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Startups are created to do two things: explore a new idea or exploit an existing concept with new methods. There are possibly three types of startups:

1. Early-stage: The startup is primarily in the survival mode and people are reactive. Processes are not well defined and no clear ownership of tasks.
2. Mid-stage: Work is standardized; the business owner starts working on the business instead of in the business.
3. Late-stage: Centralized information system and data visualization capabilities for future planning are used, with emphasis on both strategic and tactical thinking.

It is a long road to becoming a late-stage startup that can scale effectively. To transition from an early-stage startup to a late-stage startup, several steps are required and need to be explored. This blog may be helpful for business owners who want to evolve their company to sustain competitive advantage and improve market position.

Define and create a strong culture

A startup’s culture is its personality. A startup needs to define its values and principles the same way a person defines his or her core values and principles. Peter Drucker states, “Culture Eats Strategy for Breakfast.” This is true. The startup and its workforce need to share similar values and principles. If the people are not aligned, it may be much harder to implement new processes and strategies. It is important to create strong bonds amongst team members that transcend beyond rewards systems such as wage increases and 4-day work week because there is a possibility the startup is not generating enough cash flow to pay its employees the same competitive wage as large mature organizations. The employees are probably driven by the growth potential, mission, and vision of the company.

Include a defined process

Initially, the primary objective of the business owner(s) may be as follows:

• Acquire enough projects to maintain a stable cash flow
• Execute projects on time and meet quality standards
• Retain current employees
• Ensure strategic alignment

The thought of a collaboration platform or structured process is usually not the main priority because owners are focused on driving sales and executing projects. Excel/Google sheets may be used frequently for planning and execution purposes because they are relatively easy to use and are low cost. However, the spreadsheet may turn into a management system for tracking and managing projects, something Excel and Google sheets may not be built for, resulting in errors, inefficiencies, and poor information flow between business units.

At this point, one of two options are generated:

1. Think short-term – focus on production, develop incremental improvements, and continue with business as usual
2. Think long-term – actively work on streamlining processes and building better information systems

But, there is a third option. The company can blend both short and long-term approaches, by making incremental improvements that ultimately simplify the process, while developing a plan to transition to a more streamlined process. However, this can be risky. A good change and project management system is required to manage the timeline and improvement, else the company settles quickly with the initial win and the process remains unchanged. Without constantly thinking, aligning all forces – people, structure, strategy, process, and rewards – execution stagnates and failure sets in.

Companies sometimes rush into IT systems and team collaboration platforms to help them automate work and capture data. But, technology simply acts as a catalyst to good processes. If there are no stable processes, the IT platform may not be able to reach its full potential and may only be partially used.

Acquire a team collaboration platform and use data visualization tools

After processes are well defined, a team collaboration platform may act as a catalyst to automate workflows, centralize internal communication, and capture organizational data. With information centralized in a standard format, organizational data can be aggregated and analyzed leading to better data-driven business decisions.

Without a centralized system, the company may be doing blind business leading to inefficient operations. Also if the information is decentralized and unstructured, major decisions are possibly left to the intuition and judgment of a few individuals. The business may be setting itself up for huge failures if the decision-making individuals quit. This is due to the knowledge gap between the business owners, the decision-making executives, and the employees.

Sometimes, poor information flow can lead to project milestones getting completed in the wrong sequence, resulting in two major impacts:

• High accounts receivables and accounts receivables days: In many cases, clients may pay a small upfront fee for a project and make subsequent payments upon the completion of milestones. If team members are only relying on emails and spreadsheets to communicate information, milestones may not get completed in the right sequence to collect payments, or critical details are missed while completing milestones, leading to rework, which leads to delayed payments, which in turn leads to a cash flow crunch.
• Low customer satisfaction and referral rate: Project delays and rework due to inefficiencies may cause customer dissatisfaction. Low customer satisfaction leads to reduced repeat customers and customer referrals. Low customer referrals and increased customer churn rate reduce sales, further compounding the cash flow problem.

There are several low initial investment plug-and-play team collaboration platforms in the market such as Monday.com, Asana, Basecamp, Avaza, etc that are easy to configure and do not require a high upfront investment. The transition from decentralized to centralized can take time, since employees are still used to spreadsheets and emails for communication. Based on my experience the transition can easily take up to a year and requires constant reminders.

Low-cost team collaboration platforms are good at capturing information, but may lack good data visualization capabilities. Tools such as Google Data Studio, PowerBI, and Tableau can take the company a long way. The reports from team collaboration platforms can be exported in a CSV format or connected to a Google sheet via Application Programming Interfaces (API), which do not require high IT investments. With the data visualization tools integrated with the team collaboration platform, the company spots trends in business development and project execution, which should help the management plan for the future and allocate resources more efficiently.

What’s next?

If all the above-mentioned steps are completed, the company may transform from a startup thinking only for survival to a mature startup with high integration looking months into the future for sustainability. The company may also start building organizational data assets in the form of standard operating procedures, flow charts, and data collected from the collaboration platform. The organizational assets could increase the company’s valuation if the business owner(s) plan to sell the company.

The business owner(s) should now work on the company instead of in the company and think more about ongoing strategic alignment and intent.

Authors: Pranav Modak & Frank Otabor

Disclaimer: The contents of this blog are based on our professional experience working with companies that were transformed from a reactive survival mode to a proactive strategic mode. Contents shared here are not facts, but opinions.