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5 Tips for Building Adaptivity Into Your Business Model

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Why do 75 percent of all technology startups fail? The inability to adapt.

According to Mashable, successful startups are “flexible enough to shift with changes in the tech climate. Whereas with the failed startups… there is a lack of foresight which might have saved their companies." Makes sense, right? Technology evolves quickly. Maturing with it is critical.

Adapt or die.

Related: How to Always Be Ready to Adapt Your Business to Change

More generally, though, adaptability is key to any successful business. It reflects learning and the more you learn about your market, the better you can tweak, refine and optimize (see PayPal, Twitter, etc.).

I know this better than most that building a business capable of flexibility is easier said than done. When I launched my company, VMR, in 2009, the category we were in was so new and controversial that its direction could shift dramatically in a year. We had to be ready for that. Five years later, we’re still here and growing. Here’s how we did it:

1. Invest in R&D. For any technology company, research and development should be your top asset. It enables you to lean into market changes and respond to customer needs. Constant experimentation can spark new, unseen opportunities to generate added growth and value.

As an example, about a year after VMR was up-and-running, everyone told me to invest in brand awareness but building a brand has little value if your flagship product can’t evolve for your customers. I knew that we had to be product-focused, first and foremost. Instead of spending on branding, we invested in engineering. It was the right decision. Dedicated R&D teams drive innovation and efficiency, clearing a path to continued success.

2. Talk (and listen) to your customers. Don’t be afraid of negative feedback. The positive stuff is a great ego boost but it’s the blunt critique that really helps push a business forward. Implement a scalable system at launch that allows you to regularly ask customers what they like the least, uncover pet peeves and source honest, candid feedback. At VMR, we do this through an open forum on our website. The more you know your customers, the more flexible you can be meeting their needs.

With that said, not all customer feedback is actionable, or should be. Whatever your business, invest in analytics to corroborate feedback. These tools will also help identify the more elusive patterns in user behavior that speak to shifting tides.

3. Consider the opposite.  It’s useful to think about what your business isn't. For example, if you’re an online-only company, regularly evaluate the benefits of brick-and-mortar and vice versa. This helps you deliberate new ways of doing things that could ultimately improve existing operations.

Take Warby Parker. An online-only business at launch, the startup quickly realized the benefits of having a traditional brick-and-mortar retail presence. Even though their online sales were thriving and it took nearly three years to prepare, they unveiled their first store last year.

Related: When it Comes to Business Crises, A.D.A.P.T. or Else

4. Hire entrepreneurs. Adding team members with entrepreneurial backgrounds is a plus. They often have a “big picture” view of several industries with creative, new thinking that will allow your business to be malleable if change is required. They have vision and understand change as progression. More importantly, though, they understand failure and how to recover through adaptation. This is a model of hiring that Facebook, in particular, has championed to obvious effectiveness.

Of course, a core team comprised of entrepreneurs has its own set of unique challenges. They can be hard to retain and can even grow into competitors down the road. But the risk is more than worth it for early-stage companies seeking to build an agile business and infrastructure.

5. Be lean, stay lean. Maintaining a lean and streamlined startup makes flexibility possible. Focus resources and capital on the core areas of your business. Don’t hesitate to bring in outside partners to fill gaps or help execute on potential opportunities. Doing too much on your own simply doesn’t work. It’s expensive and capital-intensive to build out entirely new operational units, divisions, etc.

As an example, VMR is an ecommerce company. When we sought retail distribution, rather than do it ourselves, we partnered with a company that has existing retail relationships. This allowed us to keep concentrating on what we do best—design and engineer great products.

You can never confidently predict the future of the market, or how your customers' needs will change. Wayne Gretzky once said that he tried to “skate where the puck is going, not where it has been.” For startups, the puck is always moving, but you can prepare by instilling flexibility into your business model from day one, and augmenting it with a real sense of urgency. That flexibility will enable you to navigate and evolve, while also helping you get a sense of the head winds well before they arrive.

Related: Five Critical Questions Your Business Plan Should Answer