the fastest growing startup in EdTech space, I had a chance to discover how powerful in moving things forward are basic business management principles from many decades ago.
Even though many startups may look like they are fueled by pure awesomeness, in the longer run they are regular companies that have to generate profit in order to survive. As any other businesses they are subject to the laws of economics.
That’s why this piece won’t be about Lean Startup, Business Model Canvas or Agile Product Development. It is going to be about Peter Drucker’s thoughts on effective management from 1963.
Words of wisdom
In Managing for Business Effectiveness, Peter Drucker mentioned three key aspects of effective management:
- Manager’s job is to maximise economic result from the resources available. In startups economic result can take the form of: revenue, user base growth or validated learning. Resources in wider terms include: team (their skills and time), budget, technology and so on.
- Economic result is achieved by managing effectiveness and efficiency. Effectiveness is about doing the right things (tactics), while efficiency — doing things right (operations).
- Pareto Principle (80–20) rule is in force. It says that only 20% of your channels/products/processes drive around 80% of the business value. In particular, it means that focusing on the few most relevant things pays off.
Driving retention ‘60s style’
How does it translate to the business practice? Let’s assume that your company objective is to boost retention. As a manager you have to identify and leverage tactics (activities) that may have or already have significant impact on retention.
You start with measuring how your current activities contribute to the goal but also how much you can get from each of them by investing more resources. By answering these two questions, you are able to assess the potential of each of your tactics.
Let’s consider an example of low potential and great execution. You may have an excellent presence on Facebook, attracting hundreds of likes and new fans every day. You may know what is the ideal post’s time, topic and form. However, if it doesn’t affect key performance indicators of your business it is a pure waste of resources.
There is nothing so useless as doing efficiently that which should not be done at all. Peter Drucker
On the other hand, you may have activities with huge potential but low efficiency. It can be even as small thing as strong positive response to the prototype you send out to few of your users. If it significantly affected retention on a small sample, it makes a perfect sense to scale it up and see if this effect is sustainable.
The first rule to follow is to stop or limit to the minimum all the activities with small potential, as they keep absorbing your resources (time and money) with no relevant effect on the goal.
The essence of strategy is choosing what not to do.
With the freed-up resources, you are able to focus on fast build-measure-learn iterations towards:
- optimizing tactics with the highest potential (e.g. making your key paid campaign even more effective),
- searching for new tactics with high potential (e.g. identifying new paid channels with strong initial signal).
If you know what you want to achieve your goal is as simple as doing right the few right things. By the right things I mean tactics with the highest impact on the goal. Some of the right things are already among your current activities. Others you have to identify with fast testing (lean startup style). Activities that are not relevant to the goal should be killed or limited to the minimum, as they consume your scarce resources. Identifying the right things is about finding the global maximum. Doing things right is about excellent performance and searching for local maximum.
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