Fatal Startup Mistakes That Nobody Talks About
Mental Models For Startups #7
Have you ever wondered why startups fail and big companies ship terrible products?
I’m interacting with many startups as a consultant or tech advisor on a daily basis. Having seen all kinds of startups, both great and terrible, it is very easy to spot the differences.
Startups fail for many reasons, but some of the reasons are less understood and talked about.
Surprisingly or not, established companies make all the same mistakes, they are just not as deadly for them.
Let’s see what separates failed startups from the ones which survive and thrive.
Mistake 1: Lack of clear vision
It is staggering how very few companies can clearly articulate what they are doing and why they are doing that.
In many companies, if you ask an employee why they work on a particular task they would answer “because my manager told me” or because “that’s my job”.
Very few people can tell what is the actual end goal of their work.
The problem is that without having a clear goal direction for the company to move forward, it will be pulled into many different directions by personal ideas of that goal of individual employees.
Every person in the company whether a manager, an engineer, a designer or a customer support person ― is making dozens, if not hundreds, of decisions on behalf of the company every day.
Without having a singular “point on a map” to move towards, each person in the company would make their work decisions solely based on their own preferences and experience, or even worse ― only implement direct orders of the managers.
Company Vision (a.k.a. Vision & Mission Statement) is a practical tool for defining and making sure every person in the company knows exactly why they do what they do and what kind of decisions to make in order to help the company fulfil its vision.
During a visit to the NASA Space Centre in 1962, President Kennedy noticed a janitor carrying a broom. He interrupted his tour, walked over to the man and said:
“Hi, I’m Jack Kennedy, what are you doing?”
The janitor responded:
“I’m helping put a man on the moon, Mr President.”
Defining a company vision and communicating it to everyone in the team will make sure everyone knows exactly the direction of the company and has a framework to make decisions supporting this direction.
In addition, it helps to create clarity and elevate team morale and trust in leadership.
Mistake 2: Not being grounded in reality
For an organization, a Feedback Loop is a process of learning from its target audience or users and applying this knowledge for improving its results.
A feedback loop is critical in any development or growth. Not having a clear feedback channel for its customers or users means that a company will make decisions in a vacuum, based on guesses and assumptions.
This is a fatal mistake for many startups and products.
“You want to build an engine in your company that translates feedback from users into product decisions.”
― Sam Altman, former president of Y Combinator
Another important aspect of the feedback loop is its length.
A very long feedback loop means that the company can’t process users’ feedback fast enough and can’t timely act upon it. That means the customers will have to struggle or search for other options.
There are two key bottlenecks in a feedback loop:
the gap between the user and the decision-maker
the Velocity of Development + the Cost of Change
Either of these bottlenecks can lead to lengthy feedback loops and mediocre results.
3. Not defining company culture and strategy
If the leadership is not pro-actively working on shaping the Company's DNA, then they will end with whatever the DNA has emerged by people bringing their ways of working and practices from their previous jobs.
It may end up working just fine, however, in most cases it leads to a mixed bag of random practices, atavisms and decisions.
This is a huge topic on its own that wouldn’t fit into a single post. Here is some good reading material to start with: Creativity, Inc. and The Culture Code.
“Building purpose in a creative group is not about generating a brilliant moment of breakthrough but rather about building systems that can churn through lots of ideas in order to help unearth the right choices. This is why Catmull has learned to focus less on the ideas than on people—specifically, on providing teams with tools and support to locate paths, make hard choices, and navigate the arduous process together.”
― Daniel Coyle, The Culture Code: The Secrets of Highly Successful Groups
Does your company have the same problems? Tell me what you think.
Until next time 👋
Some good points, thanks for sharing!
We've had success with the "EOS model" (Entrepreneurial Operating System) and their quarterly Vision/Traction organiser. You can find free templates online.
Check out "Rocket Fuel" from Gino Wickman and Mark Winters for a summary or "Traction" for a deeper dive.