Tuesday, August 20, 2019

New INC. Magazine Blog Post by Kaplan Institute Exec Howard Tullman

There's a Reason the Tortoise Wins
Startups are under tremendous pressure to scale quickly. But it's an overused and potentially dangerous strategy. Stretching your territory is pointless if you can't take care of the customers you already have.

Executive director, Ed Kaplan Family Institute for Innovation and Tech Entrepreneurship, Illinois Institute of Technology

We've all heard the story about the tortoise and the hare a million times but the basic lesson-- that slow and steady progress wins the race in the long run-- is still remarkably relevant and applicable to businesses of all sizes and shapes.  

And it's especially relevant to startups. Slow and steady sounds a little old-fashioned and even a bit boring and it's rarely something that you'll hear any West Coast VC say -- particularly when the topic on the table is how quickly to blitzscale the company.  But it's something that the very best entrepreneurs always take to heart and keep top of mind. Rushing to roll out your business nationwide (and being a mile wide and an inch deep) may make the venture folks in the board room happy, but it's bad for your business if you aren't ready.

Scaling is the seductive but double-edged distribution sword of the web. Being accessible everywhere at once, virtually overnight, is super easy.  Serving and supporting all these onesie customers spread around the world is unbelievably difficult and costly. The smartest entrepreneurs hunker down and master their craft and their basic business economics before they race around the country trying to one-up the competition. They've figured out that you've got to nail it before you can scale it. Focusing on deep penetration and stronger connections to (and results for) bell-cow customers creates the kind of solid foundation that will survive the roll-out bumps and sustain the base business when those key commitments and critical milestones take far longer (as they are wont to do) than anyone expected. Doing a lot of different things and chasing too many rabbits is not the same as getting the right things done right.

One of the most common mistakes that young entrepreneurs make is to fail to appreciate that most markets are at least two-sided. That is, you've got to be certain that you've properly aligned supply and demand before you move into a new market. Your customers may be demanding that you rapidly expand and assuring you of their undying support in the next town. But just watch their excitement and interest disappear overnight if they discover that you can't deliver, and they end up with egg on their faces because they vouched for your expansion capabilities. Adding customers in new markets without first putting in place the required resources, facilities, inventory and other kinds of critical infrastructure is an easy trip to the toilet. It's like the busted-out guy who takes an Uber to Bankruptcy Court and then invites the Uber driver into the proceedings as a creditor.

Similarly, it's way too easy as the new guy on the block to be sucked in by a large customer and bet large on substantial expansion without the certainty that the major player will stick around. The big guys are big for good reasons. They're tougher and smarter and more demanding and, in most cases, they're also the best business brains. What you can learn from them and what they can help you accomplish is priceless. If you can lock these folks in and deliver the right results for them, there's no better place to be and no easier way to scale. But they drive really hard bargains and they're absolutely bloodless and will cut you off at the knees in a second if they see a better opportunity or, frankly, if senior management just changes their mind. They're not long on loyalty. It's much better to get a pet if you're really looking for love.

And speaking of love, as you start to scale and soar, you need to be very careful not to leave your early adopters and beginning boosters behind. They were there for you when the whole thing got started and - especially in large organizations - they're critical references, foundational supporters, and concrete proof that your product or service is sticky. Make sure you give them the attention, the care, and the ammunition to prove that they made a smart choice in selecting you initially and that it's still the right choice today. Tracking improvements in same-store sales is the best and easiest way to measure stickiness and also the best way to keep score, especially when those critical numbers keep ticking up year over year in your oldest markets. This is critical to measure because, if the older customers lose interest or connection and they're leaking out the back door, it doesn't matter how well you're doing in terms of acquiring new customers at the front end of the funnel. 

Good business isn't usually about beating the other guys. There will always be new and different competitors and there will always be people pitching cheaper and even better solutions. Chasing someone else or trying to quickly copy their plans and trying to outshine them assumes that they know what they're doing and are a lot smarter than you. I don't think there's any good reason to believe that. Sustainable businesses create real, demonstrable value for clients and customers. They keep upping the ante, and they consistently deliver proof of the pudding. No one new gets to rest on their laurels or their past performance even if they have a track record to point to which most startups don't have.

Customers' expectations are progressive and, as you grow, everyone in your business needs to have the same attitude and objective. It's NOT about how fast you're going (of course, you should never slow down); it's about how fast you're getting faster and better. It's all about acceleration, not simply velocity. And it's about innovative techniques and technologies rather than tonnage as well. Precision trumps volume. Your pitches, programs and proposals must be better, not just longer or louder. This discipline of "always trying to be a better you" needs to be a central part of your company's culture and embedded in the ways that you do business, whether you're selling products or services - widgets or wisdom - or whatever. 

Having a great product isn't enough. Because no one sells just a product these days. We're all in service businesses trying to secure not a single sale, but to grab and hang on to the lifetime value of each customer. Creating a business that will last is about building long-term relationships and compounding customer trust. Connection and continuing engagement coupled with constant improvement and innovation are what keeps you in the game.

Startups don't have an established following or a brand that customers can default to as a way of overcoming the decision fatigue that plagues us in a world of infinite choices. Startups make a future promise and then it's directly on them to deliver on their commitments and to keep raising the bar. Your business's job is to earn and retain my loyalty. Loyalty today means nothing more than the absence of a better alternative.

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