Agile Focus Strategy for Startups

Agile Focus Strategy for Startups: Oxymoron or Key Success Factor?

A PhD study done at the Technion’s Industrial Engineering and Management Faculty turns into a practical new book for entrepreneurs and innovators, offering a simple framework for setting a promising strategy based on the successes and mistakes of hundreds of startups.

One of the most common pieces of advice for entrepreneurs is to adopt a ‘laser-sharp’ focus approach, wherein they pursue a single narrow market opportunity in order to make the most out of their scarce resources. And because innovation is often fraught with uncertainty, they must also stay flexible and agile so that they can adapt quickly.

Without a doubt, both focus and flexibility are crucial elements for successful startups. But the two are often contradicting. In fact, a narrow sharp focus may lock the company into one specific direction, and actually hinder its agility. So how, if at all, can entrepreneurs manage this delicate balance?

Dr. Sharon Tal – a marketing lecturer and the former manager of the Technion Entrepreneurship Center – saw startups dealing with this dilemma over and over again when mentoring budding entrepreneurs at the center. Intrigued by this question, her PhD study examined the early strategic choices of startups. In an in-depth research, she interviewed technology entrepreneurs to understand how they choose their market focus and how they manage the trade-off between focus and flexibility.

Her study found that 72% of the companies changed their market focus within the first three years, which illustrates the importance of startups not sacrificing their agility for the sake of sharper focus. In fact, firms that were able to manage both turned out to be the most successful startups in her sample. These companies consciously strived to avoid locking in by keeping a few related market opportunities open. Acknowledging these future options helped them develop their resources and capabilities in a more general manner. It also made their firm more robust to change, without compromising the pursuit of their most promising opportunity. Sharon and her research colleague Prof. Marc Gruber (EPFL, Switzerland) termed this the Agile Focus Strategy.

The researchers say that companies of any size and stage  – from small startups to large enterprises – can embrace this strategic reasoning and adopt an Agile Focus Strategy. They also say it can be accomplished in three clear steps:

1. Identify additional market opportunities that could be suitable as your backup or growth options. A backup option is one you will want to pursue if you are not successful with your current opportunity. A growth option is a market opportunity you will want to pursue once you are successful with your current opportunity.
2. Evaluate the relatedness of these possible options to the market opportunity you are focusing on. Relatedness means that the ability to develop and deliver the product – for both markets – requires relatively similar resources and capabilities. The more related an option is, the more you can leverage your existing competencies to succeed in it. And this is exactly what we want.
3. Pick at least one backup and one growth option to keep open. Keeping an option open means that you invest very few resources and management attention only to monitor it and to make sure not to lock yourself out of this path. So, when you develop your venture’s unique abilities, resources and networks, you keep these options in mind. This is exactly what will keep you flexible and nimble over time.

To help entrepreneurs and innovators design their market opportunity strategy, Sharon and Marc recently launched a new book – Where to Play (Pearson Financial Times). In it, they present a visual, easy-to-apply framework for identifying, evaluating and strategizing market opportunities, in order to get the most value for your innovation. This proven method is based on the successes and mistakes of hundreds of startups. It nicely complements other well-known business tools, including the Business Model Canvas and the Lean Startup Methodology.

In fact, in a recent course done at the MBA program of the Technion, students applied this framework on Technion related inventions with great success. One of the key take aways from this course was that startups can make informed strategic choices that keep them both focused and agile. Without being open to alternative paths while concentrating limited available resources, and without the ability to efficiently handle change or adaptation, they may simply lose the race.