Keeping a Cash-Starved Start-Up on Track

In a start-up, there’s always too much to do and not enough time or money to do it. There are never enough people to fix what’s broken and never enough resources to develop the next strategic phase. For the first 12 months of Posse, I felt as if I was swimming as hard as I could, trying to avoid drowning. But I knew that if we were going to succeed I had to develop a rhythm to our development.

Then I read an article in the Harvard Business Review about the “closed management loop.” Briefly, here’s the loop: Strategize, develop targets, plan operations, carry out, monitor, learn, test and start all over again. The article suggests that companies go through the process, which you can find in any systems development textbook (although the texts disagree on details). I’m sure the one-year cycle works for big companies with resources, but I wondered if it could be modified for cash-starved start-ups so they can learn faster.

We needed to run and test our strategy at regular intervals. We all work around the clock, and with so many competing priorities, I had to bring order to the chaos to maintain focus and measure our progress. I introduced the concept of closed-loop management systems at our team off site last year, and since then we’ve spun through a strategy iteration cycle every four months.

We start the cycle with an off-site meeting of the full team. We all go to a beach house for a few days to discuss what we’ve learned from the last few months, what concerns we have and what ideas we can bring to improving our strategy. We look at what our competitors are doing, reviewing the ideas they have that work and the features that distinguish our product from theirs. Within each cycle, we have four monthly development and marketing “sprints” — a defined list of work for the month that we commit to completing. If we all reach our goals, we go out to lunch to celebrate at the end of the month. No one wants to let down the team.

Now, as I write it down, the system sounds more formal than it feels. The benefits are that we all agree on a clear path from strategy through plan to execution, and we can focus on this plan for a set period, knowing that it may change in the next cycle. We also recognize that success will ultimately come from advancing through the process, not necessarily by having a perfect strategy every time. The goal is to sustain enthusiasm when people are working hard, often late at night and on weekends, to release a product they will probably have to redo repeatedly until it’s right.

Followers of Lean Startup methodology will recognize this principle as the “feedback loop.” It makes sense, but is very hard to execute. Those who have been reading my posts will know that I’m no expert, and I’m still learning as I go, but here are a few things I’ve figured out about making the feedback loop spin effectively.

1. Get the team to buy into the process

I take our team away for a few days every four months in between cycles. This creates a clear end to one phase and starts the next one. It gives everyone a chance to reflect on progress, feel good about our achievements, review our metrics, dream up ideas, ramp up for the next cycle and bond as a team. Two weeks ago, I took our team of nine to the country for three days, and the whole exercise cost just over $2,000. We rented a house and we cooked and shopped together for groceries and drinks. We played board games until late at night, rode horses on the last day and returned bubbling with ideas.

2. Listen to everyone and take time to think

As a founder, I’m naturally optimistic and believe we’re building a successful company. I’ve learned to balance this optimism by testing our ideas with users — not just the big ones but every feature. For a technology company like Posse, this means making mock-ups of designs through which people can click. How do they see a new feature working, and what would they use it for? I also have a number of advisers, and I discuss all of our plans with them — looking especially for pessimists who can pick holes in my strategy. The process can be painful, and at first, I felt it was unnecessary, because I was so sure of being on the right track. Now I always discover insights that lead to better approaches.

After I’ve listened to as many people as possible, I sneak away and spend time thinking by myself. This may entail an overseas trip by myself, or a series of walks. It feels as though everyone’s ideas float around in my head for a while, and the change of scenery helps catalyze a logical path. Through this process, I build a strategy. Then I take it back to the team and test the ideas. If the strategy is good, everyone gets excited; if it’s bad, everyone argues, and I know it needs work.

3. Face problems head on

One of my mentors in the music business gave me a great piece of advice: “If you think there’s a problem, there’s a problem.” As an entrepreneur, you live and breathe the company and can sense when something isn’t working. When we first introduced our retail application, we were successful at selling it to shops, but I sensed it wouldn’t resonate with shoppers. Knowing we needed both shops and shoppers on the platform for Posse to be successful, we ran a few tests that indicated I was right. We restarted the development process, spent three months redesigning the strategy and introduced our new product. As a result, we succeeded in showing some traction before the money ran out. Many start-ups that I’ve seen fail knew of the fatal flaw that killed them long before they died.

4. Move fast

With limited time and resources, we have only a certain number of spins to fix the product. We’re not quite there ourselves, although our user engagement metrics suggest that we’re getting closer. Our chances of success rise as we accelerate the execution and testing of a new product.

5. Be disciplined

It’s natural to react to every small problem, fix every bug and make countless incremental improvements. That’s what we did last year, and weeks passed without any major advances. As a team, we’ve learned to focus on fixing the big things rather than making sure everything is perfect.

We’re at the start of another four-month loop now. Our strategy has fermented for the last month and was uncorked at our latest off site. This week, we’ll break the work down into four monthly sprints. Our two main objectives are to build our user base and to get our shop owners more engaged. In four months, we will assess what worked and what didn’t and set our new objectives — and then we will start all over again.

 

CATEGORY: Leadership, Strategy

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