Tech Startups: Strong and Sturdy, Yet Social—Kind of Like a Barstool

May 14, 2018

What does a successful tech startup have in common with a piece of furniture? Quite a lot.

I know startups. You know, tiny, scrappy companies built on a novel idea, lots of sweat equity and late nights/long hours—and low-paying, humble beginnings that can pay off big-time in the end. Been there, done that—I've founded, built, and sold several startups with profitable results, and I've also joined other entrepreneurs' startups as an executive to help them grow. Prior to my stint as a serial startup entrepreneur and leader, I also worked in and around huge corporations as a management consultant with Deloitte.

One commonality I found across the traditional corporate world and the decidedly un-traditional startup world is the importance of relying on a sturdy, reliable framework for business success. Every successful business relies on some kind of framework that supports the overall objectives and products of the organization. Just like a car can't run without a chassis to support it, and a skyscraper can't rise into the stratosphere without a framework of steel girders to hold it up, a business can't run without a solid plan and system in place that guides its trajectory.

I am Yale MBA, which is probably about as traditional a business background you can get. Suffice to say I like frameworks that are reliable, predictable, and proven to work in the real world, time and time again. Even the most unconventional startups I've worked in still had a steady framework and solid business plan. Having seen many successful startups through different development and growth stages in my time, I've discovered that tech startups which reach the next level of success tend to center themselves around three main prongs: Business, Product, and Engineering. Each one of these prongs are roughly equal to the other, with a healthy tension between them, with one prong slightly dominating over the others (for example, I view LinkedIn as Product-Driven, while most would agree that Google is Engineering-Driven).

By having three strategies constantly supporting one another, successful startups are like a stool. I'll even go a step further and say they're like a barstool at your favorite watering hole—because just as a barstool keeps you centered and upright even if you have one too many beers, a balanced, three-pronged business approach gives you the baseline support and stability to branch out and take the risks necessary for a successful startup, while offering additional support. You've probably noticed that if a barstool has one leg that is a little lopsided—even to the point that the stool becomes wobbly—the other two legs are there to capture your weight and keep you from toppling onto the floor.

Here's a simple graphic of the Three-Legged Business Stool: Business, Product, and Engineering:

As you can see, the stool isn't held up simply by the points where each leg meets the ground. There is also a healthy tension between each leg, as indicated by the arrows. As I mentioned earlier, there is also a dominating leg that determines not only defines the overall culture of the company, but also the type of business features, products and technology that the company develops.

In the above graphic, the B for Business is at the top of the triangle. An example of a Business-dominant startup, in my opinion, is Uber. While the Uber app is a Product that requires Engineering, the main reason anybody uses Uber is for its Business model—which is offering ridesharing transportation at accessible price points all over the world. See where I'm going with this?

On the flip side, let's go back to Google, which I mentioned earlier. I consider Google an Engineering-driven company, where the focus is building technology and the culture entirely revolves around the software engineers' needs and wants. By focusing on Engineering, Google was and is able to build a Business that offers innovative Products (the Google search engine, Google Apps, and ancillary content sites like YouTube) that have a massive impact all over the world.

As a third example, let's talk about LinkedIn. I consider LinkedIn a Product-driven company. LinkedIn is not focused on building features or technology. Instead, they focus on building great products—namely, their career communications/media network (free and paid versions) and their subscription-based professional training applications. While LinkedIn does build some unique technology and features for its communication platform, they do so only in support of the career-based networking products—and any technology they develop is designed with that use case in mind, rather than as a standalone product. From an organizational and cultural perspective, Product-driven companies like LinkedIn tend to see their in-house product managers as the “mini-CEO” of their own product (for example, LinkedIn's Notifications or Premium subscription features). These product managers (or mini-CEOs) bring in engineering and business resources as needed for product enhancements and do the necessary coordinating between these resources.

Let's take a step back and return to Business-driven companies for a moment. While next-gen companies like Uber definitely fit into this category, many Business-driven companies are from the older generation of business-services models. These companies focus on business needs to inform their product roadmap and then build their business offerings (and pricing) accordingly. This strategy results in a strong resource focus on the business service itself—in Oracle's case, cloud-based software and platform support services. Although Oracle is quite different from Uber in that it is a more traditional software company that sells its products to businesses rather than selling rides to individual consumers, I would still consider Oracle a Business-driven company under this framework, a software-as-service Business-to-Business (B2B) model. Whatever their model, Business-driven companies have a great eye for corporate development opportunities by making strategic acquisitions and integrating those acquisitions to help them further dominate their business category and stand out against competition.

Turning now to the tech startup community, anyone who has spent much time in the Bay Area can tell you that most startups are Engineering-driven these days—at least in the beginning. New tech companies are excited to “crack the code” on a specific business or social problem they would like to solve via an innovative use of software design, applications, or interactivity. Sometimes "cracking the code" solves a business need in and of itself, but other times the engineers are just excited about the intellectual challenge of building a novel technology application. As the technology evolves and the team develops, however, questions often start arising about that technology. You'll hear conversations around the office that sound a lot like this: "Is this tech is going to be a feature? Is this going to be a product we can sell? Are we even a company at all?" These identity crises are a normal phase of the startup development process, but not all startups get through this phase successfully. in the long run. The element that separates the startups that become the next Googles or Ubers of the world from the ones that look for a quick sellout and exit into anonymity is vision. If you're ever considering investing in or working for a startup, ask yourself: do they have the vision to push through those growing pains and identity crises to develop a truly breakthrough product that stands alone—or maybe even revolutionizes an entire sector? The answer can make all the difference in whether it's a successful business venture or not.

Lastly, it's important to note that the most successful startups learn to shift their business focus and the dominant leg on their proverbial barstool—in order to move to the next stage of growth and development. A startup that was Engineering-driven in its infancy will eventually need to move its focus to being Product-driven as it grows and matures, thus applying their technology to specific use cases and user experiences. In my opinion, any company that aspires to being high-growth must eventually become Product-driven. Any technology company that builds great products and fulfills a nimble, customer-driven use case (Business-to-Business or Business-to-Consumer) with compelling user experience will succeed.

In that way, in the final analysis, successful companies are socially adept and sensitive to the needs of their customers and users. Just like the charismatic, confident, intriguing person sitting on the barstool on a Friday night who never has trouble getting a date or making a new friend, successful startups start from a solid foundation but distinguish themselves with a mixture of novelty and compelling innovation.