Startups are organizations that are steeped with uncertainties accompanied by certain risks attributed to high failure rates. Currently, about 90% of startups fail, with about 10% failing within the first year alone. The reasons for a startup failing have a wide range, from solving problems that no one has, to the lack of funding before they can show traction. These rates notwithstanding, achieving startup success is not impossible, and there are numerous examples of startups that have achieved success; the question is, how did they do it?
Startup success and failure
In an earlier paper, it was argued that successful startups maintain an ethos of continuous experimentation, testing, and learning. Successful startup founders recognize that nothing is certain when establishing a business. There is no certainty that the founders’ ideas are viable, about how important the problem they identified is to potential customers, on the practical feasibility of their proposed solution, and whether the business will be profitable. Rather, all they have are just conjectures.
As a result of this, founders of successful startups tend to approach the startup process as an opportunity to learn. For founders to learn, they must have a mindset that is steeped in humility as they must put aside their prior knowledge/experiences to be inquisitive, experiment, and be wrong. By continuously running multiple experiments and testing different hypotheses, founders of successful startups can learn, validate or nullify multiple hypotheses, and ultimately make decisions that have a high probability of leading to success.
Every startup passes through three stages before achieving success. These are the problem-solution fit stage, product-market fit stage, and scaling stage. The problem-solution fit and product-market fit stages are the riskiest stages, and as such, the stages where most learning occurs for startups. Once a startup can achieve a problem-solution fit, then it is on its way towards becoming successful.
Achieving problem-solution fit for startups
The problem-solution fit stage is the first stage every successful startup must pass through. In this stage, founders are concerned with looking for the best solution to address the problems that their customers have. However, to find the best solution, startup founders must ascertain that the proposed problems they have identified are important to potential customers. The stage comprises four key steps or activities that must be performed before the problem-solution fit is achieved.
State your assumptions: Achieving problem-solution fit typically starts with founders stating what their assumptions are regarding the problem, possible solutions to address this problem, target market that is willing to pay to solve this problem, potential competitors, key channels to reaching their target market, type of market being entered, unique value proposition, and cost/revenue structure. The outcome of this activity is a single-page business model canvas (or lean canvas) that allows the founders to show and discuss their ideas with other advisors for additional insights.
Test the problem assumptions: After this, the founders look to test their problem assumptions by organizing and running empathy interviews with potential early adopters (target customers) who are disturbed about this problem. Empathy interviews are organized to find out what problems are a source of tension and anxiety for potential customers. The interviews allow the founders to test their original problem hypothesis, find out the job to be done, and identify new problems (in the event the earlier assumed problems are found to not be a source of anxiety).
They also allow the founder to find out how the customers have tried to solve the problem and assess the difference between the customers’ current solution and their proposed solution. The outcome of this activity is a refined and validated problem statement that details what the problem is, what job needs to be done, who has the problem, and what has been done or is currently being done to address the problem.
Design the proposed solution: Armed with a renewed clarity of the job to be done and who requires such job to be done, the founders then define a solution that best addresses the concern of the customers. Also important within this step is the realization that the solution design must incorporate a unique value proposition that will make the solution stand out and differentiate itself from competitors.
This activity, which typically signals the commencement of the product design process, is done in collaboration with the product design team who take the inputs provided from the interviews to design a demo/prototype that comprises the unique value proposition that makes it stand out and other functionalities that address the problems detailed in the problem statement. The outcome of this activity is a demo that provides a visual representation of the features attributed to the solution and other features that differentiate the solution.
Test the proposed solution: The founders then look to test this solution design by running solution interviews where they can show the demo to the same group of early adopters. These interviews allow the founders to validate the solution features and check whether it addresses the problems raised by the customers. It also allows the founders to test the unique value proposition accompanying the solution against the existing solution being used by the customers. It also allows the founders to test the potential pricing of the solution.
The outcome of this activity is a validated solution with features that address the problems raised by customers, a validated unique value proposition, and a realistic price boundary for the solution. Following the completion of this activity, the founders achieve Problem-Solution fit, as they have been able to identify the job to be done as well as test and validate the job and their proposed solution to address such job to be done.
Problem-solution fit: starting point for success
Most startups commonly fall into the trap of designing a solution and creating a product that solves an assumed problem instead of a validated problem. While there are a few examples of startups that have succeeded by adopting this approach, the probability of startup failure is high when founders do not look to test and validate their problem and customer assumptions.
To that extent, it is important that all startup founders irrespective of whether they have developed a product or are about to design one, seek to achieve problem-solution fit by going through the processes detailed earlier to increase their chances for success.
With new trends and disruptions arising every day, companies are focusing now on coming up with new innovative ideas before their competitors do. Sometimes, this is done without ensuring whether strategies, operations, people, organizational capabilities, and resources are all aligned together and directed towards the purpose for which they started their businesses.
Of course, companies do know that all of their businesses’ elements should be organized and aligned together to reach their purposes. However, some could get lost in the new trending concepts without reviewing strategies and ensuring that their employees’ behaviors and actions are directed by the company’s strategy.
Having a well-documented strategy that looks great in meetings and presentations is not enough. Company leaders and managers should make sure that the strategy is well-communicated throughout the organizations, starting from the CEO of the company to the most junior person in the company; in other words, it should be aligned vertically and horizontally.
Understanding the definition of strategic alignment
According to Hough and Liebig (2013), strategic alignment “is the process in which the formerly developed strategy is executed and cascaded throughout the organization. It includes the calibration of the organization’s culture, staff, structure and governance with the strategy.” This means that employees need to witness and become aware of their contributions to the organization’s strategy.
Having all business aspects aligned together is a fundamental state for organizational effectiveness. A common agreement about goals and processes is present in a well-aligned company which occurs at two levels: horizontally and vertically. Horizontal alignment refers to the harmonization of strategic goals and performance measures employed in the different business units. Meanwhile, vertical alignment refers to the transfer of the company’s vision and mission with certain strategic goals down the hierarchy.
Not having a strategic alignment within your business is highly costly; you could lose your key talent employees, valuable customers, resources, and time. Moreover, departments might even work in an isolated zone from the company’s road map wherein each department or entity will be working and taking decisions based on their own departmental strategies. Setting a strategy or having a strategic meeting is not a waste of time.
Brightline conducted a survey in 2017 of 100 respondents from large companies and explained that communication throughout the organization and in all directions is fundamental for strategic evolution. The survey illustrated that leaders bolster the two-way flow of information between top executives and people in the company because it is very effective in delivering strategy across the company. David Kamenetzky, Chief Strategy & External Affairs Officer at brewer Anheuser-Busch InBev, explained that “Vertical communication within the business cannot fall into the trap of flowing one way—from the top, it is actually about tapping expertise throughout the organization. You have to do a certain element of consultation and even co-creation. It is about making sure the strategy is and remains right.”
So, what could be done to have a strategic alignment?Below are a few tips that could help in developing a strategic alignment within your organization:
Revisit your strategy and make sure it is well developed and serves the main purpose of the company. The KPI Institute certified course on Strategy and Business Planning Professional can help with this issue.
Conduct a strategy/strategic meeting that includes all relevant stakeholders(leaders, managers, seniors) for developing/updating and executing your strategy.
Make sure that your leadership and managerial styles serve your strategy. You don’t want to have styles that block the execution of your strategy.
Make sure that communication is clear within your organization and it flows in both directions (top-down and down-top).
Make sure that there is coordination between departments through conducting meetings to ensure that their processes, strategies, and priorities are aligned with the company’s overall business strategy.
Events and company meetings that gather all employees across the organization are important. Those events or meetings could remind the employees of the company’s purpose and strategy as well as their future plans, just to make sure that they are seeing the big picture of their roles.
In conclusion, strategic alignment is a crucial element for business success. Business owners should be aware of its importance and this is the most important step for executing it internally. Making sure from time to time that all your employees are aware of the firm’s main purpose, is not a waste of time. It has a direct positive impact not only on your employees but on your overall business as well.
The term value flow analysis is derived from the concept of value stream mapping, which is deeply rooted in activities relating to producing and delivering a product or a service to the customer. James Womack, Daniel Jones, and Daniel Roos first formulated the value stream concept in their book entitled ‘The Machine that Changed the World”. Published in 1990, the book was considered to have launched the Lean movement, which popularized methods of systematic reduction of waste in working processes.
James Womack and Daniel Jones further took on the concept in their book entitled “Lean Thinking,” published in 1996. It defines a value stream as “the set of all specific actions required to bring a product or service through critical management tasks.” (Womak & Jones, 1996, p. 19) According to Drew Locher, the author of “Value Stream Mapping for Lean Development,” “Value stream mapping is an effective and proven tool to assess existing business processes and to re-design them based on <Lean> concepts.” (Locher, 2008, p. 1)
As related to process performance and a potential model for linking processes to organizational strategy, value flow analysis enables the categorization of KPIs through their contribution to the main stages in the value generation chain: input, process, output, and outcome. Furthermore, this distinction allows for a deeper understanding of each KPI’s contribution to the organizational objectives set, based on clear assignation to the following listing:
Input metricsare associated with the quantity or quality of the resources engaged in a particular task or operational activity. Such metrics or KPIs will be generally linked to budgets, human capital, and other tangible assets the organization brings to the production/development process. Input metrics will generally be related to achieving financial objectives, such as maintaining the company’s financial discipline, internal processes objectives like the efficient use of company resources, or people-related objectives, such as the availability of human resources for the organization.
Process metricsareaffiliated with the transformation process that is involved with taking the company’s inputs and converting them into desired outputs for the organization. Process metrics commonly reflect on the activities or actions that are taken to convert inputs into organizational outputs. Process metrics will reflect on the achievement of internal processes objectives as a rule. Quality and time-based considerations will be best reflected with selecting and establishing process metrics or KPIs for the organization.
Output metricsareindicative of the results obtainedwith the designated inputs of the organization. Output metrics or KPIs will commonly reflect on a backward or reversed control representation of the efficiency with which the company’s resources or inputs are used to produce final products or develop end-user services.
Outcome metrics reflect the ultimate effect on the value of the organization’s production and service development processes. Outcome metrics or KPIs will frequently support top-level objectives while reinforcing the company’s overarching purpose as reflected in its strategic themes. Although not generally used with the more common Value Stream Mapping technique, outcome metrics are desirable because they allow for a more valid association with organizational objectives by organizational layers.
Documenting processes by use of the value flow analysis serves multiple purposes. The quality of process outputs and outcomes is directly related to the quantifiable amount of inputs, efficiency, and speed with which they are used in the process of their transformation. As quantifiable measures of a company’s operational performance, KPIs are therefore an effective instrument for decomposing processes by their main value creation stages:
Quantitative KPIswill stand for the measurable characteristics of the inputs that go into the value creation chain. Quantitative KPIs easily relate to an objective appreciation of the amount of inputs or resources the company uses to obtain its desired outputs and positively influence envisioned outcomes.
Time-related KPIswill be easily identifiable with the activities or actions that are undertaken as part of a process. Time-related KPIs will always be process-based, given that they are the only ones capable of accurately reflecting on the speed of the transformation process.
Qualitative KPIswill relate mainly to the outputs and outcomes in the company’s value creation chain while reflecting on the quality of results produced as part of the transformation process. Qualitative measures are still quantitative; however, they possess the additional capacity of reflecting on the quality of operations conducted.
These particular characteristics make KPIs easily responsive to the four stages in the value creation process and are also similar to the characteristics of organizational objectives, which are either quantitative (i.e., Reduce operating costs) or qualitative (i.e., Improve service quality). This, in turn, makes it easy for an organization to assign KPIs to desired business objectives in a concentrated effort of monitoring the high-level strategies or the company’s follow-through on its strategic themes.
The Japanese economy was ruined after the Second World War. To help in the development of the economy, W. Edwards Deming educated Japanese manufacturing companies to make use of statistical quality control techniques. Deming focused on market orientation, people involvement, and advocated the Plan, Do, Check and Act (PDCA) cycle for continuous improvements. A number of Japanese manufacturers practiced his teachings and experienced quantum jumps in the quality and productivity of their products. Buoyant with this success, Japan introduced the Deming Prize in 1951; this can be considered as the first model on business excellence. As the model was introduced with the objective of helping industries to enhance competitiveness in their respective countries, several national governments and industry associations came forward and established national and regional excellence awards based on business excellence models.In line with Deming, the US also introduced its business excellence model (BEM) in 1987, The Malcolm Baldrige National Quality Award (MBNQA). Of course, MBNQA came into existence after the Canada Award for Excellence which was introduced in 1984. In 1984, the Australian Business Excellence framework was also developed, becoming the fourth globally known quality award. The trend was followed in Europe as well and in 1988, The European Foundation for Quality Management (EFQM) was established to help the competitive position of European companies in the international marketplace. This is how the concept of the business excellence model was born and quickly got spread to various countries.
Benefits of deploying BEM in an organization
BEMs administrating bodies based on assessment bestow awards/recognitions to companies judged excellence as per the model framework. Winning such an award is considered prestigious since it enhances the brand image of an organization and its stock/share value. The organization is characterized by high-quality products, environmental and societal friendliness, and customer orientation. Employees morale gets boosted with the organization’s culture of improvement and innovation is renewed. In turn, the practices of an award-winning organization become a benchmark for industries in that country/region. They also benefit the overall economy by facilitating the sharing of experiences and encouraging cooperation among businesses. The external feedback from the examiners provides organizations with objective information about current performance and helps identify areas of improvement. This helps organizations to analyze their present performance and strategize future road maps.
Customizing the BEM for specific sectors
In spite of the advantages and contributions of the BEMs, a range of concerns has been raised by many researchers and practitioners. Relevance and usefulness of assessing an organization (through BEM) against fixed criteria as well as the weight and insufficiency of a balanced set of results are just some of the concerns that have been cited. The most important barriers when implementing the BEMs are the lack of time, physical, and financial resources due to their generic nature. The technologies in the last two decades have also evolved with great pace; especially now with Artificial Intelligence Machine Learning, and means of communication have greatly impacted the needs and expectations of all stakeholders, be it customers, investors, regulators, or employees. The post-pandemic era has also introduced the “new normal” which needs to be adopted quickly by organizations. Globalization, collaboration, e-commerce, stringent environment norms, extreme weathers, and ever-changing macro and microeconomic challenges are contributing to uncertainty which needs to be tackled with resilience and flexibility. These changes have significantly impacted the business world on a long-term basis. On one hand, the world faces challenges related to economic recession and the ever-changing business environment. On the other hand, BEMs couldn’t escape the impact of the VUCA (volatility, uncertainty, complexity, and ambiguity) phenomenon that is affecting most of the globe. The literature review over the last 15 years indicates many gaps associated with the effectiveness of the EFQM model. Authors have pointed out various shortcomings of the BEMs, but in the present context, two important gap areas are listed below:
The BEM is non-prescriptive. The generic and the one-fits-all approach has caused an issue of effective implementation of the model to a business sector. As such, the model demands adaptation to sector-specific modifications.
Companies struggle to imbibe the model. First, the model is difficult to understand. Secondly, it is too time and resource-consuming to implement. Leaders also do not understand it fully, thereby causing a lack of commitment from them. The feedback report, which the organization receives post-assessment based on the model, is normally vague and difficult to decode. Eventually, the action plan that emerges does not bring desired improvements.
The above shortcomings indicate a complex nature of the model and call for alignment of the model to specific industries so that it can be deployed more effectively in that industry. Research and practical implementations globally have pointed out that the customization of BEM to specific sectors may trigger improvements and help organizations to face challenges. The customization calls for tweaking the framework which may include changing the total number of criteria, criteria nomenclature, weightage, sub-criteria, and guidance points. The model will need to be more prescriptive rather than generic. The organization has to administer the model and deploy it on a year-on-year basis to see improvements. The model also remains flexible so organizations can change/introduce guidance points based on the improvements achieved so far. The present and future needs of the business will also be an important trigger for changes in the model whereas global level models take years to get modified.
Conclusion
Business excellence initiatives and tools have been designed as having a generic approach and are ever-evolving. Such tools, although helpful in bringing improvements, have been met with challenges in implementation. One way to tap the full potential of these initiatives is customization for specific organizations. Since BEMs are meant to bring agility and flexibility in an organization, these should be flexible to change and imbibe to cater to different geography, cultures, sectors, and industries.
Some say when you fail to plan, then you plan to fail. This is the reason why you should establish a solid strategic planning process for your company. But strategic planning won’t succeed without the right data. Data gathering may sound simple, but you should not underestimate it. Why does it matter and how should you gather your company’s performance data?
Performance monitoring is a systematic process taken by the management in order to track the company’s performance and drive results and continuous growth. Performance monitoring could also send signals to top management which part of their business operations are failing or working below expectancy. This process plays an important part in the strategic planning initiative.
In order to successfully monitor company performance, the management should be able to gather corporate performance data swimmingly.
Data Gathering
Data gathering in general should start with KPI activation. This KPI activation consists of four different steps: meeting with the data custodians, securing the activation budget, designing the data gathering template, and communicating the template to the data custodians. KPI activation is a step that allows management to develop infrastructure for capturing and managing data.
After KPI activation is done, the next step is the ongoing data gathering process. This is where the management or the performance management team sends the KPI data gathering notification to the KPI custodians and receives the data relevant to performance monitoring. For this step, it is imperative for the performance management team to gathers and centralize the relevant data before checking the data quality.
After sending the KPI data gathering notification, the management or the performance management team could also send the KPI custodians a reminder via email to make sure the data custodians prepare the data needed.
Once the relevant data is gathered, the performance team should check the quality of the data before calculating the KPI results and analyzing the data. The quality of the data should be checked based on multiple dimensions.The main dimensions are Accuracy, Completeness, Consistency, Conformity, Timeliness, and Uniqueness. In reality, the performance management team may find the relevant data does not meet those requirements/quality. When the data does not meet a certain quality, it is preferred for the top management or the performance management team to clarify the data to the data custodians.
Data analysis is a set of processes of examining, transforming, and modeling data to generate relevant business insights that can be used in the decision-making process. In analyzing KPI results, the performance team should use analytics.
The final step of data gathering is to generate a performance report. In this phase, data custodians, the report generator, and the strategy performance team are collectively responsible for compiling all performance results, business insights, and analysis in a certain format for the decision-makers.
In conclusion, a solid data gathering enables decision-makers to set the right company’s objectives for the next period. A solid data-gathering process will help the performance management team provide the performance report required by the top management faster, making the top management adjust the company’s strategy and objectives properly. If you want to learn more about how you could establish a solid data gathering process, sign up for The KPI Institute’s Certified KPI Professional and Practitioner course.
