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Tuesday, August 3, 2010

Five Marketing (and business) Truths Every Start-Up Should Know

Start ups are, perhaps, the most exciting and the most imperiled companies on earth.  They are the products of great ideas, brilliant observations, dogged determination, perseverance and risk. In the start-up stage, everything is possible and everything is critical.  Cash must be preserved while market share must grow, and thus there is little margin for error.  The competition for dollars between innovative engineers and customer-facing marketers is often intense -- both sides win when neither side dominates, but that is fragile balance to maintain even with level-headed executives on both sides.  So, with that, we offer our five rules of the road for marketing in start ups. This has nothing to do with how to market.  It has everything to do with how to conduct yourself as a company that needs marketing to define and drive the strategy of the company.

1. Learn how to make a decision. I know a start-up CMO who participated in weekly executive strategy meetings for six months with the CEO, CFO, CTO and head of sales. Each week they would discuss their ideas and outline them in detail on a white board in an executive war room and then leave thinking they were on the same page. For all the brilliant thinking and ideas, they never seemed to make much progress.  "The board brought in an outside consultant," my friend told me.  "And the first thing he did was ask to attend our weekly executive staff meeting. He watched us for 20 minutes, and then he asked a simple question that left us dumbfounded:  'How do you make a decision here?' "  The great Harvard Business  School Professor, Michael E. Porter has said that strategy is what you choose NOT to do.  As a start-up every choice you make and don't make is strategic. A large percentage of those choices will have a lot to do with spending money on marketing. But you have know how to make marketing a business decision. You have to agree to a process, and the CEO has to be the final arbiter. That's why he or she has more stock than you. 

2.  Spin it all you like, you are not a market leader so don't act or spend like one.  We can't tell you how many early stage companies flush with venture money try to market like leaders. These are usually companies whose executive team has not worked in start-ups before and assumes that the battle and budgets should be waged just as they were in the corporate world. This is a disastrous approach tied to ego, inexperience, reading too many business books or all of the above. The likely outcome is the rapid disappearance of all those VC greenbacks despite your followers and fans, your great press coverage, analyst reports and speaking engagements. 

3.  Protect your cash. If you are new to the world of start ups, you need to understand that cash is king. Do not over spend your marketing dollars.  Use them cautiously and be sure they are aligned against specific, measurable business objectives. If those objectives are unclear, pull that big red emergency break right away and stop your marketing spending. There might be some squealing as you grind to a halt, but if your ad agency or PR agency or social media agency are the only people asking about strategy, something is very wrong and you are about to spend precious cash on tactics that probably are not aligned with what the business needs to do to succeed -- and your investors probably have the wrong CEO in place.

4.  Practice guerilla warfare. As a start up, you are small and insignificant.  Your resources are limited and your business objective is most likely survival. If you have mastered the first three points here, you are in an enviable position.  How do you -- as an underdog -- fight, much less win?  Understanding the competition is part of the battle:  Market leaders usually fight defensively.  Direct challengers are trying to take market share from market leaders.  Smaller, established companies are looking to outflank large companies and early stage companies must find a niche they can own as a base for future expansion so that they can one day move to the next level and outflank the leaders. 

5.  Learn OODA.  This is not a new martial art.  It is what the military teaches soldiers to do in any new situation. OODA is an acronym for observe, orient, decide, and act.  If you are going to engage in battle against bigger, better fortified competitors you need to learn to read the situation and react faster than the next guy to survive. That is what OODA is designed to teach us. You gather information (observe), form a point of view about an unmet customer need and/or the intentions of competitors (orient), then you make decisions, and you act on them. The cycle is repeated continuously. The aggressive and conscious application of the process gives a business an advantage over a competitor who is merely reacting to conditions as they occur, or has poor awareness of the situation.

So, there you have it.  Five practices that will help marketing become a strategic part of the ultimate start up objective -- survival.  Let us know if you have shared any of these experiences or observations in your start up.

1 comment:

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