17 Mar 2016 19:36 IST

How to strategise for start-ups

While it is hard to put a structured strategy for fluid environment, a lack of it can spell doom

Strategising for a start-up has always been challenging. By definition, start-ups begin with a great idea but without adequate resources, no formal systems and processes. The structure is ad-hoc, as few people juggle multiple roles, right from that of a peon to a CEO.

So how do you strategise for such an entity?

For any entrepreneur, tweaking is the mantra — it is the hallmark of a true entrepreneur. They will jump at an opportunity even when they have only 60 to 70 per cent clarity of the big picture. Describing them as thriving in chaos might be stretching it a bit too far — a more apt description would be thriving in uncertainty and ambiguity.

In such a context — where they’re juggling multiple roles and dealing with uncertainties — it is practically impossible to expect them to sit down and put together a strategy making process that is formal and structured. Opportunities come unannounced and formal strategising process is likely to fail in anticipating and leveraging these events.

So what works?

Seizing opportunity is the only mantra with which start-ups work. But does it mean we junk ‘strategising’?

No. It is just that strategising takes a dynamic form, where the broad contours of the value proposition is established, and as one gains customers and experience of the competition and market, one tweaks, modifies and fine-tunes the strategy.

You may argue that it is true about strategising in large, established firms as well. True but the intensity with which the process and progress is tracked and the speed with which decisions are made or modified, is different in a start-up. It is common for start-ups to pivot (move on to a different business model) very early and very quickly in their journey to success.

Even for strategising at the functional level, start-ups are unique in terms of both the content and focus. Sales and promotion take precedence over marketing and branding; scaling is more important than profits; objective for pricing depends on the volume, not margin; finance focuses on cash-flow and not costs; HR’s prioritises finding great talent in a hurry, without being able to offer market remunerations; operations focus on scaling, but with flexibility.

As everything remains fluid and the focus is on establishing quick evidence of success and traction, the entire top management works in a fashion that isn’t conducive to developing systems and processes that will be needed, once the idea succeeds, and the organisation grows.

This transition is very crucial to the sustained success of the firm, and is one of the main reasons why many entrepreneurial firms fail to achieve their potential.

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