Don’t Do a Startup, Architect a Business!
Prepare for the Unexpected
Qflicks, a movie delivery platform I founded in 2002, came out of the gate flying. We were adding more customers in 3 months than our business plan had forecasted in 15. The year or so of planning, coding and putting into practice what I’d learnt whilst helping to start and build divisions of three multinationals and two venture-backed startups was paying off.
We had validated the idea, product market fit, business model, and assembled the core team. Now our focus was scaling the business—and we were on a roll. We had seen off Netflix’s initial attempt to enter the UK and Blockbuster was in the denial death-spiral. Our team was delighting customers and winning awards: “Innovative Company of the Year”, Top Web Company” – it felt like nothing could stop us.
Then lightning struck. Letters arrived from all movie studios informing us that, while they welcomed our success effective immediately price of movies (our big cost) will increase by up to 2000%. We lived to fight another day, eventually becoming part of what is now Amazon Video. However, this unexpected development radically altered the online movie service landscape, impacted our ability to scale and changed the direction of our nascent company. The ‘Pivot’ as we call it today.
It was, however, a teachable moment – particularly how uncertainty, the unexpected and seemingly non-scaling related decisions, made very early on, can impact even a successful business during the scaling-stage.
As a result, I make sure that the young ventures we work with are built to thrive in uncertainty and prepared for unexpected developments from day one.
Here are a few takeaways….
The Corridor of Uncertainty
Peter Thiel once said, “Every moment in the history of new true innovation business happens only once, no one has ever made that particular decision before”.
A business is made up of thousands of these decisions. As the leader, each one you make will be a unique combination of art and science and takes real insight and skill to get right. It’s what I call operating in the Corridor of Uncertainty, and many non-obvious scaling risks may be associated with even the smallest misstep. We hear a lot about technical, financial and operations scaling decisions but many do not fit neatly into these categories and could prove fatal during your growth execution stage.
Qflicks survived this unexpected development, because of what we got right. However, it also exposed a number of flaws in earlier decisions. Some investors we had chosen turned out to lack the courage and ability to perform in the pressurised environment of uncertainty and rapid change. They soon panicked, became obsessed with ‘managing cost and their investment’ over what Qflicks could achieve and become. Key advisors went missing in action, not able to dedicate enough quality time. The amount of money we had raised was not sufficient to weather the storm. Although we nailed customer validations, the partnership analysis was less insightful in identifying the conclusions implicit in what the studio CEOs were saying – we placed too much emphasis on qualitative over quantitive analysis. Signs were there, but we saw the studios as partners with mutual financial gain. They bought into the part of our plan that said, “kill Blockbuster” except they wanted the resulting landscape for themselves.
Kill the Business Plan
The prevailing wisdom, among investors and former corporate executives, is the idea that writing a startup business plan and then slavishly following it is key. While it may serve as a useful tool in boardrooms to measure success or failure, business plans are pretty useless in helping you go from idea to market-fit to company to business. Writing a business plan and sticking rigidly to it is often one of the impediments to scaling a business. Why? Well, it goes back to that Corridor of Uncertainty how can you predict the unpredictable it’s impossible right, so stop trying, kick the business plan into the trash bin.
Instead, we help startups build frameworks that last the duration and flex to accommodate the needs of the business.
Don’t Do a Startup, Architect a Business!
Through Qflicks we learnt the fundamental mistake of ‘doing a startup’ in which we focused on lots of tasks to be done, the usual stuff; business plan, proof of concept, market research, engage advisors, raise funding to name a few. We soon realised that we should instead have been architecting a business with each of these being connected, agile building blocks towards our success. The goal being, a ‘Learning Structure’ able to swiftly and seamlessly adapt to doing what’s most impactful for the business instead of what was written down 18 months before.
Many stages and decisions lies between idea and execution scaling and as markets go from ‘speed of the web’ to the fast-changing velocity of smart-mobility nothing is certain. Innovators have rarely been able to reliably predict where their business would ultimately go but in this new environment, it becomes impossible. Replacing industrial age thinking and structures such as the business plan with curiosity, agility, trust and a business architected for uncertainty, able to learn and adapt to the unexpected requires courage and insightful leadership. Having insight when analysing data and identifying the conclusions implicit in what your team, the market and competitors have to say is the key to leading a new business to success.