“I have to do everything myself, and I don’t have time to fix all of this.”
The CEO who said that to me was a successful entrepreneur who had grown his startup into a 25-person marketing company serving hundreds of brands. Our technology gap analysis had turned into more of a venting session about the growing pains he was seeing in his organization. He was losing sleep about his company’s challenges arising from:
A week later I found myself in a similar conversation, this time with a VP of Engineering looking for an outside perspective. By most measures, his 350-person SAAS (Software as a Service) company was a success. But behind the scenes lurked dysfunction common to many companies, especially those that have grown by acquiring other companies. My friend was aware of these issues but was struggling to make a business case that would persuade his fellow executives to address:
What did these executives have in common?
They had accumulated strategic debt.
If “strategy” is how you define and implement a framework for success, strategic debt is what accrues when you neglect the necessary maintenance of that framework.
strategy = framework for success
strategic debt = deferred maintenance of that framework
I often speak with leaders struggling with strategic debt, and I’ve faced it myself: stuck in a cycle of endless meetings, fighting fires, continuously being in reactive mode. Or struggling to get work done across departments, each with their own competing priorities.
As a leader, at one time you may have invested a fair amount of time and thought in your organization’s strategy. Over time, that initial investment loses value. Your original framework for success drifts from the framework your organization needs today. You accumulate strategic debt.
You know you have strategic debt when:
What examples from your organization would you add to that list?
Strategic debt is comprised of the structural inefficiencies and gaps that grow over time by prioritizing short-term needs over long-term needs. Each decision may have been locally optimal — but the accumulation of these decisions suffocates your organization’s ability to perform. That’s because your people/process/priority infrastructure is no longer organized optimally for your current needs.
What gets measured gets managed
Strategic debt can be difficult to address because it is squishy and hard to quantify. To quantify strategic debt you have to measure decision-making and operational performance across the organization over a long period.
Because it’s hard to quantify most strategic debt, it can be hard to justify spending time to address it. But not all strategic debt is hard to quantify. There is a type of strategic debt commonly found in software development that is highly quantified. Not surprisingly, there is also a commonly adopted approach to addressing it.
Even though software development is creative work, that work is typically decomposed into discrete tasks. Software teams estimate each task’s size independently and log their workflow from initiation to completion. They track productivity and efficiency through metrics that are a natural byproduct of this process. (The “Accelerate metrics”, such as deployment frequency and lead time to deploy, are a popular example.)
Because software development workflows are highly quantified, it’s easier to recognize the effect of strategic debt on productivity — the drag as debt accumulates, and the boost with its elimination. In turn, that makes it easier to persuade individuals and organizations to address strategic debt, or as it’s commonly called in technology organizations, “technical debt.”
In fact, the prevalent approach to addressing “technical debt” can be used to address any strategic debt. That approach is to stop addressing strategic debt as a crisis — and allocate a recurring budget for it.
In software development, 15-30% of a team’s capacity is typically reserved for technical debt. An appropriate budget for your organization’s strategic debt may or may not be in that range. Instead of a percentage, your “budget” might be a requirement for managers to include one strategic debt OKR Objective in their quarterly OKRs. However you allot time and resources for strategic debt, what’s important is that your budget is greater than zero.
Let’s say you’ve decided to reserve a budget for your organization’s strategic debt. How can you spend your budget effectively to reduce that debt? Here are some examples:
And What It Tells Me About You as an Entrepreneur
The conventional wisdom about startup pitch decks is that the most important sections are the team and money slides. And the conventional wisdom is not wrong. Research shows that investors spend more time on these slides than any others.
But having met hundreds of startup entrepreneurs (and their pitch decks), I find I can glean a lot of information about you as an entrepreneur from your competitor slide. Here’s what your thoughtful competitive research tells me, as captured in your competitor slide or simply from a conversation with you about your startup’s competitive landscape:
You Do Your Homework
A comprehensive, detailed list of competitors shows me, first and foremost, that you dig in and do your homework. Competitive research is essentially research into how much of your opportunity has already been seized by others, not a topic most entrepreneurs are passionate about immersing themselves in. Your diligence about competitive research tells me that you’re a professional about the less gratifying tasks in an entrepreneur’s portfolio. I can also expect other facets of your strategy will be similarly backed up by substance and attention to detail.
You’re a Realist
If you’re a startup, by definition you are trying to prove your startup hypothesis. Generally speaking, your hypothesis is that customer demand will scale. If you’re really early stage, your hypothesis may be that customer demand exists. Some of the data crossing your desk will be beneficial to your startup hypothesis, and some, such as evidence of a strong competitor, will be detrimental.
How do you handle data that doesn’t favor your business case? Do you filter it out? Do you bury it? Is your head in the sand (or the clouds)? When you share thoughtful research into your competition, including strengths as well as weaknesses, that’s a strong signal the answer is “no”.
You’re Up for a Challenge
There are many bummer days in an entrepreneur’s life. The day you say to yourself about the competitor you just looked into, “Dang, they’ve actually done a pretty good job of this” is one of those days. If you’ve properly identified and acknowledged the competitive pressures facing your startup AND you’re still excited about your prospects, that tells me you’re more likely to be in it for the long haul. Which is a must for any successful entrepreneur.
You’re Not a BS Artist
Entrepreneurs should be able to paint a compelling picture of their startup. I worry if you haven’t. But I also worry how much of that picture is embellished.
When you acknowledge your competitors’ strengths, you give me confidence that you’re not trying to put a positive spin on everything. “We’ve figured out how to design a smart phone people will want to use, unlike those clowns at Apple and Google” — not what I want to hear. Unless I’ve worked with you before, I’m looking for reasons to believe your narrative. Your clear-eyed competitive research is a very good reason.
Your Opportunity is Real
Nobody can be an expert in every domain. Like many others I’m a “T” — shallow in a lot of areas, deep in only a few. I’m probably not an expert in your particular niche and its ecosystem at this moment. I bet most investors aren’t either. More than your idea or your optimistic financial projections, a few minutes looking into your competitor list gives me a quick education on your space, the opportunity, and your (or anybody’s) prospects for success.
Even though I’m a technologist, one of my favorite classes in high school was social studies class junior year, where we debated different sides of an argument (often not the side we started out believing). Competitive research is like a pro/con debate on “I have a great startup idea”. Use it to challenge your assumptions. Your startup strategy and execution, as well as your pitch deck, will be the better for it.
This post is also featured on The Startup. It was originally published on Shulman Rogers NEXT.
The Epic Software Fail was Management‘s Fault