The Soul of a Startup

Question 1

As startups grow, they often lose some of the core features that allowed them to succeed in
the first place.

Answer 1

True

Question 2

List 3 Core features of startups that entrepreneurs may need to preserve as their firms grow.

Answer 2

1. Business Intent
2. Customer Connection
3. Employee experience

Question 3

Define Business Intent

Answer 3

“A reason for being”

1. Often much broader than merely the attributes of the products and services.
2. Specifies why those products and services are important to society; often inspiring.
3. Study Sapuri’s website says that it is “providing the best learning environment for everyone, aiming to solve the problem of education gap,
   ” which is broader and more inspiring than simply providing educational and test preparation software.

Question 4

Define Customer Connection

Answer 4

“A close bond with customers, and intimate understanding of their preferences and needs”

1. Involves a deep understanding of the firm’s products and services, as well as why
   and how customers use them.
2. Focuses on those who benefit from (and pay for) the products and services; may
   involve empathizing and relating to customers.
3. BlackRock refuses to conduct transactions that, although lucrative, could create a conflict of interest with customers; the focus is customers, not the firm itself.

Question 5

Define Employee Experience

Answer 5

“Attention to the quality of the experience of work”

1. Connecting to employees, giving them voice, and prompting engagement.
2. Encouraging employee freedom and creativity within a framework of guidelines to promote continuity and focus (sometimes called loose-tight governance).
3. One firm allows employees to think of business models, products, and services that
   could disrupt or threaten the firm’s current offerings; the firm and employees then
   decide whether to pursue these new ideas.

Question 6

What do the 3 core features aim to do for the firm?

Answer 6

They are meant to make the firm more
relational rather than simply transactional

Question 7

List the conditions that threaten these core features of startups

Answer 7

1. Outside investors often push for changes that undermine these core features (provide needed capital, social prestige, contacts, but interested in short term and rapid growth; reduce founders’ influence over firms)
2. Formal structures often replace informal coordination (necessary to promote control, discipline, consistency, and organization. When implemented poorly, hinder and alter 3 core features)
3. New managers, often from larger firms, frequently are hired as startups grow (help professionalize startups and encourage behaviors typical of public firms. Devastate the cultures that facilitated startups’ initial success)

Question 8

List ways to preserve the core features

Answer 8

1. Keep entrepreneurship and diversification focused on the business intent (Netflix pivot to streaming)
2. Protect customer connections, and build tighter customer connections as firm grows (Schultz returned to Starbucks as CEO)
3. Continue to emphasize the employee experience, despite structural changes (many large firms including Google and 3M continue to allow employees to use company time to pursue new business ideas of the employees’ own choosing)