Every Startup Should Focus on These 4 Things
If you want to change the world, your startup has to grow fast. So why not look into the growth strategy tips of a pair of Stanford MBAs whose startup has expanded its customer base nearly 200 percent a year in the last two-and-a-half years?
The startup is Austin-based Main Street Hub, or MSH--its social-, Web-, and email-marketing service claims to help “merchants get more customers and keep them coming back by spreading word of mouth, extending their customer service, managing their online reputation, and leveraging Main Street Hub’s merchant network.”
Co-CEOs Andrew Allison and Matt Stuart co-founded MSH in 2010. Allison, a Yale graduate with a Stanford JD/MBA, runs its product-development, content-operations, and customer-success functions. Stuart, who has a Stanford MBA and worked at Goldman Sachs, manages MSH’s sales, marketing, and business development.
Targeting the $133 billion local media ad spend market--20 percent of which is being spent on digital/online, MSH raised $14 million in January from investors led by Bessemer Venture Partners to tap that market’s expected 27 percent annual growth over the next four years.
Growing from scratch to 3,000 customers in 50 states with 175 employees across four offices, MSH has its hands full when it comes to managing its growth while sustaining a high level of employee and customer satisfaction.
In a recent interview, Allison and Stuart offered four things you should focus on that could help your startup grow.
1. The customer’s pain. It seems to go without saying that you can’t have much of a business if customers won’t pay you. As a leader, you must spend time meeting with those customers and find a need that competitors aren't meeting.
Then you must rally your troops to do a great job of satisfying that unmet need. MSH did just that--discovering that local restaurants and other small businesses didn't really want to become experts in Internet marketing and managing their social-media presence.
In response to that focus on its customer’s pain, MSH developed a "Do It for You," or DIFY, service using the so-called lean-startup approach. Specifically, MSH built a prototype of the DIFY service, put the prototype in front of the customer, then got feedback on what worked, what was missing, and what needed to be improved. Then the company repeated the process until it had developed a service that customers loved.
2. Your co-founder. Many entrepreneurs seek out co-founders. But picking the wrong one can be fatal for your startup. How do you find a partner with complementary skills who shares your vision and commitment to making it happen?
Allison and Stuart shared goals and values. As Allison explains, “We were both focused on building a company that was for-profit and that had a social purpose. We had strong alignment on values and we decided to work together. We built up trust by making commitments and acting on them.”
Interestingly, they reject the idea that co-founders should work together because they can split up the work. “We're skeptical that co-founders can find each other solely on the basis of complementary skills,” says Allison.
3. Your culture. As a startup grows, founders can’t do all the work themselves. Instead they hire people who they hope will be able to identify opportunities and capture them at least as well--if not better than--the founders would.
As Stuart explains, “A culture is essential to attract and retain talented people. When Andrew and I met at Stanford Business School in 2009, we talked about what the company would be like. We figured out its values and social purpose--to help create thriving local economics. We really wanted people who would care about strengthening local markets. We hire people who are passionate about this mission and share our values.”
4. Adapting. The biggest competitive advantage of a startup over a big company is its ability to attack profit pools faster. That means that if there's an opportunity to deliver value to customers in a new market, the big company will lumber while the startup sprints.
But such quick adaptation to new opportunities doesn't just magically happen. Leaders must have a clear vision for the market and deep insight into customers’ evolving needs. Thanks to these skills, MSH has developed popular additions to its service.
As Allison explains, “We developed our first product then we listened to our customer. We got feedback from every one of our customer touch points--engineers, sales, and customer service. Based on the feedback, we followed lean principles of product development--testing and rolling out prototypes constantly.”
MSH exemplifies the concept of Boundaryless Company Development, which I developed in my book Hungry Start-up Strategy. “We make assumptions or hypotheses and run small tests before we build fully featured versions of a new service. We measure the impact of our prototypes to see whether they confirm or disconfirm our hypotheses. For example, we developed Hub Exchange, a service that lets local businesses that target the same customer--such as an ice cream stand and a toy store--cross-promote each other’s’ products."
Strategy consultant, startup investor, teacher, corporate speaker, pundit, and author of 11 books, Peter Cohan has invested in six startups, three of which were sold for a total of $2 billion. Before founding Peter S. Cohan & Associates in 1994, he worked with HBS strategy guru Michael E. Porter.