Playing to Win
Strategy for Start-ups — Redux
Sameness & Difference
I keep getting asked about strategy for start-ups. I did a piece on this subject much earlier in the series. But people continue to ask me questions about strategy in the start-up context. So, I am doing another Playing to Win/Practitioner Insights (PTW/PI) on the subject entitled Strategy for Start-Ups — Redux: Balancing Sameness & Difference. All previous PTW/PI can be found here.
Sameness & Difference
To set the context for delving into strategy for start-ups, I need to detour briefly into a tricky human tendency, which is our reflexive instinct to declare things to be either the same as or different than the comparator that comes to mind. I have written about this before — actually on Medium before I started the PTW/PI. It was one of the ten pre-PTW/PI pieces that I wrote during the summer of 2020 while I was learning about the platform. It was too long — a 16-minute read. I learned my lesson and rewrote a shorter version (8 minutes) that I posted as a between-years piece at the end of PTW/PI Year One, before I started Year Two.
The point of the pieces was that we have a natural instinct to declare any phenomenon that we come across as the same as or different from phenomena that we already know. ‘This is just like that’ comes easily to mind, as does ‘this is completely different from that.’ It is a cousin of fight or flight — our instinct is to go to the extremes.
This plays out in life is that when people want to take credit for something: they see things as the same as their idea/organization, philosophy. However, when people (academics in particular) are proud of or invested in their field, they are likely to emphasize the difference. (see Life of Brian for a priceless example). The latter phenomenon helps explain why when I write about strategy and marketing converging or question the distinction between strategy and execution, people go nuts — I mean really nuts in insisting in no uncertain terms how very different they are. That is also why there is so much animosity in the strategy academy between adherents to ‘the positioning school’ and the ‘resource-based view of the firm.’ The latter in particular is so very proud of itself that it sees any other view as totally different (and, of course, inferior).
I believe that a key to being a sophisticated thinker is to overcome this instinct. It is to have an inner voice that says to you: “Because my first instinct is ‘same,’ make sure I ask what is different?” Or “Because my first instinct is ‘different,’ make sure I ask what is same?” If you do, you will get a more sophisticated view of the topic in question because there will always be both sameness and difference. Even if there is very little that is indeed different, your ‘same’ view will be stronger. And even if there is very little that is indeed same, your ‘different’ view will be stronger.
How This Relates to Strategy for Start-Ups
All the questions at that I get on strategy for start-ups focus on difference. “How can Playing to Win be applicable to start-ups because they are so different?” “What specialized strategy framework do you have to use for the unique nature of start-ups — especially tech start-ups?” And really especially for B2B — which I have written about previously?
So, to understand strategy for start-ups in a more sophisticated way, we need to explore not only what makes it different from strategy for established companies, but also what makes it the same.
Important Stuff that is the Same
There are numerous important things that are the same for start-ups as for established companies — which I will use to term any company that is not a ‘start-up.’
The Definition of Strategy: Strategy is about making an integrated set of choices that compels desired customer action. That is the same for start-ups as it is for established companies. This is a core law of strategy. It recalls my second favorite lawyer (my wife is my favorite!), the great Vincent Gambini of My Cousin Vinny fame declaring to hapless witness Sam Tipton: “Well perhaps the laws of physics cease to exist on your stove!” Channeling Vinny, just because you declare ‘it’s a start-up’ doesn’t cause the laws of strategy to cease to exist for your company.
The Nature of Competitive Advantage: Just as established companies achieve competitive advantage; start-ups need to sell at similar price with a lower cost or higher price with similar cost. Otherwise, the start-up will be average and it is not worth the time and effort to start something up to be average.
Customers: Customers buy from start-ups for the same reason that they buy from established companies: the offering meets their need in a superior way to anything else in their consideration set. And by consideration set, I mean the set of offerings for which customers have mental and physical availability — per Byron Sharp. That is, they know that the offering exists, it is in their mind, and they know enough about it to understand its value to them — i.e. mental availability — and they have a ready means to acquire the product — i.e. physical availability. Otherwise, they would buy something else.
Competition: As with established companies, there is always competition of some form for start-ups, even if that competition is a way for customers meeting the desired outcome differently or customers doing without. That is, there are always substitutes of one sort or another that a start-up needs to consider.
Anybody who doesn’t recognize these important aspects of sameness will do a crummy job on strategy for a start-up.
Important Stuff that is the Different
That having been said, there are two important ways in which strategy for start-ups is different from strategy for established companies.
Problem Definition: I argue that strategy starts with defining the problem to solve. A problem is a negative delta between the outcomes that are occurring and what you wish they were. Those outcomes are occurring as a consequence of the interaction between all the company’s prior choices and the competitive environment. Hence, the task of strategy is to alter the set of existing choices to cause the negative delta between aspiration and outcome to disappear.
However, a true start up that hasn’t done anything yet is a proverbial blank slate. It can’t start with outcomes it has produced because it hasn’t made any choices or produced any outcomes yet. Though frankly, that changes quickly. Because strategy is what you do, not what you say, the minute the start-up starts doing anything, it produces outcomes and gaps — and you can proceed as above from that point.
But let’s start with the very inception of a start-up. There is not yet a choice in any of the five boxes of the Strategy Choice Cascade — except perhaps the implicit choice inherent in your own capabilities as an individual or founding team (I.e., features of the Must-Have Capabilities box). For a start-up, instead of beginning with a gap between the outcomes you are producing and your aspirations, I would start strategy with a customer gap. What is the gap between what customers are receiving from the world in general and what they would wish? This is, of course, a tricky thing because while we know what the gap between outcomes and what we wish is (in the established business case), we can’t know for certain what the gap is for customers because they might not be able to articulate it. As Steve Jobs always warned: sometimes customers don’t know what they want until you show them.
Fixate on your best estimation of the customer gap as the beginning point in start-up strategy. Avoid focusing on capabilities — i.e., this is what we are good at, let’s figure out for what can we use it. That is the technology start-up trap — we have a technology; let’s figure out what to do with it. I am sure that has worked. But I bet it is relatively rarely.
Mental and Physical Availability: Start-ups should focus obsessively on mental and physical availability (M/PA). The biggest strategic difference between a start-up and an established company is that M/PA is already in place for the customer base of the established company. Sure, the task of maintaining, enhancing, and expanding M/PA is always present for an established company. But a start-up has little if any M/PA at inception. I believe that failing to gain minimum economically viable M/PA before running out of cash is one of the greatest drivers of the low success rate of start-ups.
Obscurity is a deadly adversary. I will never forget the early days of Monitor Company. I always used to argue that our biggest problem was not potential clients who knew us and thought we sucked. It was potential clients who were completely oblivious to our existence on the planet. It took us ten years to get to a reasonable M/PA, and it was a hell of a lot of hard slogging to get there.
So, in a start-up, a core part of the business model must be the investment to build and maintain M/PA of the targeted customer base. It won’t just happen by itself.
Practitioner Insights
The laws of strategy do exist for start-ups. Don’t talk yourself into being some kind of ‘special case’ as a start-up and following some other script. Strategy for you, just like every other company, is an integrated set of choices that compels desired customer action.
Start your thinking with a customer gap not with a tool, technology, or other capability. Rather than think about unsatisfactory outcomes that you have produced from your choices (because you haven’t made any yet), consider the unsatisfactory customer outcomes that are the result of your non-existence — thus far. For Steve Jobs it was the institutional (i.e., IT department) rather than individual control of all computing power in the world. His start-up succeeded because it solved that unsatisfactory customer outcome — forever.
And spend some of your best thinking energy on availability to customers — M/PA. I think it is the number one cause of the death of otherwise good strategic ideas. Bad ideas die because they are bad. But good ideas can expire before they achieve a minimally viable M/PA — i.e., the offering is available mentally and/or physically to enough customers to have an economically viable business. Make sure your economic model and your cash reserves can get you to that point.
More generally, become a more sophisticated thinker by always asking what is the difference in sameness, and what is the sameness in difference?
