We will cross-pollinate what works in strategy for the established for-profit firm with what works in strategy for the major new venture startup seeking to create a lot of wealth. Why do this? It has to do with the key strategy dilemma in each world. From my thirty years of experience, here are the key dilemmas from each world:
The Strategy Dilemma of the Established Firm:
1. The near ubiquitous downward fade in free cash flow over time caused by the “crush of competition” and
2. The ubquitous presence of four kinds of barriers that get in the way of reversing the downward fade. The barriers prevent innovation and other growth initiatives to reverse the downward fade. These barriers (subject matter, process, structure and culture) not only preserve the status quo, they work many times in insidious ways to build a cancer in the organization
The Strategy Dilemma of the Major New Venture Startup:
1. Selling the business idea and business model to enough investors and stakeholders (especially enticing key employees to join the venture) in the quickest amount of time to prevent “holdup”. Holdup causes frustration and perhaps inertia and the possibility (real or percieved) that the idea will be poached. This can breed paranoia and angst that can be debilitating.
2. We actually find that this fear of the idea being poached is typically in the mind of the entreprenuer and is part of the near ubiquitous “paranoia of the entrepreneur”, thus is very much a part of the dilemma. While some ideas are poached, this is not the norm because a well thought out business model is actually very hard to copy in its entirety, certainly in the short to mid term. When the mid-term is past, the entreprenuer had usually already “pivoted” with the next release of the “minimum viable product” anyway. I have experienced these two aspects of this dilemma twice in starting two consulting firms. One was successful the other not due to holdup of not enough funding in the business climate after the tragedy of 9/11.
What if the established firm could take on the entrepreneurial capabilities of the major new venture startup and the major new venture start up could take on more of what gives the established firm a sense of stability and well-being and live life a little easier?
Here are two key questions:
Why can’t the established firm just start acting like the major new venture start up – tomorrow!?
This is very difficult but it can be done. We will explore why and how in this website.
Why can’t the major new venture start-up team begin building stability oriented infrastructure, routines, reporting and control mechanisms – very early and maybe way ahead of what is normally done? Sounds crazy?
I have done this in three major new venture startups as their key advisor and the eventual new owners (all sold out early to much larger firms as a form of exit) paid a premium for each venture because of the early investments “to already look and act like an established firm”. This allowed each venture to be integrated into the new owner much quicker and cheaper than is the norm, thus the purchase price premium. To get a new venture management team to carve out time and money to do this in the midst of the excitement of giving birth to a new winning idea is not the norm.
The possibilities are huge for the cross-pollination of knowledge and new learning from it. We will provide this cross-pollination throughout this website.