Flux companies

Nothing is one thing, or something, or of some kind. But from motion, change and mixture with each other come all the things which we say “are” — an incorrect way to speak of them since they never are anything, but constantly become (Plato, Theaetetus 152d)

How do you build something long lasting when everything around you keeps changing?

For decades, we have been used to associate companies with the product they produced. It was a stable world where companies, and the managers within them, could make plans and everybody could name who their competitors were. That world is no more.

This doesn’t mean that we can’t build something to last anymore. It simply means that our idea of company, how they are started, how they are run, how they are measured, will have to change. The signs are already there and we can see them in a handful of successful modern companies. Facebook, Amazon, probably Uber, and many others that are just at the beginning of this journey. Inspired by Frank Chimero I call these “flux companies”.

Flux is the capacity for things to change.

A flux company is a company able to continuously evolve, a fluid entity in constant movement.

More specifically, flux companies have 3 characteristics: 1)They embrace software mindset 2)They focus on the essence 3)They find the entry of the maze

Embrace software mindset

Why are software-based companies taking over the world? The answer is simply that powering companies by software allows them to be responsive and data-driven and, hence, able to react to changes quickly.

It is common these days to hear that every company will be a software company. I am not sure everyone understands the true meaning of that sentence. Being a software company doesn’t mean selling your product online, doesn’t mean having an app and, as a stand alone, doesn’t even mean selling software as main business. As the quote above (and the great post where it is taken from) suggests, being a software company means behaving like modern software. It means creating and supporting a system of continuous releases and feedback loops. That applies to more than software development, it applies to marketing, to sales, to hr, to accounting.

Another key aspect of a software mindset is the rate of innovation. Software companies delivering their product or services through the web have the ability to constantly improve and innovate. The product is never finished, it is the ultimate flux. When we sign up for a saas company we know we are signing up for a specific product but we also expect the product to keep changing and improving over time. And we expect that to happen without any change in price. Rate of innovation defines flux companies, and separate winners from losers.

Focus on the essence

When navigating a world in constant change we are better off by following a compass than a detailed map. Flux companies embody this principle. They have a clear vision but they know that the product they are offering today is only a transient manifestation of it, not the end game.

Finding that vision is about understanding the essence of the need you are addressing as a company. Fundamental needs seldom change, it is the solution (driven by what’s possible) that changes.

This also means challenging and refreshing that understanding on a regular basis. What’s the core of the problem your are solving and what business are you in? What’s today’s version of how to best address that need?

Very few companies are able to that, and it is no surprise that those that can are mostly founders led. A lot of existing companies have lost their compass and are simply being stirred by the desire to squeeze their existing business model to the last drop. I don’t expect these companies to last long.

Find the entry of the maze

The remaining question is: where to start?

This question can appear trivial since we have just established that it is not the product or idea that matters but rather the goal and the process to get there. It is a false appearance.

Translated into the popular metaphor of the “idea maze” I find picking the right entry a critical part in reaching safely to the end. David Galbraith calls this “ecosystem fit”:

How do you capture the potential market opportunity from what’s newly possible here and now?

Most successful companies have something in common. They started small and with a narrow focus that bore little or no signs of the larger opportunity they would eventually capture. This can appear counterintuitive but is exactly the opposite. Because of their ability to change and rapidly evolve, the most important part of their beginning was reaching rapidly a certain speed. We can argue whether this was intended or simply luck. Either way the result is the same.

To find the entrance of the maze look for something small, something you can act on fast and something that you can possibly dominate.

In today’s world nothing just “is”. This should help us rethinking the process we use when building a company. Instead of starting with a goal in the form of a business or product idea we should start from the underlying need we want to address, identify a tangible entry point and set up ourselves to learn and adapt.

Originally published at www.buildingsquared.com.

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