How to Keep Your Best People When Evolving From Start-Up to Scale-Up
Don't lose the people who build the organization in your growth to maturity.
Marty de Jonge
And the impact has on team dynamicshttps://shiftup.work/
10:36 AM - Headquarters of ‘amazing-products.com’ — somewhere in Palo Alto — California
“ Hey Wendy, I just realised that today it’s exactly four years ago that we both joined the company”, Joris sighs while looking around the floor packed with desks and people. “ Can you still remember our first days? Just a few months after Mike and Sally started the business and the four of us had to work in a Starbucks or a McDonald’s just because they had free WiFi since we couldn’t afford an office space.”
Wendy smiles when she thinks back at that time. “ Oh yes, What a time that was. The scraping and begging in my family, I order to pay the rent is something I don’t miss, but what a vibe and energy back then. And WOW!!! When we got that first signed contract! I’ve never drunk as much as I did that night. And look at us now. I feel that I’m spending most of my time now putting out fires, doing desk work, controlling processes and teams all over the world and never having time to do some actual meaningful work.”
A recognizable story from a random organization that, for example, originated some ten years ago from a start-up and has become increasingly successful over time.
In the early days of the start-up, there is only one small team and, it is ‘all hands on deck’. Although people may have different skills and experience, they work together seamlessly. They take on tasks where necessary or transfer them to others without a single doubt.
The organization becomes successful, but success also brings a higher workload. Suddenly it is more challenging to keep track of who is doing what and working is also becoming more specialized. So roles are defined. One of the founders becomes the financial director; another becomes the marketing director, and so on.
Over time, these roles develop into functions, and these functions develop into silos. If you want to achieve something, then, of course, there has to be cooperation and it needs clear organization to keep it manageable. So a long series of communication and coordination is required for projects. When it appears that all of this entails too many challenges, a more transparent structure with different levels is created. However, the benefit of this structure might be at the expense of the entrepreneurial spirit in the future. For now, everything is Crisp and Clear; we have to go further!
The organization is on a steep way up and is on the hunt for growth! International expansion is formed with new teams in new countries. But after a while, it is noticeable that there are several teams in different places doing the same work. What a waste.
So as a result, teams are centralized and streamlined under one leading entity. Often someone who stood at the foundation of the organization. S/he grew step by step on the ladder alongside the rise or the organisation. And before they know it, Wendy or Joris are managing processes and teams instead of doing the work they are passionate about.
When ‘amazing-products.com’ hits the acceleration phase
In his most recent book Start-up, Scale-up, Screw-Up, Jurgen Appelo describes the different stages that he distinguishes within the Business lifecycle of a product or service within an organization*. Starting from a rough idea that a visionary founder thinks is the next thing that people need in their lives. (just know that 70 percent of start-ups no longer exist within 5 years) If this product or service proves to be valuable and an actual breakthrough is made, it will, according to Jurgen’s classification, go through the next 10 stages in its business lifecycle
- Initiation: Explore the feasibility and viability of the idea and your purpose as a founder. Create a product vision and prepare to find a Product/Solution fit
- Expedition: Check the vitality of the Business model. The customer discovery phase, forming a team of cofounders, develop strategy and business model hypotheses. You have a start of Problem/Solution fit.
- Formation: Begin building the product and get structure in place; you start to become fully committed to the new business. Things begin to become serious. You start finding a Vision/Founder fit.
- Validation: Now, it gets real. Prove assumptions of your business model to have traction, growth and revenue. Create MVP’s, finding Product/Market fit.
- Stabilization: Spend time in fixing the holes you left behind and finishing the corners that you have cut to get here. Test if the business model is repeatable, profitable and scalable. You work on the Business/Market fit.
- Acceleration: Shift to a higher gear. Make sure your competition does not copy your proven business model, make it sustainable and create healthy cash flow. A formal structure and delegating becomes more critical.
- Crystallization: Business model becomes more routine, proven track record, start-up culture is mostly gone, improve profits, margins and further expansion.
- Expansion: Business model begins to need revitalisation, funding of internal start-ups needs to rise, try to stay relevant by looking for new markets or channels.
- Conservation: The beginning of the end for the business model. Focus on cutting costs as much as possible.
- Finish: The business model has come to an end, break it up in separate valuable pieces, pull the plug and bury the remains.
Roughly between phases five and six, you can make a separation between the start-up phase and the scale-up phase. At this point, the impact on team dynamics is also the most severe. It is there where the service of “amazing-products.com” is currently in its business lifecycle and here is where Wendy and Joris are wondering. “Is this still the company and the team in which I can develop my talents at its best?”
You should not underestimate the distinction between these two parts of the business life cycle. This is a tipping point both for the organization as a whole and for the people in the team.
Where in the first part of the lifecycle the focus was mainly on research, innovation, perseverance and creativity, from now on matters such as registering trademarks, reproducibility, assurance and structuring become essential.
In the first part of the cycle, the profitability of the product or service is not an issue to discuss. Why should it be?! In this phase, first, you’ll have to see that you can get the product on the market at all and hopefully find customers for it. Long-term profitability is an item to worry about in the Scale-up phase when the product has a foothold. Also, potential competitors might try to copy your successful product and put it on the market at a lower price.
In addition to the way the organisation has to be run, this often means that a different type of person is needed in your team to successfully give substance to eighter the start-up phase or the scaling phase. The one is simply better suited, talented or feels happy in the midst of chaos while another feels more at ease in a controlled environment. One type of person is no better than the other, you need both kinds of people, only in a different phase of the business life cycle.
The pain of acceleration is, therefore, often the most severe with people who have been there from the beginning. They started in this organization and the product because this start-up phase suited them. Now the product is entering the second part of its life phase; it is questionable whether they still feel at home.
For Wendy and Joris, this means that they increasingly feel as if they have to wade through thick mud. Running the business has gotten so slow and it has grown to be so difficult to get things done and ‘moving’ around here. This causes more and more irritation within the team. Wendy and Joris are getting crazy about the risk-averse behaviour of the people for whom they are responsible. Same time they can not let go of ‘their baby’. The other way around, some team members can’t comprehend that Wendy and Joris do not understand that they are jeopardizing the stability of the delivery by wanting to make major changes in the product.
How do we keep Wendy and Joris involved?
To start with, on the horse track it’s never wise to bet on one horse, and that also applies when managing an organization. If you let the value of your organization dependent on just one product or service, this will make you extra vulnerable to developments that you cannot control.
It is therefore in the Crystallization and Expansion phase that the organization must start investing in new start-ups for the future. The ‘old’ product is now mature and therefore, just like in real life, now has the money and resources to support the next generation to grow up. Now it’s also the responsibility of the organization to start a new Initiation and Experimentation phase for its own continuity.
It is therefore just in time that the following Monday Mike and Sally, take Wendy and Joris out for dinner and ask them:
“Listen, I see that you are slowly dying here. So let’s search together for a suitable replacement for your duties, someone who knows about process optimization and knows the market well, someone who has done such a job before, both for you and for the team that can provide a lot of peace and clarity. As soon as we get it in place I would like to ask you to set up an innovation and R&D lab. What do you think about it? “
Initially, Joris and Wendy have to swallow. Will the product they worked so hard on be in good hands? Will the new guy/gall know how to take care of it? On the other hand, they realize, small children grow up and one day you’ll have to let them go...
With eyes that shine with tears, both of grief and enthusiasm, they look at each other and then nod simultaneously, YES!
Marty de Jonge
As an agnostic change agent, I am constantly amazed at what happens in organizations and learn every day. Enthusiastic writer and always open for discussion.