Startup Systems

Little decisions compound and then anchor systems.

Our commitment to defending sunk costs keeps those systems long after they’re no longer serving a purpose.

The early days are exciting. Customers are seen and heard and served. Variations are created and value is produced as problems are solved.

In the early days, the most celebrated employees are the ones who figure out what someone needs and then determines a way to fill that need.

Once the organization gains traction, it’s possible that a short-term profit maximizer will join the team. They push to treat the customers as replaceable flanges, almost identical, income opportunities to be processed. And the employees? They are expenses, not part of a team.

It can seem like the fastest way for a stable business to increase profits is simply to remove some sticks. Process more flanges with fewer expenses. Lower overhead, measure the easy stuff, do it faster.

We spend too much time dealing with shaky towers. The resilience of people connecting, of organizations evolving, of service and clarity and generative work is far too important to be threatened by a few hustlers who insist on measuring the wrong thing.

It’s hard to get a company to do a new thing, and the bigger the organization, the harder it is to change. Companies that are trying to change tend to require an equal and opposite force to overcome the inertia. Large enterprise sales teams are built around signing a single customer, while on the small business end of the market all you need is a few quick calls around an otherwise self-serve solution. When an executive wants their company to change, they often hire expensive, high-status consultants like McKinsey to make a plan that gets everyone on board.

If organizational inertia is one form of resistance that you might want to overcome, what are the business equivalents of simple machines that create mechanical advantage and multiply your input force into a much larger output force? And if they exist, do they have an equivalent trade-off of physical machines where you have to apply the force over a longer distance to gain leverage?

Maybe! Startups often hyper-focus on a small number of customers that share specific traits. This compresses all of the startup’s energy and force into a small space. It’s the opposite of being “spread thin.” The advantage of this approach is that you’re more likely to solve a problem, overcome inertia, and gain adoption by the customers you focus on. The trade-off is that it might be questionable how many more customers you’ll be able to find. I call this a market wedge, where you sacrifice scale for power.

The network effect is sticky and hard to overcome, and as we move the internet of things from our phones to just about everything we touch, it’s worth thinking about resilience, flexibility and the reason we need something in the first place.

Often, we end up compromising about our compromises, maximizing for the wrong outcomes and getting hooked on a new system that forgot what the original system was even for.

When a system is new, few are watching, so a handful of people with intent can design it and optimize it. As it gains in scale and impact, it calcifies at the same time that new tech arrives to codify the decisions that were made when the conditions were very different.

I believe there are seven key phases in SaaS companies’ go-to-market success. I’ve outlined each phase below and hope to elaborate on some of these in later posts and videos. Most of the phases center around a mantra I call “triple, triple, double, double, double”, (T2D3 for short), referring to a company’s annualized revenue growth. (