Getting lean to survive the downturn

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Promising startups are exiciting. But during a downturn, they can also feel a little too exciting.

Funded startups are always on the clock:  Time till the next funding round. Time till cash flow positive. Time till a public offering.

In a severe downturn the clock keeps ticking, but it becomes harder to bet on closing that next big sale or funding round.  Financial visibility declines.  Management must aggressively take action to steer the corporate ship to account for the increased external risk and uncertainty: 

  1. Re-prioritize to focus on the highest probability, nearest term revenue opportunities
  2. Cut spending to preserve cash
  3. Look carefully for unique opportunities in the surrounding turmoil

The more severe the downturn, the more aggressively these actions should be taken.  Yet traditional organizations are poorly equipped to handle this change:

  • Forward-looking plans and budgets that were carefully set in stone, now break rather than bend.
  • Severe bottlenecks appear throughout the organization as the ratios between dependent teams and specialists get thrown off by hiring freezes or layoffs (“We were counting on that team to deliver their part of the project, but they’re all laid off!” or “How can we hit the same schedule with half the test team?”)
  • An organization that isn’t practiced at delivering value on short cycles and dynamically re-prioritizing, will find their plans churned and capacity to deliver shredded.

The reason why lean thinking is so powerful is it embraces change. When the market is in turmoil, change is legion and organizations that apply lean thinking stand the best chance of surviving, or even thriving.  To best satisfy the 3 goals above, take steps in the lean direction to:

  1. Get closer to the customer. Listen to their priorities. Tighten the feedback loop.
  2. Break projects into smaller pieces and deliver them on shorter cycles.
  3. Drive the organization with clear but dynamic priorities, rather than long-term dates, deliverables, and deadlines. 
  4. Break dependencies between projects and between specialists.  Give small teams everything they need to deliver on their own faster schedule.
  5. As change churns the organization, regularly ask “where is our bottleneck now?” and do what it takes to resolve it.
  6. Break the “union mindset” of specialization. Ask everyone to attack the bottleneck wherever it is.  Retain generalists who can thrive in an environment of change.
  7. Don’t let people and organizations be spread thin.  Focus on the highest value deliverables.  Do less, but get those priorities done faster.

These are all great practices for any company, especially a creative startup.  Lean thinking gives an organization the tools to think about opportunities and capacity in a highly dynamic, scalable way. In a downturn, nothing could be more critical or valuable.  The urgency of a downturn may, in fact, be the best opportunity to adopt changes that will pay off even more when things turn up again.

In a nasty downturn, do not ask for whom the bell tolls.  Embrace change, get lean, and make darn sure the bell does not toll for thee.