Building technology companies

Strategy In Start-Ups – By Anik Bose

“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.” – Sun Tzu Strategy (Greek stratēgia) is defined as a high level plan to achieve one or more goals under conditions of uncertainty. Entrepreneurs often tend to view strategy as the domain of large established slow moving companies with high priced management consultants and fancy power point slides.  Often times this disdain leads to a technology driven approach to build a start-up – i.e. build it and they will come. Our experience in building successful companies from raw startups to large global companies leads us to believe that strategy formulation is an essential building block for value creation in a start-up.  Whether this is at inception through the development of an investor pitch/business plan or during it’s operations via continued refinement and testing of key assumptions with new data.  This is because start-ups operate with limited resources and often compete against companies with far larger resources and balance sheets; consequently the right strategy can determine the difference between spectacular success and abject failure.  Our experience has also led us to the conclusion that no amount of detailed tactics and flawless execution can overcome a bad strategy.  Tactics and execution must follow a well-formulated strategy. A well thought through strategy answers three fundamental questions:

  1. Who – Who is our target customer segment.  For example are we selling to enterprises or consumers or service providers?  Within enterprises are we selling to the CIO or the CSO?   Within service providers are we selling to the Network group or the Marketing group.  Furthermore a clear understanding of who is the technical buyer and who is the economic buyer is important for success.  A crisp definition of the target customer segment allows a startup to quickly get market validation for its business/product concept prior to investing resources on product development.
  2. What – What is the value proposition that we will offer to our target customer segment?  For example what pain point or unmet need are we solving and is it several orders of magnitude better than the current approach to address the pain point along the dimensions of cost, time or value – a quantitative definition is critical i.e. 10X cheaper, 5X faster etc. This helps prioritize product features, defines the company’s unique differentiation and ensure that the company’s technology is adopted more broadly vis a vis the competition.
  3. Where – Where do we want to build our distribution channels?  For example which geographies and within the chosen region which are the optimal pathways to best reach our target customer segment.  This helps define the company’s Go To Market model.
Needless to say relevant market, technology, industry and regulatory trends inform and shape the answers to the above three questions and the strategy needs to be refined over time with new data. Commitment to a strategy is reflected in the operating plan, budgets and goals – deciding where the company will invest its resources.  Many start-ups make the mistake of trying to avoid making tough strategic choices but strategy at its core is about making choices.  In most cases deciding what not to do is equally important as what the company will do.

Illustrative Example

Who

What

Where

Intrusion Prevention Company Chief Security Officers & Network Administrators in Large Enterprises In-line, Automated Network security @ Multi Gigabit throughput protecting enterprise networks from worms, Trojans, spyware and DoS Initially US and Financial and Higher Educations Vertical Markets with Direct Touch Sales; Later expansion to other verticals and System Integrator channel partners
Small Cell LTE company VP of Networks in Mobile Carriers High performance, carrier grade availability small cells – offering macro parity at a fraction of the cost, footprint and power Initially US through an overlay technical sales force working with the direct touch sales force of  large carrier systems integrator partners
We are not suggesting that Strategy formulation is a substitute for innovation, talent or critical thinking.  What we are suggesting is that it provides a powerful framework for guiding resource allocation decisions and significantly increases the likelihood of success in building a technology company.