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Strategic Thinking: a Critical Tool for Founders to Define Higher Purpose and Set Goals

August 13, 2020
9 Mins
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Strategic Thinking: a Critical Tool for Founders to Define Higher Purpose and Set Goals

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Strategic Thinking: a Critical Tool for Founders to Define Higher Purpose and Set Goals
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9 Mins
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Summary

In the beginning is an idea and the idea becomes a product and a startup takes shape, all built on the founder’s passion. But, the gears change almost overnight when the product-market fit is achieved and suddenly there are other stakeholders, investors are at the table, and the race is truly on to scale up. Passion is not enough. ‘Strategic thinking’ becomes primary and that’s when many founders stumble as not everyone has this ability. But this skill can be learnt, practiced and honed and this second post in my ‘First Principles’ series is a guide to how to internalise strategic thinking as you build and scale your startup.

(Read the first article in the ‘First Principles’ series here)

Why Strategic Thinking

When a startup moves from early stage to a growth-focused venture, ‘more of the same’ does not produce results. In simple terms, in the early stage, the sphere of influence is limited. As the organisation grows, the founder has to be mindful of competition, people, the larger ecosystem, internal processes and practices and a myriad other factors. New dynamics come into play and complexities increase. Here, the struggle for the founder is what to prioritise, or, how to strategise?

Think of the difference between a 500 m run and a marathon. As a regular runner, I don’t have to prepare myself if I have to do a 500m sprint. But if I have to run a full-marathon, I need to think about and manage hydration, nutrition, breathing, mental toughness, and muscle strength to finish the marathon. Like a marathon runner who needs to manage his finite amount of energy to ensure he completes the marathon, an organisation has to effectively allocate and consume a finite amount of resources to go from point A to point B. Strategic thinking is all about how the founder goes about doing this.

Strategic Thinking Vs Strategic Planning

Many use strategic thinking and strategic planning interchangeably and that’s incorrect. Strategic planning is oriented towards breaking down a goal into steps that will lead to the achieving of that goal — for instance, defining what steps will lead the company to increasing customers from 100 to 1,000 in six months. Strategic thinking is a more cerebral and continuous process of understanding what will take the organisation to its ultimate goal. It is about analysing current and future realities of business and deciding on what needs to be done for the company to stay relevant, always. Strategic planning then is a subset of strategic thinking.

In this post my endeavour is to give you an actionable framework to create your very own strategic thinking guide. Chances are you might not have all the answers to each of the following points immediately, but that’s alright. Break it down into parts and cover, say, one part a quarter.

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Strategic Thinking Framework:

1. Mission

The first question you have to answer for yourself is what is the raison d’etreof your venture? All good companies have a mission — this is what helps employees focus on what’s important daily. Clear articulation of the mission is critical; it defines who you are and what you stand for. Amazon’s mission of offering lowest price, best selection and utmost convenience is well known.

Clearly defining your mission leads you to the next step — how are you different from your competition? Once you have a mission statement — a clear understanding of why you exist — the other points will easily unravel.

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2. Vision

Many think mission and vision are the same — not true. Vision is future focused; it is about what you want the organisation to be. It is the vision that gives your team higher purpose. When Amazon launched in 1995 as an online retailer of books, its goal was not to become the best books retailer in the US, rather it was to be Earth’s most customer centric company. That’s vision.

You can simplify this by setting for yourself a vision for what the company will achieve in one year. When this is clear, you can focus better on what you need to do to get to your vision. You can keep revisiting this — with evolving markets and with new information and insights, how is that impacting your vision? What do you need to do differently to achieve your vision?

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3. Values or Behaviours

I have found that startups and founders who consistently perform well are those who have an unambiguous understanding of what their values are. Sometimes scale and growth are so rapid that a founder does not really have time to consciously examine if they or the team are being true to the values of the company in every action. But if values have been identified, communicated and internalised, it is easier to adhere to them intuitively. So communicating values to the ‘people’ or audience important to you, like customers, investors, and employees is important.

But, how do you arrive at these values? Think of your organisation as a person and describe it. How you describe the organisation’s qualities, the adjectives you use — that shows its values. Google’s 10 core values, like ‘Focus on the user and all else will follow’ and ‘Fast is better than slow’ are quite well known. A major part of the myth building around iconic companies like Google is based on such values. The storytelling around a company is constructed on the foundation of these values. An important exercise here is to also define what you are not or do not stand for.

The culture of an organisation or “the way we do things here” is guided and created by values.

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4. Strategic Objective

It is only when Mission, Vision and Values are consistent that an organisation gets built. But equally important is deciphering what the strategic objective is for your vision. For instance, when Flipkart started out, it may have seemed similar to Amazon. But Flipkart called itself a technology company offering retail, while Amazon’s a retail company with a technology backbone. With the difference in emphasis, it is very clear what the priority of an organisation should be.

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5. SWOT

Now, this is a concept all of us know — the Strength, Weakness, Opportunities and Threats analysis. Once you arrive at the SWOT responses for your organisation, you need to cross check this with the actual picture to truly examine what the startup is good at and where it needs improvement. For instance, if you run a technology company but over 70% of employees are in the Ops team and the tech team is not empowered to scale and do not have resources, calling yourself a tech company is a misnomer. The SWOT helps achieve clarity of thought.

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6. Competitive Advantage

The purpose of a for-profit startup is to win customers, gain market share and stay ahead of competition. Knowing your competitive advantage then becomes crucial. It is the answer to the question of what is your organisation particularly good at. More importantly, what are you better at than everyone else?

The answer to this question is needed to deliver value to stakeholders and to end users. Innovation is the key here and you should constantly ask yourself if you can build or create something that hasn’t been done before to deliver this value. There are many food delivery companies in India, like Swiggy, Zomato and even Amazon now. Are they all the same? What does one offer better than the other? They need to be offering something different and of value and the customers need to know that. That’s when they will have competitive advantage.

But, it is also important to pick your battles. What should you avoid fighting as it consumes too much resources for the value it delivers? Building a competitive advantage at too great an expense (time, effort, people and not just money) defeats the point.

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7. Risk

The ability to assess risks and identify potential future challenges is a highly valued trait in founders. Risks and uncertainties do not come up in expected spheres. So, look at every aspect of your business from the prism of risk assessment. You should answer the following four questions:

What uncertainty exists in your organisation?

What will be the impact of that risk?

What is the likelihood of it becoming a reality?

What can we do to mitigate it?

Risks are ever-present, from key employees leaving to macro economic changes. But being aware of your primary risks and knowing you have a plan to deal with them will give you confidence.

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8. Stakeholder Understanding

I believe a founder should not think like a seller, but should think like a buyer. The difference is empathy. If you think like a buyer, the features that are important changes and that is what you will focus on. The difference is profound and this is one great way of understanding your stakeholders’ needs. You need to answer the following:

  1. Who are your stakeholders?
  2. What is important to them?

It is not a one-way street between you and the stakeholders, of you providing value to them. Say one of your clients is Google or you have a well-connected investor, how can you leverage them?

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9. Communication Strategy

Now that you have all these core ideas and strategies in place, internalising them isn’t enough. You need to communicate to all your stakeholders. What you will share, how you will share and to whom you will share become important.

Plus communication cannot be one-size-fits-all. For instance, your startup goal may be to reach $10 million ARR by the end of 2020. But, it makes more sense to communicate more to your investors, like the caveats to this goal and the assumptions you have made. The value an investor places on your thinking goes up when you are able to communicate to them how you have arrived at the goal. Why is this important? Because it could lead to better allocation of resources.

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10. Identify Gaps

When you have spelt out your strategy and what you are setting out to achieve, you need to identify where the gaps are. What do you need to do to ensure you achieve these goals? I have seen cases where founders have hired highly skilled executives and then realised that they are not the right fit for what they want to achieve. The issue is the founder did not do this exercise and so did not know what exactly they were looking for.

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You could create your own version of a strategic thinking document that is easily accessible — something you can check everyday. Here’s a sample table:

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So you have done this cerebral exercise, now what? The document/table above is a great base to build your more practical and action-oriented OKR (Objectives and Key Results) framework on. There are many steps to creating an effective OKR framework, but that’s another post!

Strategic thinking at its best brings crystal clear clarity of thought to achieve your goals with the given amount of resources. However, this is not an exercise in isolation — founders need to track how closely they are sticking to the path identified. At its core, strategic thinking gifts you purpose, the one element that truly engages knowledge workers. Articulate the purpose of your startup and you have an engaged set of stakeholders on your side.

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