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.