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Early Stage Organizations Fail For 3 Common Reasons

Photo by CHUTTERSNAP on Unsplash

I was re-listening to Patrick O’Shaughnessy’s podcast with Charlie Songhurst recently. Charlie was the former head of strategy at Microsoft, and is now a prolific investor in early stage companies. In the interview, Charlie outlines a framework for thinking about failure in new ventures. It is exceptionally insightful and worth highlighting directly.

3 Common Reasons for Failure in Organizational Growth

Failure of Labor Productivity

The first failure point that Charlie highlighted is when a team is unable to come together to produce a product. I personally have seen this with startup teams that are more interested in the romance of the idea of the business than the willingness to actually do the work to get the thing off the ground. There is a reason why Elon Musk described entrepreneurship as being willing to show up and eat glass every day.

There are a lot more warm fuzzies that come from an unexecuted concept, than the cold, harshness of actually shipping product. Companies that are not able to manage personal entropy or inter-personal issues will not be able to come together to actually start the process of shipping a product.

Success doesn’t really interest me any more – it’s too easy.  Analysis + Capital + Execution…anyone can do that.  

Lukas Matsson (Alexander Skarsgard) Succession

Failure of Product market fit

The second failure point highlighted in the interview is when the team produces a product but is unable to find a market demand. This more commonly known as finding product-market fit. This hits at the important question of if you have a produce a product of value to someone who is in fact willing to pay for it. In my experience, this is where the rubber meets the road for many new ventures. A key is understanding when the fit does not exist, and being able to pivot rapidly. See also Moore’s Crossing the Chasm for a more complete treatment of where / how fit can be found.

Failure to Scale

Songhurst’s final failure point is after product market fit has been found, but when the business must now grow beyond a single product team, and turn into an institution. A key insight Songhurst highlights is that if this transition is not managed carefully, you can see a ‘managerial collapse’ where the productivity per person almost turns to zero

In order to be successful, you have to build robust, scalable infrastructure and processes necessary to manage the volume flowing through the business. Every event or opportunity that occurs cannot be a fire-drill or a one off exception to manage.

A key dynamic here as well is politics within the organization. Songhurst is key to highlight that as you hire senior talent, their ability to accomplice complex tasks also comes with self-interested behavior that can manifest as politics. “Difference between high performance firms is that politics is 25% of time spent vs. firms that grind to a halt may seen politicking occupy 50%+.”

Proverbs 14:4 describes this dynamic as this, “Where no oxen are, the trough is clean; but increase comes by the strength of an ox.” Namely, when you buy an ox, you can plow a lot of land, but you also have to buy a shovel to clean up behind the ox. By analogy, organizational politics are after-effects of A-level talent, which will always need to be managed.

As we all discover and work with organizations of all shapes and sizes, these points are exceptionally helpful in identifying root causes of issues an organization may face. Do yourself a favor, and check out the interview for yourself – Patrick O’Shaughnessy’s podcast with Charlie Songhurst

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