Sergii Malomuzh is a founder of two companies: Rewmp, a private venture fund, and Rewump, a business incubator. Follow on LinkedIn.
When you build a company from scratch, the risks of learning on the go are exceptionally high. I experienced this when my company began with a team of ten and eventually grew into a company of 500, organized into several teams with diverse expertise.
When a business starts out, everything revolves around quick decisions, rapid growth and intense dynamics. Somebody came up with an interesting idea? It’s just what we needed. Now, let’s have a brief discussion, scratch a plan and get moving.
This is typical for startup teams, who need to be quick and adaptable to gain an audience and a market share. But the truth is that you can’t make this approach work. Without a clear strategic vision and a well-defined strategic plan, your efforts can quickly turn into chaos, which can be extremely costly.
From my own experiences building a company, I’ve gained some insights, which I’ll share here so other leaders understand how to come up with a strong strategy and vision from the onset.
First Strategy, Then Action
Let’s say a startup launches a new decentralized finance protocol that automates yield farming strategies. They have a brilliant concept, skilled teammates and the drive necessary to make the vision a reality. However, when the protocol is launched, they discover that user engagement is minimal.
This can happen when long-term goals—which should be based on the analysis of the market, niche, audience and demand—are not established. It can be challenging to consider customer expectations, market dynamics and competition without a strategy. Consequently, this may result in difficulties with investments, growth and the quick burnout of resources.
My experience growing a company to 500 employees has shown that many tactical decisions don’t always align with strategic goals because those goals are different for each person. This is a result of the lack of a well-established and accepted strategy that specifies the goals, the methods and the responsibilities of everyone in the team.
After doing this kind of analysis, you should only develop those products where you have expertise and results—and strongly consider shutting down or avoiding projects without a competitive advantage.
Strategy Vs. Tactics
First, let’s be clear: Strategy and tactics are two distinct management levels.
To get things done in business, it’s critical to have both a micro and a macro viewpoint. Tactics are the micro perspective, while strategy is the macro perspective. In other words, strategy is the long-term goal and the plan that helps establish where and why we are going, and tactics are particular activities meant to implement the strategy.
For example, launching a new feature that allows users to swap tokens on a DeFi platform is a tactic, while planning how to increase user engagement and attract more liquidity through this feature is a strategy.
Strategies and tactics should complement each other. They cannot exist in isolation. Startups that operate purely tactically, coming up with and implementing steps on the go, face the following challenges:
• Inconsistency: Without a strategy, you will likely see frequent changes in business direction, quick decisions for current problems and a loss of focus, which can all impact the trust of partners and investors.
• Resource Burnout: You risk depleting your budget and resources by investing them in irrelevant ideas and concepts.
• Missed Opportunities: Without a strategy, a startup can miss opportunities for market differentiation that could be the key to audience loyalty.
• Growth Issues: Growth is always based on strategy; without it, you limit your long-term potential.
Six Tips For Developing A Strategy
Even a great idea and the strongest team cannot protect a startup from failure if these issues aren’t addressed in time and if the founder doesn’t set the strategic vision. Based on my experience, here are six steps to take to build a strong strategy:
1. Establish your vision and mission. What long-term goals does your project have? What objectives do you want to achieve in the next three years? What is your mission? Apply your vision and mission to every strategic choice you make.
2. Define success using specific metrics. These could include the percentage growth in the number of users, engagement levels, churn rate, etc. The metrics you use will depend on the project’s development stage and your business goals.
3, Include your scaling plans in the strategy. The founders should understand how they intend to grow the company. Perhaps, not specifically but generally. This requires understanding the market potential, capacity, possible expansion paths and basic resource requirements.
4. Communicate the strategy with the team. Your team members should know where they are now and where they need to head. Moreover, engagement and understanding of strategic goals always boost each employee’s effectiveness.
5. If you lack experience in strategy development, involve mentors and consultants. There’s nothing wrong with this. Many successful entrepreneurs have effectively employed this common approach.
5. Maintain a balance between strategy and tactics. Startup founders are generally very skilled at maintaining balance. Strategy and tactics are no exception. Connect long-term goals with the ability to act quickly and adapt.
Startups navigate in an environment of uncertainty and unpredictability, making strategy especially important.
It’s your chance to plan several steps ahead. When you know and understand your long-term goals, you can easily change tactics while always staying on the right track.
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