What is Stage Three?
Sand Hill Partners defines Stage Three as the period in which a start-up company now goes to market in earnest with the goal of becoming the recognized leader in their initial target market. Stage Three is a time of rapid change within the company as it goes pedal to the metal hoping to create a wave of frenetic growth. All the demands of a complete business rear their heads at once, and the foundations built in Stage One and Stage Two are thoroughly tested.
Internally, the Stage Three company finally begins ramping its marketing and sales model along with its product delivery process, including post-sales services and customer support. The lead generation flywheel will begin spinning, along with appropriate press and analyst visibility. The company that was previously a remote blip on the radar of “status quo” competitors may discover the gloves have come off, and the selling process is now overtly competitive. The product development process will have plenty to chew on, as customers, and possibly competitors, will apply high pressure to ascend the product roadmap.
Perhaps the critical success factor above all others is to stay focused through what may seem like chaos. A primary purpose for the company stage model used at Sand Hill Partners is to provide clear context for what “the main thing” is at any given point.
The focus for Stage Three is to be the recognized leader in the target market. It sounds straightforward, but start-ups often skip this step by convincing themselves they need to get bigger by broadening their offering and their appeal early. The reality is without completing Stage Three, the company does not yet have the internal DNA or collective business prowess to successfully engage the Stage Four goal of expanding into adjacent markets (for all of us Geoffrey Moore fans, Stage Four includes the famous bowling pin expansion strategy described in Crossing the Chasm.)
Ah but were it so easy. All who have led a Stage Three company will attest that focus can be a daily battle. There is a 100% probability that sales opportunities of seemingly epic proportion, requiring “some” engineering development and an excursion outside the perceived needs of the intended target market, will present themselves in Stage Three. These opportunities present a multi-million dollar (in company valuation) question: Is the market guiding you, or is this a potentially fatal diversion from the strategy? It’s an immensely challenging decision, as one must discern between a possibly critical discovery of an unforeseen market sweet spot, versus a mere distraction, tying up a chunk of your limited resources in what ultimately will be a booby prize. While big companies can usually survive a misplaced foray down a market rabbit hole, start-ups rarely do.
Critical Sucess Factors
The Critical Success Factors in Stage Three address the above challenges and prepare the business for Stage Four.
A company that has done the Stage One and Two product work, specifically the crisp product and market definition, is well-armed with the context needed to correctly evaluate and prioritize new or seemingly incidental opportunities. The goal of Stage Three is to execute and grow revenue from the market opportunity that was thoroughly evaluated in Stage One with the Breakthrough Product Model and/or the Stage Two Product process.
During Stage Three, the company gains enormous feedback and data points on the product, market, technology, and customers that no one else will have. Sand Hill Partners can work with you on how and where to capture the most important data, and then how to convert it into unique customer and product insights that will drive the product roadmap and build more barriers for eventual competitors. This becomes the engine driving true sustainable market leadership.
Shifting Role of Company Leadership
It is in Stage Three that all companies run into one of Sand Hill Partners immutable laws:
Successful companies grow faster than people do.
The reality is the different stages of company growth require different skill sets for success. The different skills are equally valuable – what is important is applying them at the right time. This truth is most apparent at the leadership level, and unfortunately is also where it can be most challenging to manage. Rare are the Bill Gates of the world, executives who can start as employee #1, and successfully lead a company through all five stages of growth. There are special skills that make for good early stage leaders. It takes a true pioneer to start with embryonic soup, form a strong core team, get them inspired around a vision, and energetically build the first product. The successful early stage pioneers most often are people with unusually high levels of perseverance and innovation.
The game changes in Stage Three, and becomes altogether different in Stage Four. The beginning of Stage Three requires a team that can capture the first real hill, locking on to the right path and sticking to it. The right leadership skill is less of a visionary and more of a company-builder. Sand Hill Partners provides embedded guidance and know-how for company-building leadership. We work with Stage Three start-ups around factors such as:
- Re-positioned role of CEO and leadership team
- Distributed CEO responsibilities among leadership team
- Clear executive team roles and responsibilities
- CEO and leadership team focused on the strategic work (i.e. moving from technical and operations to managing the competitive work; managing external environment)
- Adequate “technical” and “character” capabilities
Properly navigating these transition points is an essential element in managing the wild ride of Stage Three, and sets the stage for the processes and systems required for large scale growth in Stage Four.
Processes and Systems in Place
Stage Three success places internal company pressure on the people inside the company, the way they are organized, and how they work. The ways in which the leadership handles this pressure will determine not only the level of success in Stage Three, but also the early business results in Stage Four, along with the overall quality of your workplace.
Is the leadership of the Stage Three start-up creating a successful business that is also a great place to work? As the company begins to experience growing pains, Sand Hill Partners provides sound medicine by implementing the right structures for scaling the business:
- How to organize around core and enabling business processes
- Creating strong business process ownership and performance metrics
- Identification and focus on “competitive work”
- Tying together the organization into a high-performance system
The successful Stage Three business will have strong processes and systems in place and be ready to scale them in Stage Four.
Shared Mindset & Capable Talent
Stage Three is the time to grow the company beyond the initial early-stage team. Soon the number of new Stage Three employees will exceed the Stage Two headcount, and it is assured there will be differences in how employees perceive the vision, strategy, reward systems and even their role in contributing to it all. One of Sand Hill Partners immutable laws is:
Organizations are perfectly designed to get the results that they get.
This means it’s important to be deliberate in determining the cultural attributes and intangibles which will differentiate the organization; and there are few times more critical than when the company is rapidly doubling and tripling in size in Stage Three. Sand Hill Partners can show you how to consciously design and plan activities to reinforce the culture and distinctive competence of your organization so you can emerge from the Stage Three tornado ready for large scale victory in Stage Four.
The essential employee growth in Stage Three means knowing how to quickly get the right people in the right seats. Regardless of the methods used to find good candidates, the high-performing start-up needs to be fast about selecting and ramping capable talent. Sand Hill Partners makes this happen with a streamlined process based on two key building blocks:
A performance model is a detailed description of the performance required for success in a specific position; it is a description of how a job should be performed. The truly great companies in this world use performance models for selecting and developing key execs because the wrong person in a key position can kill an organization. A Stage Two start-up needs to think of all its initial hires with a similar sensitivity. It’s not that the hires are necessarily expected to be executives, it’s because in a small team with everyone working hard, fast and closely together, the wrong person will, at best, create tremendous misery and, at worst, kill the company. Sand Hill Partners offers expertise in how to make performance models work well in a Stage Two start-up. Performance models:
- Structure and design the role as it needs to be performed.
- Identify selection criteria that feeds into the Early Stage Selection Process
- Clarify performance expectations to all involved.
- Assure appraisal and reward systems (e.g comp plans) are aligned and encourage target performance.
- Determine actions that will remove work environment barriers to high performance.
Stage Three Selection Process
Culled from time-tested principles and best practices learned and applied over 30 years in the selection of employees for new organizations (and key executives in large companies), Sand Hill Partners’Stage Three Selection Process brings manageability to a potentially frenetic hiring process while assuring the company has its best face forward while gleaning the right insights about each candidate. It balances a start-up’s need for speed and simplicity with proven methods for determining what someone will really do on the job.
Contact us to schedule a more detailed discussion of how Sand Hill Partners can help you create a successful start-up and a great company.
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