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- Growth vs. Value: Not All Revenue is Created Equally - October 10, 2016
Recently I saw a speech from Jim Collins, the legendary author of Built to Last, Good to Great and, more recently, How the Mighty Fall. He was yammering on about the importance of building a company with “disciplined people” thinking “disciplined thoughts.”
He got me thinking about the importance of discipline in the first few months of a startup. I used to own a market research firm, and we’d do just about anything for a buck in the beginning. You need focus groups? No problem. You need a conjoint study? We’re your guys. Mall intercepts? Let me get out my clipboard.
By offering such a broad set of services from the beginning, though, we never really had the chance to get good at any one thing. We had consultants doing certain types of projects only once or twice a year, so they lacked experience and got intellectually rusty. Plus, we needed all sorts of people to offer such a broad set of services stretching my startup resources to the brink. Eventually we decided to change models and offer one set of research papers to all of our clients on a subscription basis.
The subscription business started off well enough, but along the way, someone asked us if we still did focus groups. It was like a recovering addict being offered a fix. We jumped at the opportunity to do the project. The problem was that people noticed the crack in our resolve and burrowed a large hole in our claim of being specialists. Clients realized we weren’t totally committed to the subscription model and started asking for customization to our reports and one-off side projects. My employees noticed we had strayed from our offering and started accepting other projects—much like a child seeing his parents say one thing and do another.
Pretty soon, we were running two businesses in parallel with our resources being spread across two completely different models. We were half-pregnant: spread thin, cash flow tightened, project quality slipped and deadlines pushed. After a while, with clients demanding custom work, we had to abandon the subscription model and go back to just doing projects.
After a few years, we took another run at building a subscription business. This time, we were firm about telling clients we were not accepting custom projects anymore. Suddenly, we were having much better conversations. Clients stopped asking us to do custom work and started asking how our new model could help them achieve their goals. For every one client who said no to our new model, two new ones heard about our specialization and wanted in. Our salespeople got good at the pitch and were able to sign up 100 enterprise customers as subscribers.
As you’re starting your business, choose a limited menu of services you will offer and don’t waver from it. Remain disciplined and focused from the beginning and your startup will have a better chance to take root.