As Bob Dylan wrote, “When you ain’t got nothin’, you ain’t got nothin’ to lose.” The converse of this is true, too: when you’ve got something, you’ve got plenty to lose. And in business, that’s why success leads to failure.

How so? It’s simple. If you make a profit, you can get pretty self-satisfied. That feeling can paralyze your ability to react to change.

So is there a way to keep success from leading to failure? Always be ready for change.  

Former Intel CEO, Andrew Grove famously said “Only the paranoid survive.” He was partially right. But the part that Grove missed is important. Paranoia only goes so far. My 162 interviews with founders suggest that start-ups, whose survival is always precarious, are highly attuned to changes in customer needs, technology, and competitor strategies. And they’re great at filtering out the handful of signals to which they must respond from the hurricane of noise.

And hungry start-ups adapt to change in three ways.

1. Fill capability gap to implement your vision.  

You need to have a very clear vision of the capabilities your company needs to prevail in the long term.

You should seek opportunities to acquire companies or hire people who can fill in the gaps between your vision and your current capabilities. You should build relationships throughout the industry and try to create opportunities to fill these capability gaps in order to accelerate the realization of your vision.

Yesware makes a browser extension to Google’s Gmail that lets salespeople report on their activity more accurately, so public companies can make more accurate sales predictions. Yesware’s CEO, Matthew Bellows, wants to turn it into a big company rather than falling into the trap of the typical Boston start-up that gets acquired by a California firm. To do that, Bellows wants Yesware to have millions of users in the next year or two.

To that end, Yesware announced this week a $4 million Series A round of funding. Moreover, Bellows wants to boost Yesware’s capabilities in outbound marketing, viral growth among sales people, inbound marketing, and expanding the platforms on which it runs.

2. Track market feedback.

You should be effective at measuring and observing leading indicators of change in your industries.

By picking the right measures--for example, changes in the rate at which existing customers are recommending their product to others--you can anticipate opportunities and threats. By getting a lead on competitors, you are better positioned to change strategy to avoid the threats.

iZettle is a Norway-based service that lets people in Europe accept chip card payments on their smart phones. CEO Jacob de Geer has a very clear north star by which he navigates the company. As de Geer works toward his vision of expanding iZettle into Asia, Latin America, and Europe, he also aspires to provide his customers a way to analyze their huge quantities of transaction data.

De Geer adapts by listening to users through social media and in-person conversations as a way to identify the changes that require iZettle to respond. For example, in February 2012, when iZettle introduced its product in Denmark, Norway, and Finland, de Geer expected to find that merchants in each country would adopt iZettle in different ways, especially since many small businesses that used traditional Chip-and-PIN readers would view iZettle as a lower-cost alternative.

As he told GigaOM, “We’ll see totally different usage patterns. The cost of a reader without the PIN pad is much lower, which makes it appealing for smaller merchants like chiropractors, carpenters, or anyone still bound to cash, checks, or invoices.” 

3. Boost performance on key customer need.

You should seek to stay ahead of competitors by continuing to make a product more valuable to customers.

ET Water Systems builds systems that make far more efficient use of water.  According to CEO, Pat McIntyre, “Our customer is the end user responsible for the water bill for a municipality or landscape management firm. Their pain point is wasting water and money and polluting water.”

Thanks to its investment in R&D, ET Water Systems is improving its service to give customers more of what they want. And that improvement is boosting its growth. As he said, “We are growing through investing in R&D which is what our investors want us to do to stay ahead of competition. This results in systems accessible by smartphone that reduce 20 to 50 percent of wasted watering and generates customer payback in under two years--yielding a 230 percent return on investment. Our designers work in the field with customers to understand their activities. With this insight, our designers can develop new products that boost customers’ water use efficiency.”



Published on: Jun 26, 2012
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