Evolution of a Tech Startup

Observations about New Ventures

We've seen technology start-ups evolve from a few people, when the idea is formed, to a larger group... and the subsequent loss of focus when this happens. The “focus-loss” translates into delayed market entry, which in many cases results in the loss of funding, and eventually causes the business to fail. I’ll also talk about ways to avoid this loss of focus.

New ventures typically start with a few people and an idea. Driven by a deep belief that they understand how they can solve a problem. They know what customers want and when they want it. In this small configuration the team can accelerate development since there is a shared sense of urgency and focus on a common goal.

Over time the goal can change as technology, market and competitive forces never stay still. The target is always moving, yet the entry window remains fixed. The engineering prototype created by this focused group of people enables the next round of funding to be secured, which in turn funds the growing team. The target keeps changing too, yet there is still maximum excitement about the future of what is clearly going to be a successful venture.

The new people bring new skills. They also bring the “baggage” from all of their other corporate experiences. “At IBM we did it this way, at Intel we did that way, at Apple we would always do the opposite of IBM and Intel” and so on. People debate processes at the expense of hard deliverables in the development cycle. The founders, usually still focused, have little time to spend aligning all the new people towards the goal, so each tends to develop their own interpretation of the mission, based on their own perspective, history, and the “baggage” they bring with them. Left unchecked, the system will tend to disorder. Confusion is exacerbated by the ever moving target and continued pressure from investors.

At some point the founders start to drift from the goal too, as the complexities of development and the realities of daily “people management” cause more “head-down” behavior. The detail tends to overwhelm. The schedule starts to slip. This is the most unstable-state and money is also running out. The push is on to validate the product with real customers in order to raise the next round of funding.

Solution... abandon the project structure, default back to a “known norm,” which is the hierarchical organizational structure. “It worked in the big company I used to work at” so they rationalize, “so it should work here in this little one.” “Lets make some VPs and directors and create some structure,” they say. This usually starts in Engineering and spreads to create the classic functional silos like marketing, operations, finance, and so on. The focus becomes departmental goals, loosing sight of the customer and the product in the process.

With this more “comfortable” hierarchy comes vertical communication and vertical information flow. Horizontal or lateral communication is discouraged. Information flows up the hierarchy before it can flow across the functional silos and back down to the people that need it. Order is restored at the expense of speed. The target slips further past the market window that makes this technology a viable competitor. But since the emphasis is internal, most are not even aware of the external world now...Customer “who?” Investors express concern as committed target dates are missed and the burn rate accelerates.

The fast-time-to-market (FTTM) solution we’ve deployed at this stage is a “reset” back to the project or product structure, back to a lateral process orientation and away from the vertical hierarchy. Based on our best practice research over a 20 year period with fast teams, it is proven time and again, that this approach results in accelerated development and customer-focused behavior. We call this getting the right-product at the right-time. We organize these “people clusters” around customer-focused milestones, which by definition are cross-functional integration points in the development cycle. Better integration translates to saved time as future rework cycles are eliminated. We tend to leave the hierarchy-structure in place when we do this though, since this is the traditional comfort zone for people. Everyone keeps their titles! In the future, as the company matures with multiple products they will need the hierarchy again. The project structure is sold as a “temporary” fix.

This lateral focus around cross-functional points of integration accelerates the schedule. Communication is fast and efficient. The backbone of the communication system is the integrated and “realistic” schedule. This is the score card. It records slips and pull-ins. It provides the trending information that is needed to take before-the-fact actions, rather than after things have already slipped. It is the glue that holds the team together, especially when people are geographically dispersed.