Wednesday, March 29, 2017

Strategic styles at a startup - An insider's perspective

For most part of 2015, I worked as a business analyst for an Accel Partners portfolio startup. It was an e-commerce startup for selling premium goods online, and included premium electronics as well as luxury goods. The description of strategic approaches in Your Strategy Needs a Strategy by Martin Reeves, Claire Love and Philipp Tillmanns elucidated my observations while at the company from a lower level since decisions were usually made by the investors and the CEO. The startup was not doing well during the time that I left them, which through my understanding of the article I can now attribute to the mismatch in choice of strategy to the competitive circumstances.

The startup could be considered an analog to the internet software vendors the authors talk about. This alludes to the surrounding economic weather being high-growth, with low barriers to entry, high innovation rates, and most importantly the relative positions of competitors being in flux. This seemingly necessitated a Shaping strategy, and would’ve from my understanding avoided the impending doom now facing the startup. What really happened was that the company, armed with a hefty seed investment set out with a Visionary strategy.

 This included leveraging a high-seas supply model, in all senses new to the specific market at that point in time. But as it turned out, this could not be leveraged to make the startup a super-successful one. The reason the Visionary strategy failed to be successful was because of failure to understand the unpredictable nature of the market. As it transpired, the main weapon for the company vis-รก-vis the high-seas model, was also being evaluated and employed by the competition, and even though they did not have the same levels of expertise, it cut down most of the company’s leverage. There was also a similar luxury line launched by the bigger incumbents, which wasn’t expected as per strategy. Thus, completely invalidating the visionary approach. A knee-jerk result of this was a shift to Adaptive strategy, which meant that there was a strategy which responded to whatever cards the market was dealing out, as opposed to the dictating terms model initially envisioned.

What I believe would’ve been ideal instead is a Shaping strategy which used the high-seas model as the ‘innovative move’ to cause a radical shift in the market, instead of using it as a build-and-they-will-come strategy, since there clearly wasn’t enough evidence to suggest it was worthy of such a bold strategy. This failure could’ve been avoided if the decision makers had asked themselves the two critical questions to evaluate predictability and malleability, and where they would come short. If this was done along with a sound Shaping strategy to rally an ecosystem of high-seas suppliers, the startup would have charted a clear path to success. This as opposed to the Survival strategy they’ve currently employed, as I recently heard, by replacing higher level management and trimming down the product portfolio.

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