Does Strategy Need Innovating? A primer on Lean Strategy for Startups

Several months ago I set up my own business to work with startups, forward thinking small businesses and social enterprises seeking to scale and grow. I wanted to bring the useful elements of my ten years experience as a corporate management consultant to new ventures.

I hold a strong view that there is a lot that the corporate world can learn from startups, but that there is also a lot that startups can learn from the corporate world, particularly when it comes to scaling. These two worlds are constructively colliding at the moment and I’m fascinated to see where it is going to take us.

A few observations on strategy in the startup world

With a background in strategy consulting, my attention quickly turned to how startups approach business strategy. It didn’t take me long to realise that this topic is not really discussed. Since the dawn of management thinking, thought leaders have justified their existence through its study and eminent businesses have existed to help clients formulate and execute it. Yet in the startup world strategy is given very little attention. I decided to undertake a bit of research. My methodology was admittedly crude, but strategy is all about hypothesising!

Googling ‘strategy for startups’ returned a page of results dominated by articles on sales strategy, branding, marketing and advertising strategy, content strategy, IT strategy and exit strategy. All are important elements of an overarching business strategy but none of them will alone lead to business success.

With further searching, only two articles really stood out on the subject of business strategy for startups. The first is a blog post by the VC Fred Wilson. Encouraging all startups to make sure that they have a strategy, he provides intellectual definitions of what strategy really is and encourages readers to distinguish between strategy and tactics (a very common pitfall). The second post by Uzi Shmilovici, is more practically-focused. With a focus on disruption and the work of Clayton Christensen, he explains how startups should choose intelligent and specific tactics that support their overall strategy (another very common pitfall).

In the opening pages of The Lean Startup, Eric Ries sets the tone for lean startup success: a trifecta of vision, strategy and product. I was encouraged then that strategy is considered an important determinant. Turning to the book’s index though I found that only 2 pages are devoted to strategy as a concept. That’s not a criticism of The Lean Startup, the book provides a fantastic framework for legions of entrepreneurs across the globe and does not sell itself as a discourse on business strategy. But it’s interesting that little discussion is given to what strategy actually is. I use this example then only to set the tone for opening up further discussion, so that founders may be assisted further in their strategic thinking.

Don’t believe me? The importance of strategy for startups

Amusingly, Uzi Shmilovici probably answers my earlier about why strategy is not really discussed in the startup world. As he correctly points out “unfortunately, it suffers from a bad reputation among startups. It is associated with consultants who are paid millions of dollars only to come back with a two-by-two matrix of animals”. As far a perception goes, I concede that to be a fair point! Despite this, he is clear that “strategy is crucial for startup success. Startups usually operate in an environment of constrained resources while competing with strong incumbents. Hence, the right strategy can be a matter of life and death”.

And Fred Wilson succinctly states “don’t think you are going to win in business with a better product, more capital, or a bigger team…The winner in a market most often has the best strategy and executes it well”. I’m encouraged that such eminent VCs are pushing forward such points.

An Introduction to Lean Strategy for Startups

The business world is evolving at a rapid pace but the essence of good strategic thinking, a discipline which predates the birth of Jesus Christ, remains largely unchanged in my humble opinion. The ability of humans to take logical and structured approaches towards solving challenges of any kind would appear to be something that is rooted in our basic nature and behaviours.

The financial crisis, combined with more recent disruptive technologies, have led some to comment that ‘strategy is dead’. For me this is a huge over-exaggeration and an effort to sensationalise a debate. Strategy is not dead, we just need to reframe how we think about and approach it. In accordance with lean thinking, and the recent writings of individuals like Rita McGrath, what can be said to have changed is the pace at which strategy must be formulated and executed.

And that has some fascinating implications for startups. In my next post I go into more detail about how more traditional thinking on the subject of strategy might be aligned with modern startup approaches. Call it lean strategy for startups if you will. Principally I’ll explore:

• The bit that most people get wrong… what strategy really is in the first place. It’s not to be confused with objectives and methodologies / frameworks;
• The need, in any business, to consider strategy in a holistic and overarching way – a solid business strategy represents a strategic top layer that guides all aspects of your business, and it is not solely product focused; and
• What is meant by lean strategy for startups. We’ll see that a critical component of strategy for startups and new ventures relates to the pace at which it must be formulated, executed and revised.

image credit: pixelmepink.com

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Richard Hughes-Jones is an experienced management consultant, having spent most of his career with Deloitte UK and working in a senior management role for Her Majesty’s Treasury. He now works with high growth businesses, bringing strategic business thinking to support sustainable growth. Richard blogs about a range of business issues at FireLDN and is on Twitter @FireLDN