Efi Ben Artzy is the Global Business Growth and Innovation expert with over 20 years of experience. Efi advises startups on their growth strategies, but he is also a lean management practitioner, helping companies to achieve operational excellence. Today we talk about streamlining startups’ activities as their concealed growth lever.
Agnieszka: Efi, my experience with the startup environment is that the majority of discussions strongly focus on how startups should scale their growth, but there is less talk about those parts of the business models which are related to managing internal activities and securing resources. Obviously without sales business has no fuel to go, but without the right structure of the back office, without processes and operations managed in the efficient way the sales margin can be quickly eroded in chaotic actions. Do you agree?
Efi: I totally agree. I always go back to Eric Reis (Lean startups) definition of startups: “a human institution designed to create a new product or service under conditions of extreme uncertainty”. The word human means there is a team (people) to manage, and the word institution means that there is a bureaucracy – process to manage.
Even in 3 people startups it exists. The process of learning towards proof of concept, of product development, the process of failing fast and learning faster – PDCA cycles (under extreme uncertainty). And people – I always say – great people make great products. Not vice versa. So we need to manage people, to manage their talents (not using people talent considered by the Japanese as the worst type of waste).
I used to work in HP division. They were 10 people startups, acquired by HP in 2000, grew up to be a global giant. I was their global OPEX manager and I spent a lot of time and money solving millions of $ business problems, that could be prevented from day one. You need to grow smart. Not fast – people and process, that is one of the keys.
Agnieszka: Based on your experience, to what extent startups fail on the market because they lack sales and to what extent because they lack the right resources and structure to deliver the promise that has been made to the market in the value proposition?
Efi: Let’s review the data. 90% of the startups fail. Everyone knows that. BUT only 14% of the startups fail because of lack of resources. The rest (28%) fail because of poor idea and market fit, 24% because of poor business models and fail to pivot, 32% because of team issues, lack of focus, ignoring customers, ignoring investors (I have unbelievable examples of those), 42% – bad timing with the product, failed geographical expansion.
In short. If you have a good product that solves real problem, great customer experience (It can be even a minimum lovable product, not only minimum valuable product), if you have a strong diversified business model, if you defined your growth strategy correctly – sales will follow. Sales and growth are an outcome – of effectively aligning the business strategy, process, people and daily problem solving (getting better every day).
Agnieszka: Efi, I fully agree. I am aware of those numbers and for that reason I always advise founders to first sort out their business model, before they go to the market. However, my experiences show that many startups organize the right side of the business model (definition of target audience, right value proposition, right channels) and they stop there. They have the tendency to overlook the importance of the right structure, tasks and workflow management. As a result, they have great product idea which fails to achieve sufficient traction because it is lost in inadequate resource management. In the startups environment we often keep on repeating that we need to be “Jack of all trades”. I agree with this, but one the other hand for an institution to move forward it is necessary that people understand their roles, their tasks and don’t interfere with each other. Otherwise the company will end up in chaos. Would you agree with me?
Efi:I agree. However, it’s not only about interfering with each other. It’s about synchronizing with one another and above all learning together. Speed is important, or else somebody will take your place in a competitive world. So if you really want to perform fast learning cycles and go to Market quickly, you need to synchronize all the “silos” of the company. For example: get the sales, marketing manager and the product manager sitting together, understand what is the customer need, and quickly change and iterate.
Agnieszka: When you start working with a client on putting his back office in order, what do you analyze and organize first? What is the starting point? Is it the structure or processes? Or maybe something else?
Efi: My first step is to create clarity! (read the book “clarity first” by karen martin). I will not mention the name, but in a huge corporation with a great system of OKRs I asked the site manager: “Tell me. If I am an alien from out of space, and I am coming to visit your office – and I see Anna that is working on her computer – how will I know that she is doing the right thing, connected to the strategy? And let’s say I know. How will I know what problem is she facing? Without asking. In one glance. Even with great OKR system I had to ask.
Eliyahu Goldratt and theory of constraints suggest that we need to solve the bottle necks. And that is my first step. I create a very simple management system (lean management system) – actual Vs target, that reveals all the problems at once, in one glance. So, if I am the CEO, or just a guest from out of space and I am coming to visit – I immediately know what is the status of the most important things, what are the bottle necks, what and where are the problems, that prevent me from growing at that moment (see also the book creating a lean culture).
Agnieszka: Are there any organizational benchmarks for startups in the growth phase that you use in your work?
My benchmarks are startups that are already 300 people and have so many problems in the sales process and not even in recruitment and benefit systems. I use negative benchmarks 😊 But I also know people who developed amazing startups (like At-Bay). Honestly, I always say that there are no perfect companies (Even Google has problems, and we all want to be Google, yes?).
My approach – learn what worked and what didn’t work from different companies and different industries:
- Google – OKRs- when you know what to do and what not to do, it generates innovation as well. Spark with imagination and fuel with data, fall in love with PDCA/PDSA and scientific thinking, use design thinking, post and premortem etc..
- Starbucks – don’t wait for 20,000 shops (global growth) just to lose your customer experience and 100,000,000 dollars per year operational problems (like coffee waste). Almost got to bankruptcy.
- Ford motors – use sentences like “we like bad guys, not assholes” to develop new market segments – When they developed mustangs for women. Drive your cars across the USA to talk to customers (Ford CEO).
- McDonald’s – everything is a standard including facing the customers as the operations goes.
- Evian water– use brand experience and emotional experience for high pricing and create
- Apple – start with customer experience and go backwards to technology.
And more and more….
I call it the innovation and growth Kata. Like in karate – you follow the set of basics exercise that makes you ready for the fight (for the kumite). If you follow the right things, you will grow and be ready for the fight of the real world. Because crisis and wars will always exist, you must be strong to survive them. And most of all, try to be better each day.
Agnieszka: Efi, the observation about Kata and basic routine is an excellent point and a great summary of our discussion about the reasons why startups need to have clear structure and processes. Practice and repetition makes perfect. Practicing improves companies’ ability to find more efficient ways of doing things and achieving quicker growth. If you don’t practice, you have no chance to excel. It makes you weak. If you practice, observe, improve – you grow stronger. Thank you very much for this conversation.
Agnieszka Węglarz is an independent consultant, business strategist and practitioner in B2B and B2C, as well as lecturer, speaker and blogger. She has over 20 years of professional experience working as manager in both large corporations and SMEs, where she was responsible for strategy, marketing and business development. She uses her long term executive experience and training expertise to assist companies and their managers in building their business strategy using a workshop methodology. She specializes in business modeling, segmentation, value proposition, sales and marketing strategies as well as consultative selling. She runs her own consultancy business, as well as cooperates with Google for Startups Campus in Warsaw as the business modeling expert and mentor in the international acceleration programs. Agnieszka is an author of many business publications. You can read her writing on her business blog on www.agnieszkaweglarz.com. You can contact her by writing to: agnieszka.weglarz@g2m.biz.pl or directly by sending a message via LinkedIN.
Efi Ben Artzy has been working both as a manager and as a consultant in various companies in Israel, Europe, and the US. Efi has a diverse background in companies’ excellence in various industries (Manufacturing, Services, High-tech, Healthcare, Startups, Etc..). He has been leading operational, digital and business transformations to improve companies’ value to customers; Improving customer experience and success by implementing top-notch processes and better products. Efi is improving complex global operations and developing leaders and managers to achieve business growth and global expansion. Among others, Efi is a mentor in different startups programs around the world, and working with startups from different industries, to achieve innovation and better product development. He also mentor business angels how to evaluate startups for successful investment and support companies in fundraising. Efi is also a member of the board of the EU tech chamber’s (the largest European tech organization) Startups & Finance commission.