Building a successful startup: Embracing the right approach for success means understanding unique challenges
Managing a startup versus managing a larger, more established company requires a different approach. To avoid common pitfalls and successfully grow their business, startups must understand the biggest differences and unique challenges. Key among them are:
STARTUPS CAN INNOVATE MORE QUICKLY BUT MUST SCALE AT A FASTER SPEED
With startups, you’re innovating something that may never have been done before—or you’re recreating something with a whole new twist. This generates a lot of energy and momentum and can be very exciting.
To be successful, once a startup has found the right recipe for delivering a new solution for a customer problem, it must immediately begin to scale. Finding a path to scale is critical for a startup and—once that path is found—you must make sure you can scale fast enough to go the distance.
Because established companies must support an existing customer base and follow a roadmap that’s aligned with that base, innovating can be slower and more challenging. This makes growing at a multiple digit rate much more difficult. Consequently, larger companies that can’t innovate fast enough frequently end up partnering or acquiring new technologies.
STARTUPS ARE MORE AGILE BUT ADDRESSING CUSTOMER PAIN POINTS IS MORE CRUCIAL
Because customers have never heard of you, startups must be much more customer-focused than established companies. If you don’t deliver value right away, they will write you off quickly. Getting the first few customers that are willing to try the minimum viable product (MVP) is crucial. Startups must deliver the MVP in the most efficient way and shortest amount of time. Startups must also be able to implement changes as fast as possible in response to customer feedback. This requires an agile, dedicated and hardworking team.
In a larger company, roadmaps may span multiple quarters and multiple years. Large, established companies frequently have three-to-five year business plans in place. Any changes to plans can be time-consuming and drawn out, requiring approval from multiple organizations within the company. Employees also often don’t experience the same urgency as in a startup.
STARTUPS CAN FIX MISTAKES MORE EASILY BUT ALSO PAY A BIGGER PRICE FOR THEM
The nature of a startup is to iterate fast—identifying issues or product challenges and fixing them quickly. When a startup spots a problem, they can correct it much faster than a larger company. If a startup wants to add product functionality or adjust an internal process, they can just do it, whereas a larger company typically has to go through a number of hierarchical approvals to evaluate and implement a change.
This agility benefits a startup. Conversely, startups can also pay a higher price for mistakes that aren’t caught in time—as the user base or potential prospects are much less forgiving.
Because larger companies have already delivered value and have an existing customer relationship, customers are generally more forgiving with occasional errors.
STARTUPS HAVE LOWER OVERHEAD BUT MUST SPEND MORE TIME ON FINANCING
With a startup, financing is far more critical. You’re constantly trying to figure out how to get the next round of funding to make it to the next milestone—or potentially risk going out of business.
Established companies have more latitude with financing. Because they’re usually generating profits, they’re able to survive downturns and think in longer timeframes. With more resources available to patch mistakes, they can still remain a viable business when mistakes are made.
To grow their business, startups need to deliver differentiated value, iterate and react to issues rapidly, and ensure they have the resources and a growth model that can scale. With more insight into these unique startup requirements, startups can grow more effectively without missteps.