How should you set direction for your startup?
In all of my years in business, every company I know has used the beginning of a new year as a time to reflect on goals. There’s nothing particularly special about the new year as a time to do so, it’s just a natural marker in time that prompts us to think in fresh and bold ways.
The cadence of goal planning in business begins earlier in the year, and a plan goes from a general vision to something tangible with a detailed operating budget. In my experience, the best mid to large-size companies force themselves to translate general direction into a specific destination. Something tangible, measurable, that’s obviously marked when you get there. Some call it a mission, others a vision. The language doesn’t matter so much. But it does serve a really useful purpose: to describe an interim destination, an aspirational waypoint on a never-ending journey.
This challenge is much harder for startups. Plans can (and should) change so often, and at times so radically, that it can be hard to know what level of planning even makes sense. I’ve spent much of my career directing strategy for big companies, and now that I’ve spent some time investing in really small companies, I’ve concluded that two big variables matter most: stage and uncertainty. The earlier the stage and the greater the uncertainty about what to build and scale, the more flexible the tools for planning should be.
To bring this to life, let’s think about the tools we all use to set direction in the physical world. Today, the gold standard for direction-setting is GPS. Assuming the conditions are there for it to work, it essentially never fails. For good reason, it’s now the default wayfinder all over the world.
Prior to GPS, maps were standard. Over decades and even centuries of development, maps became the staple for navigation. Starting with rough drawings that explorers would assemble based on their wanderings and observations, the art of mapmaking became an actual science: cartography. Precise calculations of longitude and latitude combined with measurements of elevation could result in highly detailed maps of terrain, methods of travel through that terrain (e.g., trails, roads, rail lines), and distances from one point to another.
Combined with visible markers (like signs) while on a journey, you could see where you were on a map and continue or adjust direction as needed. Maps had many limitations, not the least of which was their tendency to be rendered obsolete by human actions (construction, renaming, etc.) as well as, in some cases, natural catastrophes, such as floods and hurricanes, which could literally “wipe things off the map.”
Preceding (while also supplementing) a well-developed map was the compass. Using the magnetic poles of the earth as a reference, the compass needle would point north, and you could then aim yourself in a direction if you knew generally where you needed to go. Lacking a map, you might encounter unexpected obstacles that would require you to temporarily move off course, but the compass would always allow you to reorient. We could even go back to celestial navigation, but the application remains the same. One direction (north) was known, and all other directions used it as a fixed point of reference.
So which of these navigational tools is the aptest metaphor for guiding direction for a startup? In my view, that’s easy. It’s the compass. Startups face a vaguely defined starting point, an unclear destination (other than eventual success), and no fixed route. By definition, a tech startup is creating the route along the way. To a founder, this might be frustrating. Wouldn’t we all love the equivalent of a GPS to navigate how to build a company, turn-by-turn? If not that, a map at the very least. Let’s dive a bit deeper.
At their very beginning, great startups know little more than a clear customer problem and some early inklings about how that problem could be solved. The purpose of the company is to solve the problem (and, over time, related problems to build an even bigger business), not to build any particular widget that may or may not be the best solution. In direction-setting terms, the quest to solve the problem becomes the setting for the company’s compass.
Great founders do a lot of discovery to learn about the customer’s problem and weaknesses of available solutions. Armed with that information, they dial a setting on their compass, and the journey begins. Smart startup teams then build something basic, frequently testing and trialing, guided by customer feedback. This process of iteration is invaluable. If a team was trying to follow a map, they’d be focused on a fixed path to their destination, ignoring blaring signals from their customer and market compass that they were drifting off course, let alone missing the possibility that the destination itself may have changed.
The compass metaphor in startups also works in other ways. Ernest Shackleton’s attempt to reach the South Pole is a great illustration of how. Shackleton’s objective was clear: He developed a plan to achieve it and then assembled the crew and resources he thought were needed to carry out the plan. But as with all journeys into the unknown, lots of surprises arose. Horrible weather, equipment failure, a critical loss of time, food supply issues, and countless other challenges meant that Shackleton was often changing his plan in real-time. When it ultimately became clear that he could not reach the South Pole, he had to reorient his compass and choose another destination. Encountering the unexpected time and time again, Shackleton kept changing his plan. He had to—to not do so would mean death for him and his entire crew.
Startup teams experience exactly the same things. They start with a clear direction in mind, and then everything changes along the way. Customers don’t behave how they were expected, competition arises seemingly out of nowhere, teams run late, products have bugs, costs go up, and on and on and on. The solution? Use your compass. Keep aiming in the direction of your destination (a high-value solution to the customer problem) and deal with change as it comes.
I strongly believe that a highly detailed plan for a brand new tech startup is worse than a waste of time. Not only will it be wrong, but it may also entice the team to stay fixated on executing the plan, confusing activity with outcome when the evidence is mounting that they are going in the wrong direction (or taking a poor route to get there). To repeat, don’t use a map to navigate when you don’t know your exact destination, when the terrain is unknown, and when you may not even know exactly where you’re starting. Seems obvious, right?
The solution is not to have no plan at all. Instead, act like an explorer. Divide your journey into segments. Each segment can end with a critical waypoint like an explorer would aim for landmarks or settlements. For a pre-product startup, these could be the completion of the beta product, a critical mass of daily active users, or some revenue milestone.
After the milestone is reached, then create detailed plans that cover short periods of time while spending modest amounts of resources. The shorter the time, the more detailed the plan can be. A tech team can have a very detailed plan for a sprint, but that same level of detail for several months of software development would be dumb. No matter how thoughtfully developed, it would quickly be tossed as the team learned, acted, checked for results, and then re-oriented.
Remember, the two key guideposts here are stage and uncertainty. All other things being equal, the earlier the stage, the more things will change during the journey. While this might seem like just another way of describing uncertainty, they are actually different ideas. Some companies face high uncertainty even when their stage is more mature. As an example, it was far from clear years into Amazon’s existence that it could ever be more than a large online bookstore, let alone a seller of virtually anything, including cloud computing and world-class logistics. Stage alone does not predict uncertainty. Where uncertainty remains high, plans should stay flexible.
In later articles, I’ll have more to say about planning intelligently as you start and grow a business through various stages of success and maturity. For now, I’ll end with a reminder from more than a century ago. In the mid-1800s, America was just starting to discover the opportunity that lived in the unknown, far from the crowds and habits and traditions of the original eastern states. There were new, unexplored lands. The possibility of new opportunities and resources. But to create a new and exciting future, one would have to leave the familiar behind and take risks, often with little in the way of food, money, or other resources for support. During this exciting time, a traveler was said to have approached Horace Greeley, an author and newspaper editor for advice. Greeley’s response was, “go west young man, go west.” No detailed map with a fixed destination or turn by turn directions. Just go west. To this day, the best entrepreneurs start the very same way, using compasses to begin the journey.