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Thinking Like a Start-Up

  |  October 3, 2001   |  Comments

Marketing in an ever-changing world of uncertainty calls for every company -- even large ones -- to adopt the perspective of two guys in a garage.

"Say, Bill, why don't we put the workshop in the garage?"
--what David Packard might have said to Bill Hewlett

To be a successful marketer in a down economy, you have to think like a start-up.

Bill Hewlett and Dave Packard started the Hewlett-Packard Company while the world was still in the throes of the Great Depression. Jobs were scarce, and money was scarcer. And Bill and Dave had the crazy idea of starting an electronics company in Palo Alto, CA, a place better known for orange groves and farms than industry. Because they didn't have a lot of money, they started their company in their garage, and the rest, as they say, is history.

Bill and Dave were successful for a lot of reasons. They were talented. They were lucky. They pioneered enlightened management with their HP way. But the bottom line is that they succeeded during the worst economy in the history of the world by thinking -- and acting -- like a start-up.

Today, as the world stands on the brink of recession, Bill and Dave's start-up mentality is just as important. Think like a start-up. This advice may seem simplistic, but it is essential -- and little followed.

Throughout history, successful entrepreneurs have followed a few simple rules, such as minimizing your costs and focusing fanatically on revenue-generating activities. These time-tested rules apply to any marketing problem, from promoting your daughter's lemonade stand to managing channel sales for a semiconductor original equipment manufacturer (OEM).

A disciplined marketer forces herself to think like a start-up even if she works for a big company -- especially if she works for a big company.

Big companies are run differently from start-ups. Neither style is better or worse than the other (I may never want to work for a big company, but there are plenty of people who would, and, furthermore, who would hate the entrepreneurial existence), it's just that each approach is adapted to a particular circumstance. Think of it as managerial Darwinism.

Big companies think strategically; start-ups think tactically.

A big company has to focus on big successes; small victories are mere rounding errors in the quarterly filings. That means placing bets on strategic initiatives and having the patience to wait for results. Hewlett-Packard spent billions over several years to become a PC powerhouse.

A start-up has to focus on getting quick revenues. This often means settling for smaller but more readily attainable wins and avoiding any projects with long payback periods. But having the flexibility to win small victories allows a start-up to try a lot of different things and experiment its way to a big success.

As a marketer, you should focus on winning rapid tactical victories. Since the rules are changing so rapidly, try a lot of different tactics. Feed more resources to the winners, and cut off the losers. Your strategy should be to adjust to the changing markets.

Big companies invest for the long term; start-ups minimize costs.

A big company will make capital investments that reduce the variable costs of manufacturing a product with a five-year life cycle.

A start-up will manually process a transaction for two months to save the $1,000 it would cost to automate the process. A start-up simply can't bet on being in the same business in five years -- or being in business at all. The best way to succeed is to minimize fixed costs and up-front expenditures so that you maximize your option value.

As a marketer, you should avoid large investments that assume a stable environment. Instead, invest in flexibility, especially in your staff. And keep those costs low.

Big companies believe what they read; start-ups believe in the cash register.

A big-company manager will often make decisions based on what she reads in the business press or sees on the news. The big-company mentality says that the world is a relatively orderly place and that the wise businessperson listens to the experts.

The start-up entrepreneur knows that there are no experts, that all the analysts are full of bullsh*t, and that she can only believe what she knows from experience.

As a marketer, take columns like this with a grain of salt. If someone tells you what to do, try it out, but don't commit to a strategy unless your experience bears it out.

A lot of people are more comfortable with the big-company, big-picture philosophy. Life is more reasonable, more manageable, more dignified.

Unfortunately, applying that philosophy during turbulent times practically guarantees disaster. An entrepreneur knows that life is unreasonable, unmanageable, and often unmentionable, and that it takes a street-fighter mentality to succeed.

So if you want to succeed in this down economy, look at the list above, and decide if you're willing to move into the garage.

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ABOUT THE AUTHOR

Chris Yeh Chris Yeh is a partner at Porthos Consulting, a sales and marketing consultancy that focuses on delivering measurable results in lead generation and telesales. Prior to joining Porthos Consulting, Chris helped start companies like TargetFirst, United Online Services, and Merrill Lynch's Intelligent Technologies Group.

Chris and his work have been featured in Fortune, the Financial Times, and the New York Times. He earned his MBA from Harvard Business School.

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