Among investors, advisors and experts I'd argue that "focus" ranks on top as the most hyped buzz word of the startup world. It makes sense, though, when you have limited resources and you are new in town, you really want to cut through the noise. The only way to do that is to target an unsolved problem, truly understand it, and then, focus on delivering the best experience in order to solve it.
When you are the underdog you can't afford to fight in several wars at a time, but you certainly can win the one that matters the most. Here's where focus comes into play: anything that is not aimed towards this particular war should be dismissed. Focus means optimization, obsession, deep understanding and going beyond anyone has gone before. This is how true disruption happens and the only way to leverage opportunities in such a crowded market.
While the theory holds by itself the reality speaks a whole other language. In this article I’ll try to relate my personal struggles with focus at iomando. As much as I understand and love the idea of focus, when you find yourself growing your own company, decisions are tough and the line becomes blurrier than the success stories you read on Fast Company once in a while.
Too much empty space
When we first landed in the market in 2012 with iomando there was nothing like us. Because of that, we were conflicted for two reasons:
- The lack of competitors worried us because we might have entered a market where there’s nothing worth fighting for.
- Creating awareness of the product was a really difficult task. Since our product required to change deep rooted behaviors, the single fact that people knew it was possible to use the phone to access would be a huge win in itself.
The problem, though, cuts both ways. The market was literally empty and we could start wherever we wanted. Choosing one vertical over another was presented to us as a risky idea, because we didn’t know yet how the market would react, and we hadn’t enough information to understand what space would be more interesting.
Therefore we started exploring several verticals simultaneously. Since our product was like nothing to be found in the market, most of our customers put up with the current feature set and were happy with the delta improvement. Because of that we were selling like crazy in several channels at a time. As a result, we pretended that nothing happened in order to postpone the decision of “which channel is the most optimal”. We were seeing a lot of money coming in and we didn’t want to say no to additional revenue from anywhere.
Seeing our sales grow was great, but our customer base was also growing in diversity, and that was a bad thing. Our customers started asking for new features that our competitors were already offering, but we couldn’t keep up with all the request coming in from a vastly different range of customers.
Looking back, this ultimately led to one of the biggest mistakes we’ve made at iomando. This was one of those situations where everything seemed “so far so good” and by the time we realized something was wrong, it was already to late. Seeing our sales grow was great, but our customer base was also growing in diversity, and that was a bad thing.
As much as we were pretending that nothing happened, the day when our customers started asking for new features came sooner than later. They were way passed the learning curve, they were used to it and, of course, wanted more. Moreover, some competitors started popping up with more optimized products for certain verticals, but unlike us, they saw the first mover perform and could learn a lot from our errors.
Product management became a nightmare because it was impossible to maintain the balance among all the use cases. An administrator of a city council had radically opposed problems than a home owner or a retailer… All of them used our product because we wouldn’t say no to anybody, money was flowing in and nobody talked about focus then.
But things got worse and tensions started to pop up everywhere. Sales blamed development because they weren’t delivering and our competitors were advancing at a faster pace. Development blamed management because they were not following a clear strategy. Investors blamed all of us because churn was increasing and sales were stalling. There were bad times at iomando and we all suffered because of this.
The situation was tricky because focus was not a direct remedy. Started focusing in a “new segment” meant leaving behind thousands of paying customers and narrowing the number of potential customers.
We were over spending in product development because we needed to keep up with a dozen of more optimized competitors, we were competing against everybody. Sales strategy was mixed and we couldn’t get to deeply understand our customers because we were spreading ourselves too thin. Consequently, we were running out of money faster than we could ever imagined. And this inevitably lead to the next big problem.
The small business disease
The playbook says that a startup is able to grow in a harsh environment because it approaches and focuses on a narrow subset of the market with a more optimal strategy. From there, VC money helps accelerate growth and capture value from adjacent markets. Growth becomes exponential and competitors have a hard time keeping up.
While you have money “to burn” in the bank, you can stay true to the vision despite the returns might be lower than expected. The money in the bank (among other things) buys you time to keep at it, stay focused and eventually be successful.
But when you want to follow the startup playbook and eventually run out of money without compelling metrics to face a new round, you find yourself in a really bad position. I call this place the SMB disease, because your startup has to turn on the survival mode, and we've been there. The first measure to recover is to cut expenses all around the place in order to become cash flow positive as soon as possible and auto sustain the business. From there, start growing organically until the company recovers the strengths to fly high again.
But the SMB disease is a bad place to be. Cutting expenses means focusing on tomorrow, not on the long term. Paradoxically this means not being able to execute a long term strategy because all the money is good money and thus you should say yes to everybody. Then keeping your burn rate low means under spending in product development, so you get trapped again in the aforementioned problem with customers pulling from every direction.
The worst part though, is that while organic growth is healthy, it’s usually not enough to keep up with your competitors and your existence is always under a lot of risk. Getting out of this spot is crucial and it always comes at a high cost (both at a personal and company level).
Focus is great, but there’s more than that
We all get focus. The problem is not focus itself, but carry on with all of its consequences. Sometimes, focus comes at a cost, and if you don’t plan for focus from the beginning you’ll eventually find yourself in a spot where focus is almost impossible to regain.
The good news though is you can learn. Like every skill, it must be practiced, and both in business and personal life, focus is a great value to hold onto. So the next time I’m presented with a choice I’ll make sure that I say “no” before it is too late.