The Number One Startup Mistake

For years I’ve been restoring an old rust bucket Porsche 911. The old time Porsche mechanics say you can’t have everything. They will tell you the car can be fast, or it can be reliable, or it can be cheap, but you have to pick just one. You can have a fast engine but it won’t be reliable or cheap. You can have a cheap engine, but it won’t be reliable or fast. Or you can have a reliable engine, but it won’t be cheap or fast.

When it comes to business, there is a similar triangle. As described by Michael Treacy and Fred Wiersema in their book The Discipline of Market Leaders, the triangles three components are product innovation, operational excellence, and customer intimacy.

Many firms try, and fail, to be all things to all customers. It is essential to focus on just one. You can’t have everything. The good news is, neither can your competitors.

Below are some questions to help determine which leg of the triangle might fit best with your firm.

Operational Excellence

• Does your team have or can acquire the necessary skills to be an efficient operating company like Wal-Mart? (For the entrepreneur it may seem intuitive that a small company can be extremely efficient. However, many products and services require significant scale to capture efficiencies.)
• Do you possess the needed negotiating skills to bargain with suppliers?
• Do you have the ability to build or buy the required logistics technology to compete on price?

Customer Intimacy

• Do you have the ability to buy or build the required technology to track and manage customer loyalty data?
• Is there a culture in your organization that truly believes the customer always come first, and the customer is always right?
• Does your pricing model support the necessary margin to maintain and grow customer relationships?

Product Innovation

• Do you have the engineering mentality to create and produce high quality goods?
• Do you have a pricing model which will support the needed R&D for new product development?
• Are you willing to kill 49 product ideas to get to the 1 that resonates with customers?

Remember differentiation is key to a solid competitive strategy. If you scored low in all three disciplines, no worries, that result is not unusual for a startup or small business. Hang in there, the direction will tighten up as you develop your key discipline.

The number one startup mistake? Not picking a singular focus.