Startup strategy (in times of crisis)

Unlocking Potential is a newsletter by me, Kiko H. de Mello, CEO of Qulture.Rocks

Hellloooooo

How's quarantine suiting you?

At Qulture.Rocks, we are on work from home mode since last Thursday when we learned that one of our Q.Players had contact with a friend that could be carrying the virus for COVID-19. He had attended our office the day before and had contact with many other team members, including me. So we took fast action and sent everybody home, and I, personally, had a mask on for almost 48 hours, until we confirmed the friend tested negative for the disease [1].

Anyway, this has been an intense year to date. I'd been, since late January, working on our strategy for this year and since last week I am now basically revising everything (I'll tell you what “everything” means in a bit".) Anyway, I really mean everything. But I've learned a ton in the process and wanted to share some of these learnings with you.

First, I'll talk a bit about strategy and strategic planning (stuff I learned since this strategy binge started). Second, I'll briefly talk about how COVID-19 affected our strategy (and how it should affect yours) without getting into specifics of our strategy. I really hope you enjoy it!

A tiny (I hope so) bit of what I learned about strategy

After a lot of reading and searching, my best attempt at a definition for strategy is “the rationale behind the series of steps your organization's leadership plans on taking to get from where it is now to where it wants to be in a given timeframe.”

Let's break this definition down a bit [2].

A strategy is a rationale. It is an explanation of what steps leadership plans on taking, and why these steps are the optimal combination, where “optimal” means “that maximizes the chances of getting there.”

It is a rationale that is usually developed by leadership, and then shared with the rest of the company for buy-in and alignment. But it is primarily a leadership thing. So the fact that a strategy is not thoroughly rolled-out (explained and unfolded into OKRs and projects so that everybody in the company knows what to do and what the priorities are) doesn't make it less of a strategy.

‘My best attempt at a definition for strategy is “the rationale behind the series of steps your organization's leadership plans on taking to get from where it is now to where it wants to be in a given timeframe.”’

Strategies involve a plan for a series of steps. A plan is more concrete in the short-run (therefore, among other consequences, we can “turn it into” OKRs), and more abstract in the long-run. But it's still a plan. The steps on this plan are a progression of choices around geographies where the company will act, products and services it will offer, go-to-market channels and MOs it will use, customers and jobs-to-be-done it will solve, and so on and so forth (a great framework on these “choices” is Playing to Win, by A.G. Lafley).

Finally, we use strategy to get from point A to point B, where point A is, ideally, where we are now, and point B is where we want to be at a given time in the future. “Where we are now” is given by a thorough analysis of how your company is doing, and “where we want to be” is a mix of what the leaders want to accomplish, what shareholders want and need to accomplish, as well as what other stakeholders have in mind for the business, and is usually articulated in a set of vision statements each pointing to where the company will look like at different dates in the future.

Don't worry: we'll get into more detail on most of these topics ahead.

The purpose of strategy

As we've seen before, strategies exist to maximize the chances of us getting from point A to point B, where point A is, ideally, where we are now, and point B is where we want to be at a given time in the future.

A good strategy maximizes the chances of success because it balances the short-term, or dealing with the current reality of the company (given by a well-done SWOT matrix), with the long-term, which is what the company is likely to face in the future, as other competitors and new entrants deal with their SWOTs today. It deals with today and opens up great doors for tomorrow.

How strategy is communicated

Strategies live in strategic plans. These are slide decks or long-form written docs that explain all the components of a strategy (a great framework of what a strategic plan looks like comes from The Executive Guide to Facilitating Strategy from Michael Wilkinson.)

A good strategic plan has to have at least the following:

  • Why the company exists (the “why,” or the “mission,” or the “purpose”)

  • Where the company is now (a well thought SWOT matrix suffices)

  • Where the company wants to be in the future (a set of vision statements), and finally

  • How the company will get there, which is the plan per se

The plan begins with OKRs and projects the company will execute on the short-term (everything from a month to a year) and that should be tightly related to the stuff that arose from the SWOT). It ends with the set of choices the company will be making in the future, in a loose format (no hard dates needed). For example, we're going to be #1 in the US market (as reflected in our 1-year vision and current set of OKRs and projects), and after that, we plan on expanding first to Europe, because of X, Y, and because it helps us make our next geography move, which is to expand to Latam, and so on and so forth.

Where we are now

As we've seen, the “Where we are now” part of the plan (and the strategy itself) comes from a well-executed SWOT matrix.

“Strategies exist to maximize the chances of us getting from point A to point B, where point A is, ideally, where we are now, and point B is where we want to be at a given time in the future.”

I first learned about SWOT matrixes in college. We did a bunch of them in our marketing class, which was essentially regarded as BS by everybody (and, curiously, the only class I was ever offered a TA position in.) Anyway, at first, I basically wrote it off as more BS. But after using it with Qulture.Rocks, I've come to really appreciate it.

The SWOT matrix consists of strengths, weaknesses, opportunities, and threats. You should start with your opportunities and threats, and even break them down into “short-term” and “long-term” if it does help.

Opportunities and threats should be generally external to the company, meaning they should exist regardless of your company's existence. “Would this be true if Qulture.Rocks didn't exist?” is the way to test them with acid.

Another key tip is to rank both Os and Ts in terms of their potential impact on the business (size of impact * probability of happening). It would look like this:

After you have Os and Ts all sorted, the next step is to brainstorm and rank your strengths and weaknesses, which should generally be internal to the company, meaning inherent to it, and not dependent on anything outside of it. Strengths and weaknesses come from may places. A good source is your debriefing from past OKR cycles, where you've learned stuff that worked and didn't work and found out why. It should also come from benchmarking, customer feedback, employee feedback, competitor analysis and from a very thorough and realistic diagnosis of the strength of your company's moats [4], which should either be a strength (improbably) or weakness (probably.) This section of your matrix should look like this:

That's it. Now you have your “where we are now” section. You should think of this part of your plan as a high-resolution image of what the terrain looks like right in front of your company (using space as a metaphor for time :).

You should be going from this:

To this:


Where we want to be

As we've also seen before, the more into the future we get, the more fuzzy things get, so we don't really know where we want to be in the future except for some general metrics and statements. In an ideal world, our view of the mountain that represents our company's journey would look something like this:

Instead, the future is much fuzzier, so that it looks more like this:

Anyway, there has to be some articulation of where the company wants to be in the future. That's what we call a vision. Visions usually have due-dates and are as concrete as possible without being stupid. They should read like you describing how the company looks like at the due date, let's say 10 years, as if you were there, seeing it yourself. An example:

It is now 2030, and we:

  • Are leaders in market share on all 5 countries we operate in

  • Have made our IPO and have solid stock performance since then

  • Have the most satisfied customers among our top 3 competitors

  • Etc.

But beware: a vision is not a mission.

If a vision is where we want to be in a given time in the future, a mission is why the company exists. We at Qulture.Rocks exist to unlock human potential. It's not where we want to be, but almost a fundamental guiding principle that should guide everything we do. We won't, for example, get into the b2b banking space, because our mission is not to disintermediate access to capital nor to democratize great funding alternatives. (You can read more about missions and visions on OKR, from Mission to Metrics, our book).

My take is that there should be two visions on your strategic plan: a one-year vision and a 10-year vision.

How we'll get there

The last part of a good strategy (or strategic plan, which is the document that explains the strategy) is “how we will get there,” where there means our vision(s).

The first part of “how we will get there” is derived directly from the SWOT matrix, and will suggest a path of action in the short-term. Pundits suggest that a SWOT matrix should produce four generic strategies from the interaction of quadrants:

  • Strengths and opportunities produce growth strategies

  • Strengths and threats produce external development strategies

  • Weaknesses and opportunities produce internal development strategies, and finally

  • Weaknesses and threats produce survival strategies

A graphic representation of the four generic strategies would look like this:

I don't really like this model for two reasons: first, I think you can't call these “strategies” since the product of the model produces only a fraction of what a strategy is. Cosmetic. Second, and most importantly, I think these SWOT themes, as I prefer to call them, should be the product not only of the interaction of two quadrants, but of all related quadrants, so that an opportunity may have both related weaknesses and related opportunities, and so on. A great way to find these SWOT themes is to first list all the SWOT factors (as each S, W, O, and T is called):

And then to cluster them in themes:

A SWOT theme looks like this:

We need to exploit the high-price of our competitors (O) in this current crisis (O) by leveraging our self-service product (S) and working on scaling our support team (W).

Now that you have your short-term SWOT themes, you have maybe 80% of what your short-term strategy will look like.

The second part of the process is to look at these themes and prioritize them based on their relevance (you want to put things that might kill your company first and foremost) but also on how tackling these themes will position your company for the future.

In the example above, “we need to exploit the high-price of our competitors (O) in this current crisis (O) by leveraging our self-service product (S) and working on scaling our support team (W)” could maybe put the company in a worse future position if its 10y vision is to be the software of choice of the Fortune 500, a customer base that doesn't really do free trials and freemium software. “Could maybe” are very intentional, and I hope skillful, use of qualifiers. There will be very low sureness in the process. That's the beauty of strategy. Anyway, this type of important discussion is a big part of what makes strategic planning valuable.

The “how we'll get there” part of your strategic plan could articulate some of these future moves on the form of milestones that the company wants to achieve throughout its journey. Here, guiding principles also help, even though they are hard to get right and shouldn't be mixed up with cultural values or principles, which are behaviors the company wants to reinforce. Anyway, I won't get into so much detail for now, and will probably write more about strategy and strategic planning in the near future.


How COVID-19 affected our strategic plan

Now for the second part of our conversation, we'll get into how the current pandemic affected our strategic plan.

I told you I had to scrap most of what I had done in the form of a strategic plan since the end of January. More specifically, I kept the “why we exist” and “where we want to go” parts mostly intact (there were some changes to the one year vision,) but had to redo “where we are now” almost from the ground up, and therefore “how we'll get there” in the process.

The biggest change took place in the SWOT. The COVID-19 threat, which wasn't even in our threats section, got in and VERY high in our SWOT matrix. Pari passu, I had to deprioritize other stuff I thought were important threats because this new threat is, on the one hand, much more probable and impactful than other threats, and also because our competition-related threats are also going to change based on the probable response of said competitors to the pandemic.

Following the threat reprioritization, we also had to revise strengths and weaknesses, and how they were ranked since their primary ranking factors are their relationships to the Os and Ts on the matrix. We also did that.

What followed was a set of SWOT themes that were significantly different than what we had before, and that, behold, was more conducive to our longer-term choices, which felt really weird but ultimately great!

Anyway, I presented our new strategic plan on Monday at our bi-weekly all-hands meeting and got praise for it. But most importantly (of course I loved the praise), I think the company is more aware and aligned around the short-term aspects of our strategy, and ready to start planning it more in detail (using OKRs and projects) and finally executing. This is a screenshot of my Zoom[5]:

Replanning OKRs

After we've communicated the strategy to everyone at Qulture.Rocks, we're working on a mostly new set of OKRs and projects that are more aligned with our current strategy.

It started with team meetings where people brainstormed changes with the help of our head of professional services, Renata Monteiro (who also helps customers with this stuff). This afternoon I'm revising everybody's OKRs with said teams so that we can get to a final_final_vf_dont_change set by Friday.

The idea is that everyone knows what their (cristal clear) priorities are going forward. We then poll every Q.Player (that's a new Qulture.Rocks feature) on Mondays to see what they think their 3 priorities are, and let leaders adjust and align accordingly.

I'm terrified about this crisis but confident that with an amazing team and a lot of alignment, we'll get through it.


That's it.

Thanks a lot for your time and patience.

Have a great one, and stay safe!!!

Kiko

PS: I do think all post-product market fit startups need a strategy. I don't agree that strategy and Lean Startup, for example, are opposites, but I'll get to that in a later post :)


Footnotes

[1] Slightly imprecise. The tests currently out there don't test the presence of the disease, but either the presence of the virus or the presence of antibodies, which are a slightly different thing.

[2] I refuse to use “unpack that” or “double click on that.”

[3] Yeah, I can see how a creative mind could spin that a bank was in the business of “unlocking human potential,” but you get my point.

[4] You can find more of my thinking around moats in A Genealogy of Network Effects. Also here in audio form.

[5] Cameras ON make for a much better experience running remote meetings!