26 Apr The Importance of Execution Speed
At TAC we encourage fast execution over perfect execution. We repeat this mantra to existing and prospective portfolio companies all the time. But what do we mean by it? You may know it as the 80/20 rule, pragmatic management approach, or any of the other dozens of names for what we mean: The best results don’t always come from the approach that takes the most time and effort.
All companies, big and small, make mistakes. Big companies make mistakes that are difficult to get out of (just an example: AOL’s failed acquisition of Time Warner back in 2000, valued at $162 billion at the time, which ultimately resulted in AOL’s market value eroding from $222 billion in 1999 to $4.4 billion today, a 98% drop in value), and younger companies make more frequent mistakes, but ones that are easier to fix. In other words, smaller companies have two major advantages on their side: focus and speed.
Startups have far fewer moving parts to consider than industry incumbents when making tough decisions. That means that if you, the entrepreneur, take weeks or months to make and act on a decision, you’re giving away your company’s competitive edge.
You have something that big companies don’t have: the ability to hone your focus obsessively, and the ability to change your focus quickly when circumstances change. Businesses naturally branch out to new revenue streams as they grow and develop their brands. Accordingly, big companies usually end up with many products across many different markets. They have dozens of departments and thousands of employees, which can often leave individual customers feeling like they’re being churned through a machine.
Focus on your customers; they are the lifeblood of any company. Create something that they really want, then make it the very best version of that thing. Let it drive you a little crazy. The entrepreneur’s indefatigable single-mindedness is a startup’s greatest weapon. You don’t have to beat the IBM’s and the Google’s of the world at everything they do, as long as you blow them out of the water with the one thing your company was built for.
Bureaucracy is inherently built into big companies, which often makes the decision/implementation process arduous and expensive. As these companies grow, they become increasingly more resistant to large-scale changes, even when those changes might be necessary for the company’s survival in an evolving space. They have a lot to lose, after all; there are thousands of salaries to pay, as well as big-name investors who are easily spooked by the boat getting rocked.
However, you, the ever-intrepid entrepreneur, do not have this problem. Speed fits right in your wheelhouse! When a company is just getting off the ground, you only have a few key team members making decisions (who may not even be taking salaries), and the only reason your investors are there in the first place is because they expect you to interrupt “business as usual”. You can get a little weird with marketing, prove an unprecedented business model, or release a new product before it’s completely “ready” (hint: if you wait until it’s ready, it’s probably too late). Trial-and-error is just part of the game.
When you’re running at breakneck speed, you can’t be afraid to make some mistakes along the way. Bad strategy that is well executed always beats good strategy that is poorly executed. When it comes to competing against the giants in your industry, time is on your side – but only if you know how to use it.
– Moshe Bar, General Partner