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Book review: Category creation

January 13, 2020

When you’re building something new it may appear that you don’t easily fit into any clearly defined category. The existing players and analysts may want to box you in and give you a label of a better mousetrap of one or two categories. Yet, they may not really describe your vision and understanding of the future, and the problems you’re trying to solve.

Category creation is something that takes courage but as well might be the only really good option available. If you don’t find many (or any) competitors, nobody is covering your space in media, and there are only a very small number of people who get what you are doing but they are passionate about it the good news is that you might be onto something.

Salesforce is a classic example of a category creation company. In their early years they were really loud and clear about the coming cloud revolution. Their marketing was about the “end of software” to the extent that they used “no software” in their branding. At the time cloud computing category was as widely used as Amazon in the mid 90’s.

According to Kennada category creation is a business strategy where the company is focusing on marketing the category by focusing on the new problem in the industry more than the actual solutions for it. In practise, this means a choice where the company is educating the market and building a community and ecosystem around the new category.

This is a daunting task taking a lot of company resources for the public good that often at the outset seems to be used at the expense of the actual product marketing efforts. The upside is that a successful category building brands the company as the market leader with its share of the total market revenues. Google, Uber, AirBnb are examples of category builders.

A disruptive business strategy is the opposite of category building. It is executed towards an incumbent in the industry and positioned as something better than the existing solution to the problem in question. It uses the analogies and compares oneself to the existing status quo instead of creating a completely new paradigm in the market. Zoom vs. WebEx and Google Docs vs. MS Office are examples of this challenger positioning.

One of the oxymorons might be a category creator in an industry with one or more incumbents. Category creations can be recognised as a de facto strategy later but at the time it was just the obvious choice to build the market place and create the proper demand for the solution. Yet, sometimes fast followers are the ones taking the leading market position from the first movers, and history is full of examples of this behaviour.

Most of the content is about practicalities for building and getting inspiration for category creation. It also introduces business-to-human (B2H) as an approach to marketing and sales where the main focus are the people behind the companies and logos. Kennada sees that B2B and B2C marketing are merging towards unified B2H and customers are gravitating towards companies they admire and trust.

The philosophical aspect of B2H marketing concentrates on the individuals and helping them to solve problems and build relative connections among peers and mentors. The practical aspect can use many of the existing tools and means for targeted content and marketing.

Values, purpose and overall human-centric approach to business building is one central theme overall in the book. It may very well define this new business decade as well.

Book review: Survival to Thrival

December 12, 2019

When your startup is starting to grow from a small team to 50, 150 or even 450 people in a short period of time it’s not the same company anymore. From mere survival it’s time to start thriving with its own set of challenges.

This book is a practical and rather hands-on guide for founders, investors and executives that are in the middle of enterprise startup growth. What used to work before starts to slow things down or just break things down.

When the company grows its people need to change, shift roles, unlearn and learn new skills, and sometimes just leave if it’s too hard. None of this is obvious or easy yet it’s crucial for success.

A company CEO needs to be able to zoom between micro, macro and everything in between while having a mindset of confident optimism and total paranoia at the same time. In the beginning the CEO resembles Captain America / Wonder Woman type of superhero that is all over the place and totally hands-on.

The next phase is Captain America and the Avengers where a team of superheroes band together to tackle the growth issues while everyone have their special superpowers. The third unlearning and transition phase for a CEO is to become the Professor X and the X-Men where the focus is on the next generation of talent and the overall big picture.

Corporate types coming to startup leadership roles might prefer to build their startup using sequencing that is linear. Unfortunately growing a company is not a straight- forward process and too much of a single thing usually causes a new set of consequences that drain resources, focus and execution at the wrong time.

An open-ended spiral is another way to see the scaling challenges with just right type of balancing act. There will always be more bottlenecks but they are the necessary pain points of growth, and overdoing may be more harmful than the trial-and-error process of finding a proper balance.

The book gives tips how to swim in lanes (hit and plan milestones) and be aware of huge signal generation that happens in executive and board functions per default. Doing, not doing and just being are each a signal to the organisation and set examples. Similarly being a ruthless decision-maker but yet sensitive of the consequences on people of these decisions is something of a must. The company must come first but not at the expense of the people who are making it to happen.

How to be motivational and emphatic as a CEO? You’re also all alone and under assault from all directions ranging from customers, board, market and the team. This is the everyday struggle of never comfortable life of a growth company CEO.

When the company grows the previous superheroes need to unlearn their previous working modes and become super-leaders for the new superheroes. This is a mental battle where ego, emotions and self-perception are at test. For someone used to do things it’s hard to let others take care of the details and re-define one’s worth for the organisation. Yet, this is exactly what is needed when the headcount becomes too big for the old organisational ways to work. Each transition point from survival to growth and finally to scale have their own peculiarities. Challenges are different whether you’re a business, engineering or financial type of a leader.

What happens when a previous superhero becomes a mere mortal along the growth of the company? Sometimes the best but a hard choice is to let some people go if they cannot unlearn they previous roles and accept new ones. Company culture becomes a crucial success factor the bigger the startup becomes. Avoiding the bozo creep by hiring too fast just to hit the numbers is as important as having a clear, consistent and strong culture where people know where their stand and what is expected of them.

Overall, the book’s message is that growth affects everyone, and everybody needs to change or be changed. Nobody can expect to have a stable or consistent career path when the requirements of the growth company change yearly if not quarterly. Unlearning becomes even more important than learning new things. Buckle up – there’s turbulence ahead.

Book review: Range

September 26, 2019

Our world is not very kind and predictable. It is full of wicked problems and outcomes where causation may not be observable for us. This makes learning from our actions difficult. There are simply too many variables and time delays may be too long.

Yet, one of our greatest gifts is our ability to adapt to new circumstances and situations. We do not need predetermined models and patterns to interact with our surroundings.

On the other hand our tech is leapfrogging in the field of pattern recognition. Machine learning with proper data can already outperform humans in narrow specialised fields. Some sports and games are examples of kind domains where the rules are clear and the surroundings are predictable.

We are using pattern recognition in our learning. Chunking data together makes our actions faster and easier no matter whether we play golf, study languages or drive a car. An amateur can be distinguished from a master by the amount of practice. The sample size is larger, or different.

Hyper-specialisation has its dangers. When reaching into depths the field of view often narrows. It’s getting harder to see the inter-linkages and solve wicked problems that require different approaches. That’s why we see outsiders solving challenges that industry insiders consider insurmountable. 

There is a tendency to prefer quick specialisation and stick to ones trade. In a way one is required to reduce uncertainty and have the answers before actually diving in. This is prevalent in science as well as other domains like business and education.

Data points are easy to understand and measure. Quantifiability gives a sense of control and security. Common sense and reasoning are fuzzier and have less contrast. They require value judgement and range of experience to be appreciated.

Range refers to wide and broad reach. Seeing connections and similar patterns in different fields help to solve problems and excel in new areas or even in one’s own field of expertise.

Very successful individuals tend to have multiple interests and activities outside of their main focus. Darwin and Einstein are good examples but you don’t need to be a genius or polymath to reap the benefits. A curious mind finds always unsolved puzzles and areas to master.

The path to great discoveries and success is not always paved with grit and specialisation. Generalist may be slower in life to bloom but more weird and wicked their world become the better they tend to perform compared to specialist. They simply have more varied repertoire of experience and data points to match for the new circumstances.

Everybody’s path is different and specialisation is just one way to reach to your destination.

A Finnish review published in Talouselämä.

Book review: Startup Scaleup Screwup

September 1, 2019

Startups are fast learning laboratories where too many variables are at work in any given moment. The failure rate is high but success will be more favourable for those that use some systematic methods and processes along the way.

Serial entrepreneur Jurgen Appelo has put together a practical guide that gives you the latest tools and practical knowledge for a high growth venture. The book is packed with agile and lean community techniques and best practices.

You can build your business from an idea onwards by following the ten stages of growth. These stages are independent for each business model so in a larger company there can be more than just one business lifecycle simultaneously in different stages of maturity.

Initiation stage is the stating point where you have an idea that you develop further.

In Expedition stage you start to validate the hypothesis and formulate the business into an entity with bootstrap funding. Customer discovery and minimum viable product methods become relevant here in order to confirm a possible problem/solution fit.

Formation stage makes things official and it’s the time for a full time commitment for founders and initial team. Shareholder agreements, compensations and other growth structures become apparent. Vision/founder fit has been found and your team is ready to commit for the long journey.

Validation stage is the beginning for the product/market fit validation that usually takes minimum of three years. It’s the make it or break it for the next stages. Business model assumptions need to be validated and everything is geared towards proper traction.

Stabilation stage comes after the product/market fit issue has been somewhat solved. Scale too early and you may fail due to lack of traction. Scale too late and you may miss the market. Business/market fit becomes the focus and it’s more about the various business relationships around the product itself. Here the idea is fix things that did not scale before.

Acceleration stage defines your venture as a scaleup after the startup phase. Customer creation becomes the theme and it’s time to execute since things are working now after experimentation. Focus is on revenue and market share growth and trying to outsmart copycats and other competitors. As the organisation increases its size the complexity require more attention and different methods of management.

Crystallisation stage makes running the business more a “biz as usual” routine and it’s a sign of lifecycle maturity. This can take the form of an IPO or M&A trade sale for the founders.

Expansion stage is about trying to make most of the opportunity left and keeping the business model fresh with new initiatives and renewals.

Conservation stage is the cash cow moment where the end of the line is at sight.

Finish stage ends the business model and decisions need to be made about its existence.

The book is beefed up with interviews from various startup ecosystem players around the Northern Europe. These insights give a fresh and authentic touch for the multitude of ways to build and experience the startup growth.

Startup, Scaleup, Screwup is the best startup handbook I have seen for a long time.