The Art of Operations: A Guide to Efficient Operations for Early-stage Founders
Osita James Uche
Leading Startup Attorney @BlackCrest LP I TEDx Speaker I Startup Coach | Chevening Scholar '22 I Human
Welcome to a new edition of Building Digital Products (BDP).
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Building Digital Product (BDP) by Osita is a monthly newsletter that supports founders, investors, and startup enthusiasts with insights and principles on how to build better products and startups.
This is my 25th edition and eighth edition for the year.
BDP's theme for 2024 is "Resilience."
Here is a little snapshot of me.
Osita James is a technology entrepreneur and a partner at BlackCrest Legal. The start-up advisory law firm (BlackCrest) has successfully advised start-ups across Africa in investment deals worth over $20 million. He holds an MSc in Innovation Management and Entrepreneurship from the Nottingham Business School, Nottingham Trent University, a bachelor of law from the University of Nigeria, Nsukka and a Diploma in Technology and Innovation from the Nigerian University of Technology and Management. He writes poetry and fiction in his free time.
He supports African founders with professional legal and start-up operations advice and can be reached at [email protected] or here.
Today's edition will explore startups' operations, emphasizing how to improve, grow, and sustain profitable operations.
If you can't fly then run, if you can't run then walk, if you can't walk then crawl, but whatever you do, you have to keep moving forward. - Martin Luther King Jr.
What is startup operations?
This is the range of activities that a startup undertakes to create and ship value to their end users. It encompasses product design, product development, marketing, sales, customer success and product review.
When put this way it may seem like the operation manager does everything, which is the same thing as doing nothing. However, the operations manager needs to have a handle on everything to ensure the business operations remain sustainable.
What does a startup operations manager do?
Startup operations managers are in charge of the startups day to day operations. Their goal is to improve the overall efficiency of the business to optimise revenue, customer satisfaction, product or service quality and sustainability.
A startup operations manager is like a god of productivity sitting outside the direct tasks of teams in order to clearly identify the issues with the operations and fix them pronto.
Every startup team needs someone in charge of operations. Image In practice the startup operations managers create operating process manuals for different teams with input from the different teams. This manuals are also called playbooks. Most startup teams need playbooks for marketing activities, playbooks for Human Resources management and playbooks for partnerships.
A, Early-stage Startup Operations
Early-stage startups have fewer operational requirements in comparison to late-stage startups. This is because the early stage startups often deal with fewer clients, have fewer regulatory requirements, have fewer financial operations and have fewer team members. I am going to address early-stage startup operations with the following business functions:
1, Business Process Improvement for Early-Stage
Startups Business processes are developed as startups start creating and shipping value to their end users. In the very early stages, all the team members are usually unsure of what their exact role is. Roles are fluid and often overlap with other roles not clearly defined. It is also possible that the startup may not have hired an operations manager. In such a case, one of the founders has to take in this role.
Business processes involve everything from the point the startup begins its product development to the point the product gets to the end user, including activities maintaining the distribution channel. For a SaaS, this would mean the process for determining the right features to build, the processes involved in ensuring shipping of the product is done within a stipulated time, the process of creating and managing a distribution channel, the process for marketing the product to the end users and the process for keeping the clients who already use the platform.
2, Business Strategy for Early-Stage Startups
In an early-stage startup, business strategy entails thinking about how to penetrate a competitive market and how to stay competitive. Unlike established companies that can afford external consultants who charge thousands of dollars an hour for market research and business strategy documentation, early-stage startups have to rely on one-on-one interactions with customers, speaking to customers using their competitors and negotiating with platforms to display their products and give them access to more distribution.
This of course does not always work out.
According to Investopedia:
Despite their promise, as many as 90% of startups fail. Statistics show that as many as 3,200 startups went under in 2023 alone
A good example of how a startup can leverage unorthodox methods to create a distribution for its products is the work of Michael Dubin, founder of the Dollar Shave Club now acquired by Unilever for $1 billion.
Michael Dubin knew that he did not have the marketing budget to compete with big brands like Gillette. He created a YouTube video to talk about his competing products in a humorous and relatable way. The video ended up going viral.
As an early-stage startup try not to take advice from too many corporates. The approach to strategy is very different for established companies than for companies just starting out. Try out as many things as possible and learn from it.
3, Marketing for early-stage startups
Early-stage startups have very limited marketing budgets and therefore have to ensure every dollar spent returns value to the company. The role of operations in early-stage operations lead is to implement lean marketing strategies. The lean startup model is a system that maximizes resources, iterates ideas quickly and continues in an unending loop of sustainable growth. Early-stage startups can do a lot when they measure their progress on a daily or weekly basis. They may not have all the tools to automate tracking all their marketing campaigns but they can be intentional in improving each effort every time until they can get to the sweet spot that produces their desired outcomes.
4, Partnerships for early-stage startups
Partnerships are a great way to scale a startup's operations. Through the partnership, a startup servicing a small segment of people can have access to new customers affiliated with the new partner. Early-stage startups have to ensure that they start documenting their partnership collaboration process on time to save time and resources as their number of partners grows. This can be done by having a simple playbook on partnerships. The playbook can contain the link to the email database of the startup's prospective partners, how to reach them, the resource person and the partner's business interests. It can also contain the partnership proposal template for different categories of partners, the steps to take to close out each deal, how to counter offers from potential partners and what is success in a partnership arrangement. By being thorough in the playbook, startups can ensure that subsequent team members who join the team can easily implement the same process and achieve the same outcomes.
B, Late-Stage Startup Operations
Late-stage startups have typically already found product market fit. They have more revenue, more established distribution channels, more customers, more regulatory requirements and more funding. This radically changes their approach to operations. Their goal in operations is more focused on growth and sustainability.
I am going to address early-stage startup operations with the following business functions:
The business process improvement is usually handled by a team rather than a single operations associate. Business processes can be categorised into three:
The operational processes depend on the type of business model and industry the startup operates. An e-commerce startup for eg would have to think about logistics as a core value partner for their operations. The late-stage startup can have operations associates who work from their logistic partner's office. This would help them resolve issues that arise faster collaboratively. They would also have advanced tools for tracking shipped items, confirming missing or faulty items and measuring the weekly average speed of delivery.
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2. Partnerships
Late-stage startups will already have a lot of partners whom they have worked with for several years. This can afford them access to more credit built on trust from doing business over a long period. They will usually have a partnership lead and some partnership and client managers. The late-stage startup partnership operations will entail reviewing current partnership deals to determine their impact on the overall bottom line.
Early-stage startups usually have less bargaining power because they don't have a large customer base, this would not be an option for them.
Partnership associates may also review product prices and distribution channels and inform the partners of any changes.
3. Marketing
Marketing remains a key activity even when the startup achieves product market fit. Marketing at this stage is not focused on the lean startup model but on outcomes. Strategies will be deployed that increase overall marketing outcomes. Budget is often not an issue for startups at this stage. The marketing playbooks are also not drafted by one person who may also double as a customer success. They are created by a team of professional marketing professionals who have worked in other organizations.
Should you Hire an Expert Operations Manager?
Early-stage startups are generally chaotic in nature. Teams are actively iterating their products and often have no clear idea who the customers are and how large the market for the product is.
Expert operations managers usually work for big corporations that have revenue in millions and billions of dollars. They make decisions in committees and think mostly big picture.
These experts as a result of their experience are more likely to approach a startup with the same framework in their previous organizations, they may try to organise things that thrive better in the chaos. Their priorities will often not align with the startup's priorities.
Early-stage startups need generalists, not specialists.
According to a study by Kevin Dunbar in the 1990s reported by Forbes:
The teams in the experiment proved to be less innovative if they were more narrowly specialized.
Innovation by its very nature requires a bit of chaos and people who are used to working with structure are overall less likely to tolerate the chaotic processes that ultimately birth unlikely innovation in startups.
Key Principles of Startup Operations
Operations are undertaken to improve the following in every organisation:
These are some key principles in startup operations and will be discussed in some detail below.
1, Efficiency
This is how well the startup manages its resources to produce and sell value profitably. A startup that spends more than it makes is not efficient. Efficiency is achieved when the cost of production is minimal, delivery is ongoing and end users exchange their money for the value created.
In a startup, this means fewer downtimes for their applications, seamless payment process, quality or competitive products and helpful customer support.
2, Speed of delivery
Speed determines a lot in startup market verticals. Competition means that startups who don't ship fast risk having their competitors become established in the market of interest when they are unknown. A startup must have enough speed in other to have effective operations.
This means that the product updates should be shipped in defined - short cycles and all bugs fixed on the same day.
The more speed a startups has in its operations, the faster they can achieve product market fit.
3, Easy Access to information
Information is a key driver of startup competitiveness. A startup that has systems that make access to relevant information as easy as possible will always outperform its peers. All the startup's processes are documented and made accessible to authorised team members.
How easy the information is to access will determine how productive overall the startup team members would be.
Managing Virtual Operations
Today, many startups operate completely virtual with teams all over the world, selling digital products to thousands and millions of customers all over the world. Operations can be a bit tricky when it is completely virtual because many teams thrive on interaction and in-person mentorship from their superiors. I will be discussing virtual operations under three business functions:
1, Communication
In a virtual startup team, ease of communication has to be a priority. The easier the tools of communication, the more productive the startup team members will be. I have discussed this in more detail in the previous edition. You can check it out here. Use simple tools like Slack, Google Workspace and Teams.
Include video tutorial for new team members on how to use these tools as part of their onboarding process.
In addition to tools for communication, founders should ensure that time zone considerations are in place in their communication with team members. Overall effective operations account for all these variables.
2, Collaboration
Virtual operations efficiency is also dependent on how well team members collaborate. To collaborate effectively teams have to have access to shared documents and virtual meeting platforms. Zoom and Google meetings are a good way to provide this. Team members who wish to share information can also record their screen together with a shared document using Teams and share the link with their team members to watch at a later time. Platforms like Trello help teams keep track of agreed KPIs and completed tasks.
The more simple the tools for collaboration are, the more productive the startups team would be.
3, Data Access
Startup virtual operations are more effective with effective digital data access processes. Startups can leverage cloud storage platforms like Google Drive, One Drive and others to store sensitive data.
In addition, generative AI capabilities may increase the reliance of team members on AI. Startup teams should create AI policies for their company that deter team members from sharing sensitive company data with generative AI platforms accessible by their competitors.
BDP Recommended Reading List
The BDP-recommended readings were carefully selected for relevance, insight and ease of reading. If you want to improve your startup operations, start from here.
Conclusion
Startup operations are determined by the startup's business model, market vertical and growth stage. To improve startup operations founders should document more of their business processes, make relevant information easily accessible to authorised team members and constantly improve their existing process.
In all you do, keep building.
Remember that you only fail when you stop trying.
I am rooting for you.
If you loved this edition, please share it with another founder.
Keep building,
Osita.
PS: I am going to be offering a free 30-minute business strategy and clarity session to 5 Kenyan founders through September.
How to qualify - Repost this newsletter and comment "I am interested" below and I will send you my calendar link to schedule a time.
Author| Serial Entrepreneur| Founder, Seavonne Belle Community
2 个月Thank you sir for this Newsletter, it was really insightful and enlightening. I have two questions to ask 1. How can early-stage startups effectively gather market insights through one-on-one interactions with customers, and what are some best practices for these interactions? 2. What strategies can early-stage startups employ to negotiate with platforms for better product visibility and distribution, especially when competing against established companies? Thank you Sir.