How We Win

It’s easy to have a lofty end point in mind. It’s better to have a rough map showing how we currently think we will get there.¹

It’s surprising how often teams have the goal but not the route.

To plot a path, the questions we need to answer are:

• What are the intermediate milestones?
• What are the things we need to do, have and be?
• How will we know we’re on track?

If you are a visual person then you might like to represent this as an actual map - i.e. draw a diagram that represents the different elements.

If you are a numbers person then you might prefer a spreadsheet that shows the different metrics that will be important and how they interact with each other.

If you are a storyteller then you probably prefer a presentation format, where you can share a narrative that will inspire and excite others.

All of these can work. The important thing is to be able to communicate this plan to everybody who will work together to make it happen: the current team, investors and other stakeholders, and not least to the customers who will ultimately fund it.

Step By Step

Perhaps the most famous recent example of a “How We Win” plan is the Secret Tesla Motors Master Plan shared by Elon Musk in 2006, long before the company was synonymous with electric vehicles:

1. Build sports car
2. Use that money to build an affordable car
3. Use that money to build an even more affordable car
4. While doing above, also provide zero emission electric power generation options

This is more-or-less exactly what they have done.² Hindsight makes it all look obvious!

We wrote something similar for Vend, on a flight back from San Francisco in 2012. Vaughan (the founder) and I had spent the previous week pitching to potential investors. Reflecting on the feedback we’d got gave us a much tighter understanding of the things we would need to demonstrate in order to raise more capital and ultimately grow the business. We cobbled together a very rough presentation that explained this as simply as we could.

It broke our strategy down into four streams:

1. Build a great team
2. Build a great product
3. Develop low-touch sales channels
4. Manage cash

The first three correspond to the three engines. The fourth is the ticket to the game.

Still jet lagged, we presented a version of it to the small team back in Auckland. The intention was that everybody in the team would be able to identify their specific part of that broader plan, and be clear about what they needed to do in order to contribute to the overall success. The story was simple: if we do those four things we believe we will win!

Later this became a company tradition. As it was repeated over the years it was refined and polished. Some former Venders may fondly remember the versions that Angus (the CFO at the time) would do for everybody as part of the on-boarding of new team members.

In 2017 I presented something similar to the Timely team, and included this diagram:

This might seem like a lot of maths, but is actually just the standard business model:

Revenue - Expenses = Profit

With some SaaS specific elements added to provide detail:

Revenue = Customers (Net of Churn) * Average Revenue Per Account

Expenses = Service Costs (CTS or COGS) + Acquisition Costs (CAC) + Overheads

This breakdown let me ask about each of these elements separately:

• How do we increase the number of new customers?
• How do we increase retention or decrease churn?
• How do we increase the average revenue per account?
• How do we decrease the average amount it costs to service each customer?
• How do we decrease how much it costs to acquire a new customer?
• How do we reduce overheads?

This is not an especially exciting list of questions. All of them are difficult problems to solve. None of them is glamorous (remember: successful execution in a startup is much more hard grind than magic spark). But these are the things that matter, in the end.

This list also highlights the trade-offs. It’s impossible to “win” on all of those dimensions. They impact each other - e.g. growing the customer support team to try and reduce churn increases the service costs and overheads. We have to pick our battles, and focus on the aspects that we think are most critical to our particular success or the areas where we think we can actually influence the outcomes. We need to find the things that can be measured or described that contribute to that result.

By the way, this divide and conquer approach even works for things completely unrelated to startups.

For example, many years ago I set myself the goal of running a half-marathon in 1h 45m, which requires an average pace just under 5mins/km. Understanding that my strength is a high pain tolerance, and realising that whatever happened I was likely to be fading by the end, I decided to go with this simple plan:

• 4:46/km to 12km
• 5:15/km to finish

In other words, go out fast and hang on!

The intermediate milestone was 12km in ~57 minutes. I decided not to worry about the second half of the race. I realised that the first half was critical - if I wasn’t on track then I didn’t have a hope. Even though I hadn’t run the full 21km distance much in training, I’d done that shorter distance at the required pace, so I knew that was possible. On the day I got there in 56m 16s, which was lucky because my planning hadn’t accounted for the increasing northerly we had to run into on the way back (one of the consistent joys of running in Wellington!)

I was delighted to cross the finish line in 1h 44m 10s. 😅

It’s amazing and depressing how often the things that our teams focus on are not correlated at all with how we win. We get distracted by growth rates (forgetting that things that grow really quickly - like cancer - can actually kill us). We get distracted by the size of our team, or the amount of capital we’ve raised (both vanity metrics). We get distracted by winning awards. We forget that we need to apply our own mask first, before helping others.

But, those companies that we read about, after they have achieved great outcomes, are the ones who manage to put these distractions aside and execute a plan that keeps focus on the things that actually matter.

How well does your team understand your plan to win?

When was the last time you wrote it down or said it out loud?

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