2 quick exercises that help build better startups

1) Be creative about burn, 2) make yourself more competitive

For the last few months I’ve had an amazing opportunity to advise startups, young PMs and new founders on how to deal with common product-related problems. Part of the role is sharing stuff we tried and tested, and especially exercises we ran across different teams that actually had a a material impact on our ability to grow. Here are 2 of them that can (and should)be ran at any moment in a company’s life.

The quarterly fire-drill

It was late 2015 and we had just raised €20M. We basically 10x’ed the last round. The company ballooned to 100 people and it was harder and harder to keep an eye on our spending. Everyone was hungry to do more, grow faster, get bigger. And why wouldn’t you? Money wasn’t an issue.

Our marketing team (the largest spender) started noticing how our costs we’re accelerating, and if we stand still, we would easily get to unsustainable CPA’s.

So Pedro Pereira, who was leading marketing at the time, challenged us to run a paradoxal exercise for someone who just raised millions: what if we were down to our last €50k? What if our total budget (for the team) was just 1% of what we had? So we got the team together, bunkered up in a meeting room for a day and discussed every single cost until we started cutting (on paper). We did this for software tools, budgets for acquisition channels, new hires and even current positions, all up for grabs. It felt refreshing this «fighting to cut». Although we were only doing a paper drill, it actually led to a re-prioritisation of initiatives, where many were reduced or eliminated

Considering the importance of keeping your spending in check, and to get people out of their “gotta hit targets” state of mind, we started running this every quarter. We even got other teams to run the exercise internally. Finance appreciates and your investors as well 🙂.

Mixing yellow to your red

Around 2016, a few months after raising quite a bit of money, we started seeing competition pop up really fast. We realised we couldn’t accommodate on the way we’ve been doing stuff just because it worked so far. Even for a startup, we needed to reinvent some parts of ourselves.

To get everyone into this “disrupt” mindset, we ran an exercise I call “Yellow Mix”. If you’ve read about “Blue Ocean Strategy” theory you know you want to be in a blue ocean (low-to-no competition where you can extract large margins), but the majority of companies exist in a red ocean (high competition squeezing margins). So if you’re in a red ocean, how do you survive? You add yellow to become a little more orange. As an analogy, in colour theory you can’t get “blue” by mixing colours as this is a primary tone, the same way “red-ocean” startups can’t get “blue” unless they make fundamental changes (generally market). But they can become a little bit less red by running this“simple” exercise:

1. First we got our team together and mapped out every variable the business and industry; from every actor involved in the business model, to company structure, even the tone of voice of your brand.
2. Then we split between the variables we controlled and those we didn’t. For example: how much you charge is a variable you control, where your competitors branding is something you don’t. Then we tossed aside everything we didn’t control.
3. Next, we asked every single person to imagine how each variable would behave in a perfect world, no boundaries, the dream for your user and company. When people submitted an idea, we would push more: “Charge 50% less.” would become “Charge 10x less” until “Charge nothing”!. Everyone in the room had this task. Only physics laws needed to be respected, everything else (economics, resources, time) was forgotten, we just aimed unbelievably high.
4. Finally we prioritised the variables that would generate more user happiness (which consequently would build up retention and revenue), agreed on a realistic middle-ground but still a stretch compared to the present, and started designing a way to get to this future. A path that would out-pace competition as no one had yet delivered this way of serving customers.

By being really aggressive, up until submitting seemingly impossible ideas, we made a 100% improvement not seem so hard after exposing everyone to a “100x more” scenario. It was literally an “Aim For The Stars, If You Fail, You’ll Land On The Moon”. People often forget how powerful is landing on the moon.