Innovation is about timing, and timing is about having the right idea at the right time. The right timing is how the comedian makes you laugh, how a beloved one surprises you with a treat, and how a business satisfies its customer expectations JIT. It is about catching emerging trends as quickly as possible. A business idea is not good if it surges too early, so you must educate the market too much or too late when the competition is ahead of you.
Investors look out for companies that can scale and make attractive investment returns. Often founders will be faced with the true meaning of a star-up; you either scale x10 quickly and efficiently, or you’re another SMB. The reality is if every sale you make requires the same or similar amount of time and effort as the previous sale, your business model is not scalable. That doesn’t mean your business model is bad or wrong. That means that your company is growing, but you’re not scaling. Scaling means with a suitable investment, you can reach and convert from 10 into 100 customers and then roll on into millions of users without increasing costs in the same exponential fashion.
Even if you had an innovative idea and an economy of scale, you can’t possibly grow if you don’t deliver. And you won’t be able to deliver if you don’t have the proper organizational structure. Start-up founders face a peculiar challenge in fulfilling this commandment. They start a business based on flat networks with team spirit, trust and Cammarata. This kibbutz-inspired way of working has to change and develop into a structured and hierarchal organization with clear roles and responsibilities, SOPs and a governance model. Decision-making must be based on data and advisors’ recommendations, not on guts and favour.
Continuous improvement principles got it right: if you want to sustain something, make a habit, and to achieve that, you have to standardize it first. However, you can’t possibly standardize something volatile that changes frequently and depends on manual work. So with growth, you have to work on your processes to correct deviations, automate them and guarantee the service levels your customers expect. Then train your teams. And as your customer demand changes, review processes, redesign them, standardize and train people again. This ongoing continuous improvement is what guarantees your efficiency in the long term. I always recommend 4 E2E processes to control the business operating model: O2C, S2P, NPL and H2R.
The right team guarantees that the right business growth strategies will be in place when needed. So, the start-up will achieve the expected KPIs: sales, market penetration, IT infrastructure, talent, supply chain and distribution agreements, customer care, financial analysis, etc.
What if… is the $1M question often asked during fundraising. What would happen if the business idea goes busted despite all the correct planning? And what guarantees can you provide? Most venture capitalists insist on seeing a carefully planned exit strategy in a business plan before committing any capital. So, it has to be prepared and explained as part of a risk assessment. Exits plans vary from planned termination of operations and liquidation of all assets, a strategic acquisition, to IPO. Bankruptcy is seen as the least desirable way to exit a business.