Startup Versus Big Company

Posted by Robert Norton on

A Comparison of Operations Modes

 

This table compares the two extremes that should be considered when selecting a management model or style for your company. Any company using an inappropriate management mode will be a significant disadvantage and could easily fail.

Big Company
Startup
Hires ahead of the curve, against quarterly and annual plans Hires just-in-time or even too late when the pain reaches an intolerable level, or some sales target is met.
Does everything "right", spending whatever it takes to produce a high-quality result. Does an 80-90% job at less than ½ the cost, knowing that we will have to do it over soon when we learn more (next month!). Always attempting to build a flexible platform to build on. Remaining fast and flexible to alter course on a dime.
Job descriptions are narrow and the phrase "not my job" is heard a lot EVERYONE wears several hats with very broad job descriptions. People with "not my job" attitudes or the capability to do only one thing should NEVER be hired.
 

Continue the table from the previous section

Big Company
Startup
Strategy is driven by very large markets and competitive dynamics and changes rarely. Big fish in a big pond. The strategy must be more flexible and focused on a narrow niche market entry. Small fish in a small pond.
Software development: 100 Developers with narrow job descriptions, product managers, project managers, focus groups, qualitative and quantitative research, lots of customer input to use in design, etc., etc., etc. 10 developers - Mythical man month. We will create a better product cheaper and faster than 10X our staff. Product management is one person with help from anyone who has valid input and lots of creative vision from spending time with customers.
Studies at great cost because changes are costly, slow, and hard = Oil tanker that needs 3 miles to stop and change course Best guess, then adjust, adjust, adjust = heat-seeking missile or speedboat. Change is easy, constant, and inevitable.
Narrow functions and job responsibilities

Narrow value added at many levels, limited authority, big process management (committee to cover your butt)

Everyone wears many hats. Roll up the sleeves. Generally, DO, not manage.

Lots of responsibility, authority, and accountability

Slow decisions. Hierarchy. Four approvals and signatures needed on everything. Flat, flat, flat organization = TEAM. Fast, instant decisions (24-hour maximum if data is in and on imperfect data). One person with experience and domain expertise takes a small risk every day that can be changed tomorrow.
Meetings rarely result in decisions but are part of a long decision process. Meetings should almost always result in actual decisions.
Every decision error costs millions of dollars because the whole organization needs a plan, budget, and commits to huge expenses and plans. Change course on a dime, so the cost of errors is generally very low and changes are relatively cheap to make.

This month's plan is different every month, while on a sharp learning curve as you iterate towards the best solution.

A year is a long time, and often results are measured over this time frame. Three to five-year plans are updated annually. A week is a long time and must result in progress against every key goal. 95% of organizational efforts must go towards short-term objectives needed within 3 months.
$100,000 is a big expense $1,000 is a big expense
Everything has a "policy". Decisions set for the masses by upper management and the fear that "everyone" will want everything everyone else gets. Time invested in setting a policy is a relatively infinitesimal cost and often creates an "everyone is equal" feel, at least within organizational levels. Superstars should be rewarded super pay, though most big companies do not do this well. Pragmatic day-to-day decisions on a case-by-case basis that make sense in the context of that month. Often driven by the cost of existing day-to-day or the current burn rate. The cost of setting a policy can exceed the cost of the wrong decision due to the smaller scale. Superstars must be cultivated and treated as such. Anything that can shortcut time to break even should have its cost compared against the burn rate to decide.
Lots of time spent on politics and other activities that do not create value for customers Minimum overhead, everyone works on creating value for customers
6 to 14 Layers of management, many people with narrow knowledge and skillets must participate in every decision. Drives creation of "committees" to make decisions. Flat organization where everyone is on a team, everyone talks to everyone to get things done quicker. This requires a broader scope of knowledge about the business issues. The buck stops at the CEO for all decisions.
Priorities are set as a result of long-term organizational goals and markets. They are often top-down from upper management, who can be isolated from customers and market and segment realities. Priorities are set based on individual customer needs with a view towards a vision of where the company needs to be in a year or less. Customer contact is a requirement for virtually all employees
Costs and sales are fairly predictable month to month based on my historical data Costs are set by restricted and expensive capital. Sales are highly unpredictable until a track record is established
No one can know 5% of what is going on, though they often believe they know much more The management team MUST know everything that happens as input into rapidly evolving strategies and day-to-day tactics.
9 am to 5 pm job? Maybe not today? Overtime expected to make deadlines. Always!
SAFETY? NOT REALLY TODAY?
RISKY?

SALARY AND NO REAL UPSIDE

BORING!

COG IN A WHEEL

OFTEN FRUSTRATING

BIG UPSIDE

EXCITEMENT

BIG IMPACT FROM YOUR CONTRIBUTION

VERY FULFILLING

 

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Bob Norton is a long-time Serial Entrepreneur and CEO with four exits that returned over $1 billion to investors. He has trained, coached and advised over 1,000 CEOs since 2002. And is Founder of The CEO Boot Camp™ and Entrepreneurship University™. Mr. Norton works with companies to triple their chances of success in launching new companies and products. And helps established companies scale faster using the six AirTight Management™ systems. And helps companies successfully raise capital.

Call (619) SCALE06 or email info@AirTightMgt.com for a complementary strategic consultation.


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