Viewing Startups as Operating Organizations
Entrepreneur's New Year’s Guide
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
As a Startup mentor and investor, until a few years ago, founders often asked me “what will it take to launch my venture?” Fortunately, the question has evolved to “what will it take to launch and operate my venture?” This shift represents a growing belief that the launch is not a be-all and end-all of an entrepreneurial journey.
To catalyse this shift, many business model canvases have surfaced that fulfil the need of building successful customer-centric ventures. For almost a decade now, such canvas’ extensive global usage is a testimony of their simplicity and power.
However, feedback from many successful startups founders shows that most current canvases are either silent or incomplete in operational areas of understanding competition, developing approaches for creating “moats”; defining the startup’s values - which serve as the glue that holds the venture together; identifying talent – often the make or break reason for enterprises of all shapes and sizes, and last but not the least, organization-building blocks like processes, roles and responsibilities.
In daily work with early and growth-stage startups at our Incubator (Bennett Hatchery), we use a modified and home-grown canvas, called the Startup Operating Canvas, to guide the operations, and growth of new ventures. This canvas depicts critical moving parts of a Startup as eleven blocks; eight within the organizational boundary and three outside of it.
With customers on the left, the overall left-to-right flow aligns better with our brain’s wiring and the reading style of the language. Each block represents the approach/strategy chosen by the startup and is developed through iterative ideation, customer interaction, and reflection sessions.
CUSTOMER PERSONAS: Taking the idea of market segmentation forward, customer personas are proxies of real target customers/users of the startup. These usually contain demographic and psychological attributes (like personality, values, opinions, attitudes, interests, and lifestyles). Personas are highly useful in capturing tasks that customers are trying to perform with the proposed product/service along with the broader objectives of these tasks. Besides the functional side, customer personas also convey the emotional and social needs of customers. Customers, and hence customer personas, are usually prioritized as early, steady-state and late-stage targets for the venture.
CUSTOMER ENGAGEMENT: This two-way communication and engagement block in the canvas defines the various channels through which customers and the venture team will interact with each other. Customers’ potential touch-points (e.g., how they find the offerings, how they conclude a sale) with the enterprise are mapped to understand the need for information and reinforcements. Means that the enterprise will use for continuous engagement with existing customers, and to build and grow these relationships are covered. Advertising, branding and positioning are other elements that are emphasized.
REVENUES AND COST OPTIMIZATION: As the next customer-facing component of the startup operating canvas, it focuses on identifying and deploying relevant revenue models that balance the venture’s go-to-market strategy with expenses of a working organization. Particular attention is paid to the costs of customer acquisition and managing the cash flow for the new business. Special pricing and promotional ideas make for a rich contribution from this block.
DIFFERENTIATED BENEFITS: Given that customers always have choices (buy from competitors or not buy at all, this section of the canvas provides compelling reasons for customers to consider the startup’s offerings. Differentiated benefits enable customers to understand what the service is about, how useful/relevant is it to their needs and if it can genuinely solve their challenges/problems. Our experience shows that an analysis of these benefits at an early stage of the venture helps in building a customer-centric mindset of the team.
COMPETITION: A venture needs to understand its relative place in the market by mapping the strengths and weaknesses of current competitors, and by keeping an eye on emerging/potential competitors. Strategies for creating differentiation, reviewing competitor’s operating canvas and protecting the venture’s turf are an integral part of this block.
TEAM: Talented and committed people are the linchpins of any organization. They become supremely crucial to a new venture because not only do they give shape to its offerings, but they also help in defining the venture's culture. The founding team analyses the capabilities (knowledge, skills, and networks) needed for the successful launch and growth of the enterprise, identify the gaps and makes arrangements (e.g., employees, consultants) for ensuring key people are available at the right time. An essential aspect of this block is finding suitable complementary co-founders.
RESOURCES: While the intangible resources of a talented team are covered in the previous block, more physical/tangible ones are discussed here. These include funds (committed and available), software/hardware/tools, raw materials, and office space. The founding team makes plans for the timely availability of resources based on the product/service development and marketing plans.
SOLUTION: This describes the product/service that will be developed as a core offering. It has functionality and features that are important to customers. Minimum functionality and features critical to launch are decided, as are future enhancement to the same. It is essential to keep a two-way link between expected customer benefits, functionality, and features.
PARTNERS: After customers and competition, this is the last block that exists outside the organizational boundary. The founding team analyses their capabilities to develop, improve, market, sell and deliver the product/service. Based on this analysis, they may identify partners who help bridge the gaps. Typical examples of partners include distributors, retailers, franchisees, technology developer and legal service providers.
SYSTEMS: Startups must be prepared to operate an organization through basic processes and systems as they approach the launch and then go beyond it. While reaching the point of launch is possible with the sheer energy, commitment, and passion of the founding team, well-oiled organizational systems are needed to create and manage market traction. These systems typically cover: organization structure, processes to develop & market product/service, systems to optimize resource utilization, and methods to recruit, develop & retain talent
The Startup Operating Canvas enables a startup to identify a broad range of focus areas during its discover and launch phases. Interestingly, we have seen that whenever a founding team has worked diligently on this canvas, then they have had to do only incremental work to develop their business/operating plans. Since startups are always in a “work-in-progress” mode, a Startup Operating Canvas that is updated continuously helps manage successful and scalable enterprises.