A couple years ago one couldn’t walk past a book store without being assaulted by a giant display for pop psychology book-du-jour, The Secret. The book and the movement it spawned has its share of ardent fans and detractors alike, so I am not about to wade into that heated debate. However, a centerpiece of the book’s premise, if I recall, was the notion that positive outcomes are manifested in some way. This is not to say that one’s path to Mercedes S-class ownership is simply to will it into appearing magically in your driveway, pink slip in the glovebox, through intense visualization; rather, the notion is that dwelling disproportionately on problems and obstacles tends to manifest problems and obstacles while focusing on solutions can bring about the kind of thinking and resources that solutions require. If one can put aside some of the gauzy new-age background music to a lot of that, the idea does have merit.
There is a convenient corollary to this idea in the start-up world as well. Almost by definition, start-up endeavors are required to focus on being extremely efficient with capital and resources. As I pointed out in my recent post, Building a Team? Think like a Chef, there is never enough time nor resources to do things optimally, so improvisation becomes the order of the day. This is not altogether a bad thing. Indeed, the management teams of many leading companies often credit what they learned during the lean times with teaching them the fortitude, persistence and efficiencies that helped them become the market leaders that they are today. Correspondingly, there are countless stories of companies that raised enormous sums too easily during the dot-com era, blew their seed capital on Superbowl ads and foosball tables, and were unable to right the ship when the market shifted dramatically toward capital efficiency and resourcefulness.
However, as we begin to see the proverbial ‘green shoots’ in our broader economy, the question that will become increasingly relevant is how an organization so focused on cost-cutting and economizing for so long can begin to grow again and think like a market leader. As management consultants have loved to say, ‘organizations cannot cut their way to growth.‘
Legacy cost of a Starvation Mentality. A challenge I am seeing in a number of my portfolio companies is how to change the thinking of an organization to no longer be in starvation and survival mode. In a sense, companies that have been operating on fumes for long periods can become “institutionalized” to those ways of thinking to such an extent that they can’t operate any differently. This can actually present serious issues. To grow a company needs to leverage resources and that can mean hiring outside professionals to support certain functions that the company had previously been doing on its own to save money. It’s important for management teams to wear many hats, but wearing too many hats is sub-optimal. I’ve seen teams spend an entire week on a task that would have taken an outside professional an afternoon to accomplish. A good venture investor and/or board member needs to have the insight and experience to point out these inefficiencies. This is sometimes contradictory for a start-up management team, especially in the current environment when so many venture investors and board members have been pounding on the proverbial table for the past year urging their companies to save, save, save. The mixed message can be unnerving.
Shifting from A Starvation Mentality. No doubt, this current downturn will take with it many start-ups still clinging to life. However, for those companies fortunate enough to make it through this rocky patch and still be standing once the smoke clears, there will be a great deal of opportunity to build significant businesses in markets that are still fairly wide open. What will be critical is that a team adjust its thinking away from a survival and starvation mindset toward one geared for growth and toward seizing market share. Companies will need to loosen the purse strings quickly to add resources and grow their teams. Companies that take too long to make that adjustment will be at a significant disadvantage.
You’re a market leader. Act like it. A second challenge for a company that survives this downturn will to adopt the notion that it is a market leader and to start acting like it. In truth, many of these surviving companies will be market leaders because there will be no one left in their space. Making this change in thinking is easier said than done, however. Companies that survive will likely have gone through their own catharsis—rounds of layoffs, product launch delays, infighting, etc. This can have a heavy impact on morale. Once a company has gone through the fallout of a downsizing, it’s difficult to shrug it off and exude confidence. Cherished co-workers are gone, offices have been shuttered or reduced in size, friendships have been frayed.
In summary, getting through a downturn is obviously what is foremost in every start-up CEO’s mind. However, it’s important that it not overtake all planning and thinking of what lies beyond the downturn and how to grow again. That will require a shift in attitudes and beliefs. Adopting a post-downturn mentality should start right away. That shift can start by tearing a page out of the pop psychology canon and embracing a self-image of success, not simply survival.