The Structure and Culture of your Startup

Understanding and adapting your organization’s structure
(Post 2)

This chapter will begin our focus on one of the four areas that are critical to the success of your startup venture: the structure and culture of the venture itself. Part of this organization is the design of the team (team members, roles, decision making process) and part is the infrastructure of the corporate entity (an LLC, a subsidiary of a larger organization, among many options). But many start up organizations, regardless of industry, size, and experience of leadership, seem to exhibit many of the same characteristics, behaviors, and constraints, and this chapter will delve into these commonalities, and how they may be affecting the forward motion toward meeting your startup’s goals.

Arc Completa’s Critical to Function Key Factors

Most startups have a set of attributes in common, some of which tend to favor progress (“Moving Forward”), and some of which tend to have the opposite effect on progress (“Holding Back”). Notice I don’t use positives and negatives because these are absolute terms. If we start getting comfortable this early with absolute states when talking about startups, we are already feeding into one of the mistaken paradigms that plague many start up leaders: believing you know the answers, without the doing the work to prove the answer is correct. Part of this journey will be to know and accept that you don’t have all the answers, but you have the confidence, insights, skills, and the team to find them.

What Moves Startups Forward

  • “Green Field” in many ways

    Many startups are working on a new project or creating a new system, where there is no legacy system in place to work around.

  • No Dogma, Intractable Culture, or Inertia

    Some of the things that slow progress in an established organization – historical limitations or cultural habits of the workforce – tend to be absent in a startup.

  • Maverick and high output producers

    Most startup workforce members are risk takers, willing to think outside the box, highly productive and motivated.

  • Desire for Profit and urgency are present

    Team members are on the same page and working together to find profitability as quickly as possible.

  • Inexperienced workforce that can be firmly molded

    This risk-taking workforce is sometimes younger and/or less experienced, with fewer bad habits and/or attitudes that may slow down progress.

  • Fast Moving

    The technologies and work tend to move forward quickly.

  • High Return Potential from investment

    If you’re first to Market and Profitability, significant profits and long term sustainability are possible via a purchase or Initial Public [stock] Offering (IPO).

What can Hold Startups Back

  • Many Degrees of Freedom and Unknown Risks

    Defining a new market segment or disruptive technology can be difficult – too many options, with the potential to define a challenge that is unrealistically large or intractable.

  • Relying on research methods instead of commercial methods

    The leap to commercialization can be deadly. The technology that worked flawlessly on the lab bench has a whole new set of challenges when trying to grow, increase stability, reduce costs, and meet the other challenges that going to market introduces.

  • The “Entrepreneurial Myth” can defocus resources and hurt a company’s potential

    Startups may be young, small, and agile, but small companies, particularly startups, neglect the organization and system norms of larger companies rely on, often stating “…we don’t need big company methods to hold us back”.

    Basic organizational structure, design processes, structured problem solving, and effective communication around expectations and desired outcomes can be seen as unnecessary big-company bulk, but their absence can be even more costly.

  • Founder-itis, or the outsized impact of the founder

    The strong personality and confidence often found in an entrepreneur or innovator can be a liability for taking a startup to the next phase of growth. “Founder-itis” or the founders’ dominant behavior can compound the Entrepreneurial Myth with lack of formal training. In addition, there can be a temptation to keep the founder in a top level leadership position even when the requirements of the organization change.

  • Startup leaders often lack of formal leadership training, coaching and suitable mentorships

    Many startups do not value basic leadership and management methods. Often siloed decision making, where decisions and goals are not communicated well across groups, can dampen creativity and eliminate possible solutions. Time and resources are limited, making formal decision making processes and communication seem like secondary requirements (but they are not!).

  • Losing sight of primary Goal

    Once the venture is founded and the goals of moving forward are established, the prime directive is not making the new technology or invention better (“technology for technology’s sake”), but rather, commercializing Products or Services, and establishing a market and demand for them.

    Achieving an exit, maybe a purchase or IPO, while delivering a satisfactory return for investors and company employees, is the new goal for everyone on the team.

  • Lack of appropriate guidance and understanding from investors

    Investors to a new venture are often ignorant of the actual market requirements or lack experience to guide the startup. If this is the case, founders cannot effectively communicate status and risks to the board of directors and investors. The founders may fear delivering bad news, instead feeling confident in delivering structured and accurate progress reports. The startup community may lack the experience to “Train” the Board of Directors on what to expect.

  • Using old methods to solve problems when new innovation is required

    Team members may do basic research or a literature search to solve problems that come up based on previous job experiences. Using tried-and-true methods can be helpful, but does not always apply to emerging technology to solve their problems. A new and innovative approach may be better suited to solving problems.

  • But also: the risk of “Not Invented Here” bias

    There are times when new and innovative approaches may be merited. But it is also important to reuse, borrow, outsource methods and solutions if there is a reliable, tested, established precedent that can fit into your process.

  • Low or no Consistent Production Quantities

    Sometimes, with limited resources and time, teams tend to build a minimal quantity of test or pre-production goods. But this may mask issues that may arise when building a larger quantity. A larger company would use a higher yield production to increase understanding of critical requirements and build product knowledge. Can you build enough products to demonstrate performance?

  • Discounting the value of early production builds

    Each build or production run is the right time to create collective knowledge base, but infrastructure is often absent and unable to collect critical data and to make decisions. Every build counts; from the earliest production runs, detailed data is key.

  • Failing to understand what the total commercialization potential might be

    When a startup is so focused on one solution, they can miss other opportunities that might be more easily attained commercially. Use contacts in other industries or market segments to consider other commercialization potential.

  • Poor capital usage and estimates

    The fear of asking for “too much” and underestimating the complexity and cost of the tasks at hand, the initial capital request is insufficient. Not only does that put the venture at risk of running out of funding, but this can affect credibility and cause the board of directors to question future requests. Be realistic, even generous, with time and resource estimates.

In this first chapter I discussed some thoughts about the nature of a startup, some constraints, and behaviors. In later chapters I will discuss some thoughts and questions raised by the Moving Forward and Holding Back topics, and how a startup might tackle these quantitative and qualitative, cultural, and behavioral challenges. But addressing some foundational areas discussed in the next few chapters is more urgent.

So why do so many people want to create a Startup?

So why do so many people endeavor and launch startups? The risks are significant but the potential upside is unmatched - the sense of accomplishment, the ability to change an industry or change the world, the financial reward. As a startup executive, it was the best work experience of my long career, with some of the most brilliant, innovative, and dedicated people I’ve ever hired and worked with.

Why do companies want startups to succeed? Larger companies look at startup acquisition as a way to avoid risky technology development investment, by buying aligned products already developed. Contract manufacturers need startups as well. Why? As my friend Dr. Teera Achariyapaopan, the previous COO of Fabrinet, Ltd,. and now the founder and CEO of Focuz Manufacturing (http://www.focuz-mfg.com/) explained, “while larger customers might grow 2-3% a year in sales, a successful startup could add a 10% increase to our sales in sales in 1 year.”

In this first chapter I discussed some thoughts about the nature of a startup, some constraints, and behaviors. In later chapters I will discuss some thoughts and questions raised by the Moving Forward and Holding Back topics, and how a startup might tackle these quantitative and qualitative, cultural, and behavioral challenges. But addressing some foundational areas discussed in the next few chapters is more.