Fitting into a startup culture is not for everyone !

It is probably the best of times for budding young entrepreneurs; they have ideas ranging from good to great, esoteric, far-fetched, imaginative, hair brained, stupid, and finally the ones that get you to “why did I not think of this” ! Funding seems to be chasing ideas across the board, valuations are going sky high; and then you meet someone who is struggling to get angel or series A funding. The grass is green but not across the new ventures field, there are many hidden brown and bald patches not visible from a distance.

Over the years I had the opportunity to work with many startup ventures though as a customer who believed in their story and vision. Some of them were into services, some wanted to build products, and there was a group that believed that they could change the world. Across all of them the excitement, enthusiasm and passion was palpable and infectious. They loved the fact that they had my attention and business, hoping to make it big someday; and some of them indeed did scale up giving me and my team a sense of joy.

Startups got a little more rope from me in comparison to larger players; at times they got second chances. I listened to their dreams and where possible gave them some insights from the journeys I had seen and my own. Almost all of them delivered to promise and some more, with quality of work and speed of execution that mostly the young are capable of. What they lacked in experience, they made up with a fail faster approach. I did not know of travails of their teams, internal culture, struggles, or their support ecosystem.

At a startup – the CEO and CTO – both approached me separately seeking advice on conflicts that had started increasing to the extent that a split was imminent. Each one believed the company’s success was because of his efforts and the other was not contributing; they resisted ideas from the other on selling and product roadmap respectively. Suddenly after the initial success, they found it difficult to live with each other. None was willing to bend, I suggested that they find an amicable way to settle their differences or go separate ways, which they did.

In the last year I have worked with multiple startups in various capacities from coaching, mentoring, product and/or technology advisor, go-to-market, writing product brochures, defining enterprise use cases, or rescuing them from the technology quicksand. Each startups had a different persona, culture, challenges and opportunities. Similar to large enterprises, the senior most person’s behaviour and mannerisms defined the company. For some of the older folks who had joined them, the generation gap was a challenge.

I met up with one senior industry leader who had given up a juicy MNC position to join a VC funded startup; he had a great track record in market expansion and acquiring customers. He brought maturity to the discussion which connected with customers, the CIOs. The going was good and that brought the company into prominence. Success plays differently with people; some change for good, some remain the same, and a few start believing that they are invincible. My friend’s exit was the trigger for our meeting.

Ipso facto analysis would reveal differing dimensions, the reality was that the conflict arose from success and divergent views of next steps. Achieving scale was necessary to take the company to the next level; the veteran knew what to do, had done it before, the CEO had other ideas and he thrust them on the team with obvious results. Observing the senseless and unaligned movement, employees urged the veteran to intervene. He attempted to rationally reason out to no avail; regretfully he quit leaving a trail of other exits.

I realize working with startups require lots of patience; they have a mind of their own and you may disagree with their views and direction. They will take your experience as an enabler or an anchor based on their frame of reference; you need to accept that they will not always do what you advised. Your success formula from the past and large enterprises are at times discarded for uncharted waters. They will listen to you and may end up doing something else. Allow them to make mistakes even if they are obvious to you; they learn that way.

The young and the restless are a different breed; most of them are born to a digital world and followers of Robert Frost !

Big customer of a small vendor, or small customer of a big vendor

The CEO was perplexed that despite his product having all the features and more when compared to the market leader, most enterprise customers were shy of giving him business. His product was priced at a discount to the larger and dominant players thus providing great business cases and ROI; the technology platform was current versus competition. Customers liked the product and agreed that it met specifications and requirements; however it did not result in business. His company was a young startup and had few customers.

The world of startups is exploding and they offer solutions for existing and imaginary problems that you may have never thought about. Consumer applications are finding their way into the enterprise while the choices for enterprise applications have increased manifold. Convergence across the differing use cases creates opportunities for IT to automate and/or create new process efficiencies. These are beginning to offer viable alternatives to the large vendor solutions with complex licensing models and maintenance contracts.

Meeting a few entrepreneurs exhibited the most prominent feature across all the discussions was the belief and the passion in their ideas. Everyone had a dream to challenge the big players, wanted to solve problems of the world, and almost everyone was born a digital native. For these individuals the pursuit of their dream overshadowed the difficulties they faced learning to survive in fiscal deficit. With loads of infectious enthusiasm they happily demonstrate the value of what they have or plan to build to anyone interested.

They have like-minded teams with great technology skills and ability to create solutions with velocity that puts many enterprise IT teams to shame. They are able to react quickly to market and demands of their sparse customers; the struggle is largely around creating a dialogue with business and IT leaders on how their solutions will benefit the enterprise. They are the advocates and the best salespersons for their companies and solutions and in an endeavor to get first few customers, it is highly probable that they are willing to offer bargain prices.

Most enterprise CIOs and business heads find themselves meeting these entrepreneurs more often, now competing with the larger well established local or global solution providers. The gorillas with loads of muscle power, large number of customers, and an ecosystem of system integrators create doubts in the minds of potential buyers on the stability and longevity of the minnows. Thus in the face of perceived risk most customers end up making the expensive choice of going with the well-entrenched players.

Good news is that there is a wave of fresh air wafting through the crevices in the enterprise fortress – the data center and the application landscape; some successful and early adopter CIOs have taken calculated risks and the call to work with startups. The benefits in almost call cases have been beyond compare with quick and unbelievable ROI; for the struggling beginners these saviors were embraced and they stretched to exceed expectations. The CIOs pleased with success built symbiotic relationships by mentoring them.

For the safety net seekers following conventionally long implementation cycles, the larger players provided rich functionality though with restrictive practices offering ROI over 2-3 years. They became victims of their choices when they could have taken an alternative approach and experimented with the newer generation solutions and enjoyed associated benefits. The loss of agility came with its own set of challenges considering the fact that rarely a solution change is undertaken after long cycle of implementation.

Startups nurture their customers who imposed faith in them; large enterprise customers bring them credibility. They contributed significantly to their revenues which in turn helps them raise money from interested sources. For the large players another customer is just another customer even if you are a dominant force in the industry; exception being companies who are larger than these large vendors and they are just a handful. Relatively size does makes a difference to the treatment the vendors give to a customer.

All things being equal the question is where do you want to be ? A big customer to a small vendor or a small customer of a big vendor ? Your choices will determine not just your success but also your ability to influence the product direction, shape industry solutions, and finally give you a financial advantage. Having been in all the three camps, I would say that being a big customer of a startup outweighs the perceived risks; the sluggishness imposed by big vendors can be a big challenge; finally as a part of startups now I love big customers !

Customer Advisory Boards

“You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new.” So said the most iconic leader in the IT industry and stuck to this philosophy as his company built some of the most vied for products; the success that followed remains unparalleled though the bull run has slowed down a bit. Everyone wondered exasperatedly on how they can replicate this model as it is contrary to conventional wisdom and what they were taught in B-school.

Until not too long ago the software industry churned out products with features and functionality based on internal discussions on what the customer may need or in some cases based on what their initial customers asked for. With generic solutions not fulfilling the expanding needs, over time they started hiring industry domain experts to create vertically aligned solutions. This did address the gap partly for a while and then customers started demanding better aligned solutions for their specific problems and opportunities.

Some companies recognized the need early and started creating Customer Advisory Boards (CAB) with CIOs of their large customers to participate in the product roadmap. This was extended to include some of the innovative adopters of their solutions though they may not have been high revenue customers but brought value to the discussion. The ensuing engagement, discussion and debate influenced the prioritization of new features and in some cases the positioning of their solutions resulting in a win-win situation.

Some of the services vendors took the cue and hired from the industry to strengthen their industry practices; consulting companies followed suite thereby changing the discussion with their customers. They determined that the need was to embed the resources internally and not limit to an advisory role. Now the software industry is going through a transition with even mid-sized companies thinking of CAB to gain the benefit of customer connect and better alignment of their product features and evolution to what the industry wants.

Interestingly hardware manufacturers have remained disconnected; they continue to launch products with the philosophy of the icon attributed with the famous quote. Past practice of customer focus groups has largely been discarded by marketing teams. Faster processors, bigger, brighter and higher resolution screens; consumers love it and they do more of the same. Then they have attempted to push the same products to enterprise customers and wondered why it is not gaining traction the way consumers are lapping them up.

CIOs are not excited; what else do you want has been the lament ? Over the years the clear message from many CIOs to the IT industry enamored by all things mobile (phones, tablets, and applications) has been that the faster, better, cheaper does not connect with enterprise use cases. Enterprises need manageability, serviceability backed by service levels, and reasonable (measured in years not months) longevity. Consumer devices require additional investments to make them work in our environments.

Consumer applications and games are great; couple of apps on the app store for some customers or pilots on industry specific use cases does not make you an enterprise ready development partner. We don’t want to explain everything from the basics to your team; how are you going to fill in the gap between what we say and what your team understands. Do some homework and more than anything else listen before you start crafting solutions; you have an advantage over your big competitors, use it well.

The question is then, is CAB the way to go for companies who want better traction of their solutions or services in the enterprise space ? It is a model that may work for the larger IT companies; how does a smaller outfit get the benefit of the experience ? In “Scaling Startups” I had referred to a mentoring model and role that CIOs can play; maybe it is time for IT companies to embrace CIOs to help them forge ahead. What is important is the change in mindset and philosophy with internal agreement on the new way of working. I hope IT companies understand this sooner than later.

As a CIO, are you up to the game ?

Scaling Startups

He was talking about the next paradigm in cloud computing that will transform the way we look at IT infrastructure; it has received good traction with the initial set of early experiments. Another one was passionate about the new world of converged consumer and enterprise mobility; there will be a need for a different type of mobile device management. Security remains a favorite subject with all kinds of paranoia and sometimes reality demanding attention and budgets. And then there are many solutions vying for attention with no real differentiation.

Technology evolution creates opportunities for innovation limited only by imagination and passion. The number of startups is growing in leaps and bounds supported by family funds, angel investors, incubators constituted by academic institutes, and sometimes the rich and foolish. After the initial idea is germinated many of them struggle to move to the next level. While the consumer facing ideas find their moments of truth quickly, the enterprises focused tend to seek advice on how to pitch and connect with the CIO and business.

Call it coincidence or maybe the industry is changing in a definitive way, the recent past had some ex-CIOs and industry friends talking about getting involved in helping startups. There already exist many formal and informal groups who tend to the needy and also help them with funding. Most such groups want to look at the idea, business case, and background of promoters to determine if they should invest their time or bet their money. Opportunities appear to be ranging from some great ideas to harebrained downright ridiculous.

Mentoring startups seems to be the “in” thing to do and talk about in social circuits. The commitment ranges from using old contacts and industry connect to open doors or at least create an initial meeting and dialogue, to taking on formal roles with shared financial upside should any intervention result in an engagement and business. The rub-off credibility is indeed making some difference to young entrepreneurs and also giving them a dose of reality to what works and what does not. The partnership is increasing the possibility of survival and success for startups.

Some startups tend to thrive in a niche without getting distracted giving them higher propensity for survival. For the challenged ones one of the reasons has been the founders becoming a bottleneck by not building depth of management; their passion and emotional connect that brought them to a market position ends up stifling the company. They are unable to let go of micromanaging every person and activity thus rarely scale up to their true potential. This is largely true for individual owned companies; partnerships face other conflicts and challenges.

Serial entrepreneurs on the other hand have enjoyed fruits of success with their ability to detach themselves. Moving on to their next idea or wave of evolution gives them new opportunities. They know who to tap and what they need intuitively; their experience adds to their ability to find the right customer advocates and advisors. Knowing when to push and when to give up comes naturally. It is not that everyone can be a successful serial entrepreneur, the success or failure of the first one is the most difficult analogous to making the first million dollars.

CIOs can play an important role especially in the evolution of startups wanting to provide solutions to enterprises.  Their understanding of the business context coupled with their technology expertise gives them the ability to craft architectures that positively impact business outcomes. I believe that CIOs should adopt a few fledglings depending on their interest and inclination; shaping the future has merit that it is predictable and brings self-actualization. The other option is to read about success stories and wonder. 

Doing business with startups, due diligence and lessons

Every CIO gets many calls from startup IT companies wanting to bounce their million dollar idea—to seek the CIO’s advice and understand whether it makes sense in the enterprise. Some of these are self-funded, while a few may have angel investors or private equity already in place for growth. The steady growth of such small startups in the recent past has created an interesting problem for the CIO. Why is it a problem?

In quite a few cases, there is not much to differentiate one startup from the other. So how does the CIO separate the chalk from cheese? What is the due diligence required before getting these vendors on board?

A majority of these startups are seeded in institutes like IIT and IIM (globally pertinent equivalents may be the Silicon Valley or MIT kind of institutes), where the idea takes shape fuelled by the entrepreneurial bug. Most such ideas take a while before they gain traction with their target audience. These are the real gems, and being an early adopter of such startups provides an immense advantage.

Having worked with a few such companies, I realize that it does take a lot of effort to get the product/service aligned to enterprise processes and direction. As the first or amongst the first few customers, the value proposition is almost always attractive. Their reference checks largely depend on their mentors (professors or others) who are able to provide the details behind their continued support to the new entity.

The second category of startups comprises breakaway groups from existing companies, where a group of people have decided that their ideas have higher value than what they currently see within a large entity. This group typically specializes in services for a specific technology, domain or application. Such companies do well to begin with as they are patronized by existing customers (supported by them) who see a price advantage with a smaller startup. Such entities pass the tipping point within 12-18 months by either reaching a steady state, or falling apart. The due diligence is thus largely dependent on the team’s leader and its past track record as they continue to offer similar services.

A variant of the second category is a group being lured by an investor who believes that unlocking the potential has good upside for everyone. The service offering is thus no different from the above. A private equity institutional player invests in existing entities that needs funds to scale up or laterally, but in this case the carving out was initiated by the investor. How does one ensure that the entity will survive and make it to the tipping point? The team comes with impeccable credentials; the unknown factor is the investor who may pull the plug. In such a case, it is critical to conduct diligence on the investor and his past track record. Search engines come to your rescue in such cases, as past footprints cannot be obliterated.

Either way, put in safeguards to protect your enterprise’s interests with financial, legal or even escrow accounts to address sudden disruption. Work with your legal team for once, ask all the questions even if they make the other queasy; at least you will be able to sleep with ease.