As companies grow, it becomes increasingly important to build an organization that can execute in multiple areas simultaneously. I'd like to talk about a technique I've used to help manage this growth without slowing down.
This technique rests on three things: identifying the kinds of work that need to get done, creating the right type of teams for each kind, and steering the company by allocating resources among them. For this analysis, I am heavily indebted to Geoff Moore, who laid out the theoretical underpinnings of this approach (and describes how to use it for companies of all sizes and scales) in Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution.
Four kinds of work
- Innovation / R&D - this is what all startups do in their earliest stages. Seeing what's possible. Playing with new technologies. Building and testing prototypes. Talking to potential customers and competitors' customers. In this kind of work, it's hard to predict when things will be done, what impact they will have, and whether you're making progress. Managers in this area have to take a portfolio approach, promoting ideas that work and might make good candidates for further investment. The ideal R&D team is a small skunkworks that is off the radar of most people in the company. A "startup within the startup" feeling is a good thing.
- Strategy - startups first encounter this when they have the beginnings of a product, and they've achieved some amount of product/market fit. Now it's time to start to think seriously about how to find a repeatable and scalable sales process, how to position and market the product, and how to build a product development team that can turn an early product into a Whole Product. As the company grows, this kind of work generalizes into "executing the company's current strategy." Usually, that will be about finding new segments of customers that the company can profitably serve. It's decidedly not about making incremental improvements for current customers - that's a different kind of work altogether. This kind of work requires the most cross-functional of teams, because it draws on the resources of the whole company. And although schedules and prediction are difficult here, they are critical. It's essential to know if the strategy is fundamentally working or failing, so the company can chart its course accordingly.
Your strategy might be wrong; might take a long time to pay off; might even pay off in completely unexpected ways, which is why it is unwise to devote 100% of your resources to your current strategy. If you invest in strategy at the expense of innovation, you risk being unprepared for the next strategy (or of achieving tunnel-vision in which everyone drinks the Kool-Aid). If you invest in strategy at the expense of growth, you can starve yourself of the resources you need to implement the strategy. And if you neglect maintenance, you may not have a business left at all.
- Growth - when you have existing customers, the pressure is on to grow your key metrics day-in day-out. If you're making revenue, you should be finding ways to grow it predictably month-over-month; if you're focused on customer engagement, your product should be getting more sticky, and so on. Some companies and founders refuse to serve existing customers, and are always lurching from one great idea to the next. Others focus exclusively on incremental growth, and can never find the time or resources for strategy. Either extreme can be fatal. This kind of work is where schedules, milestones, and accurate estimates thrive. Since the work is building on knowledge and systems built in the past, it's much more likely to get done on-time, on-budget, and to have a predictable effect on the business. Growth work calls for relentless executors, who know how to get things done.
- Maintenance and scalability - "keeping the lights on" gets harder and harder as companies grow. Yet the great companies manage to handle growth while keeping the resources dedicated to maintenance and scalability mostly fixed. That means they are continuously getting better and better at automating and driving out waste. Continuous improvement here frees up time and energy for the parts of the company that find new ways to make money. Often a company's unsung heroes are doing this kind of work: invisible when doing a good job, all-too-visible when something goes wrong. These teams tend to be incredibly schedule and process-centric, with detailed procedures for anything that might happen.
We'll talk about those problems in detail in part two.