I observe major differences between long established public companies and successfully scaling startups. The two major things that strike me are: the startups have an in depth understanding of the customer; and the startups are incredibly focused on having the right talent: talent in management, on the board, on the advisory board, as well as talented investors.
This version 2 of my document includes 3 key concepts:
- Startup board of directors are focused on creating value. Public company boards often focus on “oversight”
- Startups make 5-10 minute “pitches” for investments, focused on “What is the customer problem” and “What is the solution the customer will pay for” Public companies often have very long presentations regarding “business cases”.
- Startups are constantly re-inventing themselves and transforming. Public companies often view transformation as a one time event and create temporary organizations such as “The Transformation Office” and “The Chief Transformation Officer”.
|Successfully scaling startups||Long established public company|
|Planning driven by: what is the customer problem or need; how does the customer perceive that the solution is significantly differentiated.||Planning driven by vision and mission statements. Often little differentiation among competitors.|
|Often clarity as to the beneficial impacts on society.||Beneficial impact on society is not a consideration.|
|Focus on meeting the needs of customers||Focus on growing shareholder value|
|Every member of the board of director is focused on growing company value. They have previous experience in growing value.||Board of directors has an “oversight” role. There often the concept of “noses in, fingers out”.|
|Investors make decisions based on talent: talent of the founders and management team, talent on the board, talent on the advisory board, and talent of the other investors.||Talent does not play a major role in deciding on whether to invest or divest.|
|Most things are broken most of the time. The focus is on solving the daily issues which arise from scaling and meeting evolving customer needs.||Risk management and Enterprise Risk Management play a major role. Focus on “mitigating risk”.|
|Transformation is an ongoing and integral part of the business. As the company grows from a few co-founders to 10 people to 50 people to 150 people to 500 people, the company re-invents itself every 6 months. Everything changes: the role of the CEO, who you hire and how you hire, how internal meetings are structured and organized, the technology, the business processes, etc.
There are no such things are “Chief Pivot Officer” or “The Pivot Office”.
|Companies launch stand-alone transformation initiatives.
The is a Chief Transformation Officer and a Transformation Office.
Transformation is views as a focused one-time event,
|The start-up is the disrupter due to deep understanding of the customer and providing solutions which the customer sees as very superior and different.||Companies are “disrupted” because they no longer understand customer problems, needs, and why the customer should buy from them.|
|Uses advisors and experts who can help invent (and re-invent) and create what will be successful in a future which is very different from what was successful in the past.||Use advisors and experts who understand in detail what has been successful in the past in the industry, with other companies. The phrase “best practices” is often used.|
|Pitches to justify investments are often 5-10 minutes long. The focus is on:
One-on-one interviews with potential customers have validated that there is a problem and customers would consider for a solution.
Minimum Viable Products are piloted until the there’s validation that customers will actually pay for the solution.
Then major investors are made in growth
|Business cases to justify are built, with long and detailed presentations.
Often years pass in building a solution before launching to initial customers.