Does Focus Help?

An interesting article points out that employees should not multitask because productivity falls.

Does this apply to entrepreneurs? In many countries, and among many entrepreneurial students, the hope is to start one small business, and then another unrelated one, and still another. Is this smart? Should entrepreneurs multitask or should they focus on one venture before expansion or diversification? And when should they expand or diversify?

Examples:

· Amazon.com: Jeff Bezos focused on books and dominated online book sales to beat the well-entrenched Borders and Barnes & Noble BKS . Then he asked his book customers what else they wanted to buy and expanded Amazon.com into a platform. And added AWS.

· Microsoft MSFT : Bill Gates and Paul Allen started Microsoft to write programs for the Altair 8800 before pivoting to buying the operating system for the PC, negotiating the strategic alliance with IBM IBM , and dominating the global PC world with Microsoft DOS. After dominating PCs, Microsoft expanded to other programs that ran on the OS, like Excel and Word.

· Uber UBER : Travis Kalanick started Uber to rent limos before realizing that the market to rent cars for short hops, in competition with cabs, was much more profitable and a potential unicorn. He focused on car rental for short rides before expanding to other areas such as food.

· Gaston Taratuta: Taratuta started his company to help market services and products to Latin American consumers before expanding to the rest of the world. He focused on areas outside the U.S.

The key is that these very successful entrepreneurs focused on one product, one segment, and one strategic group. They did not diversify. They did not “multitask.” Why?

#1. The limits of venture finances. Capital is very expensive at the start of a venture. VC can cost up to an annual rate (based on dilution) of about 80% - 100% per year. When money is this expensive, ventures cannot afford to use it lightly or else they end up like The Messenger. Entrepreneurs need to initially focus if they want to dominate their segment.

#2. The need for sales driver focus. The problem in a new venture is that the entrepreneurs are not sure of the best segment, the best product, and the best sales driver. That is why many fail. Entrepreneurs need to focus on the best sales driver and use it to take off with limited capital. They can diversify (and multitask) after taking off with one sales driver.

#3. The ability to lead and dominate over direct competitors. In an emerging industry and market, entrepreneurs need to dominate. It is difficult for multi-tasking entrepreneurs to beat their direct competitors if they have too many types of competitive groups to beat. That is why Sam Walton focused on rural America before training his sights on the urban market and Kmart.

#4. Focus to make the target market happier. Customers do not switch to a new company and stay unless they can get more value out of the new company. Entrepreneurs need to focus on making target customers happier by offering more value while getting a higher margin. The late, great Steve Jobs was a genius at this.

#5. The limits of entrepreneurial abilities. There are few geniuses who can fight two wars at the same time, especially at startup. That is why they need to focus. Elon Musk is trying to lead multiple unicorns at the same time. We will see the limits of his genius.

The Implications: How to dominate for the long-term

· Focus and master one business at a time. Find the right segment and strategic group – and the right product-service for that group.

· Dominate this strategic group before training your sights elsewhere. If you diversify too quickly, others are likely to feast on your bloating carcass. So, dominate this group and make sure your customers are so happy that they will not switch for a few pennies.

· Limits of capital. Understand that capital wants a return. If you seek too much capital and expand too fast, you could be fired by the investors and your returns could dwindle – and so will your investors who will find greener pastures. Ask The Messenger.

· Return on capital. Make sure that you can earn a higher return on your capital than your cost. Your returns can be the conventional IRR or VVC (venture value created).

MY TAKE: Focus. Focus. Focus. No one in my sample of 125 Unicorn-Entrepreneurs built two unicorns at the same time. And very few built 2 unicorns at all.

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The Dangers of Unicorn Culture

Startups rely on a small group of people who can do everything (and do it all well), but unicorn culture is harmful to long-term business growth.

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I’ve worked with and for multiple startups and small businesses in the last eight years. I’ve also had the unique experience of showing up right before everything changes: that first big growth spurt hits, everyone levels up, and (for better or worse) “startup culture” morphs into “business casual.” It’s always jarring, but it can be catastrophic.

For startups that relied on unicorns, this growth came with a whole host of new pitfalls. Up until this point, everyone at the company was a unicorn: they did everything (and did it well). Individual job titles were a formality — if you worked there, you had your fingers in all the pies. The gods of hustle were offered many a libation of coffee.

This is an environment I am well familiar with. Here are just a couple of examples of unicorn culture from my own work experience:

• At one gig, the nonprofit’s board members were also the A/V technicians, while the talent also managed event planning, fundraising, and the branding development for new shows.
• I’ve been employed at a startup where the CEO’s speaking tours and friend group were the sole source of marketing and sales, and department managers were responsible for hiring, firing, coaching, process development, and individual deliverable quality assurance.
• I’ve worked at a company where it wasn’t unheard of to have one person handle customer service, project management, and content creation for multiple accounts, all the while helping interview new hires and working as a mentor and coach for new employees.

Here’s the thing: with limited resources and a lot of passion, startups rely on unicorns to get off the ground. And often it is intoxicating to be surrounded by dazzling juggling acts that would rival any circus performance. But relying on unicorn culture as a long-term business strategy is a recipe for disaster for three big reasons.

1. When everyone does everything, no one knows how they do anything

As your startup expands, you need to figure out how to scale your business model in a way that allows for growth: what processes can be streamlined or automated, which communication pathways are outdated or redundant, and what new steps should be added to produce more results more efficiently?

All seemingly straightforward questions… until you realize that because everyone has been doing everything, there are no agreed-upon processes to be streamlined or automated. Set communication pathways don’t exist, and no one has a list of existing steps, let alone concrete proposals for new ones. Now, instead of focusing your attention on growing, you have to spend a lot of time in the weeds, forensically documenting what’s been happening this whole time.

Last year, my company went through a restructure after realizing our business model was too dependent upon unicorn culture to grow at the rate we wanted. Our unicorns were all-star client relationship experts, project managers, and subject matter experts. But at the rate we were growing, it became clear that waiting for new unicorns (or adding more to the existing unicorns’ plates) were not viable options.

So before being able to fully embrace our growth phase, we needed to say goodbye to unicorn culture. A lot of that fell to me as a senior operations specialist. We set out to audit our existing model — figuring out exactly what was happening and who was making it happen.

Spoiler alert! Every single task our unicorns did was actually comprised of three or four subtasks, many of which needed to be taken on by other people in order to scale operations correctly. Here was a common problem-solving scenario:

A unicorn used to be responsible for completing Task 1, but upon closer inspection, Task 1 is actually comprised of subtasks A, B, and C, all with different specialized requirements.

• How many subtasks of Task 1 is the unicorn going to continue to own?
• If the unicorn owns subtask A, who is responsible for subtasks B and C?
• How do the owners of subtasks A, B, and C communicate with each other in order to complete Task 1 without slowing down the process or duplicating information?
• Who is responsible for confirming the completion of Task 1, and to whom do they report it?
• If Task 1 fails to be completed correctly or on time, which person is responsible and who initiates a solution?
• Is Task 1 even necessary? Or do we really only need subtask B, and in that case, whose responsibility does it become?

Considering each project we managed had at least a hundred tasks, the process of restructuring and streamlining (while continuing to grow) was quite the adventure. And the speed and effectiveness of my own contributions were only made possible by removing a bunch of tasks from my plate and giving them to other people more suited to complete them.

Speaking of other people: I hate to break it to you, but each unicorn at your startup has probably (unbeknownst to anyone) absorbed the workloads of three or four different roles…workloads that are about to exponentially increase. Identifying what those workloads are through codifying processes is step one of dismantling unicorn culture. Strategizing a staffing plan to cover this imminent demand is step two.

Unfortunately, relying on finding more unicorns is a strategy that will not work, because…

2. You can’t put “magic” as a job requirement

At a previous company, I was put in charge of building their content department from the ground up. I was also asked to spearhead hiring new full time writers and subject matter experts to add to our stable.

But there was a problem. We didn’t just need capable online copywriters. We needed unicorns in that stable. Our ideal candidates needed to be experts in highly specialized fields including R&D, SaaS, CNC machining, and electrical engineering. Those individuals also needed to understand search engine optimization and digital marketing, write and revise up to ten articles a week, and participate in real-time editing sessions with disgruntled clients. All for (let’s be honest) a very unimpressive salary.

We’d built a magic-based system that worked with the group of writers we had. When that growth spurt hit and we suddenly needed five more people, it became impossible to expand. The options became either hire twice as many non-unicorns, or pay the few unicorns we could find a much higher wage. But because the company had based their financial projections on the assumption they could put “magic” in the job requirements, neither option was in the budget.

Instead of questioning whether we should be relying on unicorn culture, this company resorted to putting more work on the existing unicorns’ plates. Needless to say, morale and content quality tanked, and a slew of frustrated resignations (including my own) left them in an even deeper hole.

Which leads me to the third reason that unicorn culture is hazardous for long-term growth…

3. Imploding unicorns are a real business hazard

Unicorns are not impervious to burnout. In fact, because they are probably doing more than one person’s job, burnout is a matter of “when” and not “if.” Placing the fate of your company on a small stable of unicorns and hoping none of them implode before you get where you’re going is a dangerous gamble. Not to mention bad people strategy.

I have watched the burnout in real time. The nonprofit I worked with years ago had a habit of piling responsibilities on eager new volunteers, along with unhealthy amounts of praise. Weekly commitments, unofficial chores, unpaid board memberships, last minute travel, and hazardous activist work all embedded you deep into a community of likeminded people… until you snapped.

Some unicorns went from shining stars to showing up late and drunk for every recording session, having tantrums on air in front of thousands of people. Others took on the extra weight and had mental breakdowns to show for it. Events stopped being planned, important decisions stopped being made, and financial growth slowed to a crawl. When they closed down the building due to COVID, it fell into disrepair and didn’t open again for three years.

The bottom line: If you’re wondering when to stop relying on unicorn culture to make your company work, the answer is yesterday. Restructuring your business model, developing new processes, and hiring additional roles in order to avoid imploding unicorns are all going to be a heavy lift. Made heavier if you’re already down a unicorn or two.

Finding homes for your previous unicorns

Don’t confuse getting rid of unicorn culture with getting rid of your previous unicorns. Those people have years and years of institutional expertise and wisdom gathered from working on all aspects of your company. That’s something that not only should be appreciated but utilized!

Previous unicorns are perfect candidates for roles that require organizational knowledge, coaching, leadership, operations, or process development. They might also be great options for marketing roles, client relationship management, or hiring for the roles they no longer need to carry themselves.

Another unseen benefit of finding new homes for your previous unicorns: because their day-to-day was taken up by being all things for all people, it is very possible their truest potential has yet to be unleashed. Giving them the opportunity to focus on their strengths may reveal hidden superpowers that you didn’t even know already existed in your company. Tapping into those skillsets, especially combined with the institutional knowledge they possess, can give you the horsepower (no pun intended) to propel your company into the next growth phase.