How to Detect if Your Startup Has a Faux Focus

I’ve realized that one of things I do for (or should I say, to) early-stage startups is detect whether they have a real or a faux focus (pronounced fo-focus) — the latter being a focus that appears to be real at first, but is in fact fake.

Focus is like baseball, hot dogs, apple pie, and Chevrolet. Needed. Timeless. And everyone’s in favor.

But, alas, when you drill in, the conversation often goes something like this:

DK: So what are you focused on?
CEO: Mid-market (MM).
DK: Do you sell anywhere else?
CEO: Yes, for sure. A lot of today’s SMB companies will be mid-market tomorrow, so we want to catch them on the way up.
CEO: Oh, and today’s MMs will be enterprises (ENT) one day, so we sell to them too — so we can learn their product requirements –and our customers can grow without fear. I mean, we’d never want a customer to outgrow our platform.
DK: OK, but what about our marketing, do we have any focus there?
CEO: Well, you know, you can’t really control who clicks on a Google ad, so we can get inbound from SMB, MM, and ENT. We can control geography though. We don’t run ads in Florin or Genovia.
DK: But those are fictional countries from princess movies. How about LinkedIn, you get a lot more control there?
CEO: We’re not doing as much on LinkedIn. Leads are more expensive.
DK: (Thinking that maybe they’re higher quality and more aligned to strategy.) How about industries?
CEO: No, we’re a horizontal play. We have customers in banking, healthcare, pharma, insurance, energy, and retail/CPG. And many others.
DK: Any focus on use-cases?
CEO: Yes. But no. No, we’re a platform play. That’s the beauty. We have an integrated platform that can support dozens of strategic use-cases. So, really, yes and no.
DK: So you’re focused on everything. All size segments, all geos, all industries, and all use-cases?
CEO: Yes. We love focus so much that we have a whole bunch of them. Go big or go home.

At this point, I’m thinking three things:

• My Latin teacher, Mr. Maddaloni, taught me that focus was singular.
• The founder of Southwest Airlines always said that to get big you should think small.
• This is why Geoffrey Moore wrote Crossing the Chasm and Inside the Tornado.

As it turns out, a quick nod to the chasm gods is a lot easier than embracing them. In the rest of this post, I’ll share some tools I use to detect real vs. faux focus and that you can use to sharpen focus in general.

• An ideal customer customer profile (ICP) with concentric circles. Sometimes it’s too binary to have ICP and non-ICP customers, with the result that everything gets equal treatment. Instead, treat your ICP like a bulls eye. Ring zero is credit unions of size X with use-case 1. Ring one is banks of size X with use-case 1. Ring two is insurance companies of size X with use-case 1. Ring three is financial institutions of size X with use-case 2. Ring four is everyone else. I find this increases focus, especially when the inner rings are variations on a core.
• Define the idea of strategic vs. opportunistic revenue. Look, I’ve run startups. Cash is king. You want to give me money, I’ll take it. As long as there are no strings attached. Startups get in trouble when they draw-and-quarter themselves by selling roadmap (i.e., non-existing) features to a diverse set of customers. That’s why you should define strategic revenue (e.g., in the first three ICP rings) vs. opportunistic revenue and then religiously enforce this rule: if it’s oportunistic revenue you have to sell what’s on the truck. Don’t even bother asking for roadmap commitments. Maybe give those sellers lower quotas in return. But don’t let them ruin your future by selling your scarcest resource, R&D capacity, for non-strategic purposes.
• Segmented metrics. Let’s say you’re strong in SMB and your growth strategy is a big up-market push into MM. All of your reported metrics quickly become a variably weighted blend of two different businesses. You’ll find yourself in board meetings saying things like, “well the average sales price isn’t that meaningful because it’s a blend of SMB deals at $10K and MM deals at $40K.” For that matter, neither are average sales cycle, close rate, win rate, loss-to, and other metrics. So, segment these metrics: present SMB, MM, and total (aka, “blended”) figures. The same goes for industries and use-cases. Sometimes you’re doing great on the new strategy but the core business is collapsing faster than you thought. Sometimes, the core business is going gangbusters and you’ve made no progress on the new strategy. Without segmented metrics, you can’t easily tell.
• Not-on-list lists. Planning is an additive process at most startups. “Let’s do this and this and this. Forget anything? OK, let’s add that, too!” To sharpen your focus, add a subtractive element. When you discuss something and decide not to do it, capture that in a not-on-list list. Think: here’s the list of things we decided to do, and here’s a list of things we considered and decided not to do. It will both help your current focus and shorten subsequent debate (think of the asked and answered objection in court).
• Split business units. If you’re constantly arguing it’s actually two different businesses that happen to share a go-to-market (GTM) team, then consider splitting the GTM team. Back in the day at MarkLogic, we had two unlikely bedfellows as businesses: intelligence and media (aka spies and publishers). It helped that our staff literally couldn’t attend meetings in the other segment (e.g., security clearances). So we split our business in two: media and federal. We didn’t have SCs, we had media SCs. We didn’t have consultants, we had federal consultants. We didn’t have a CRO, we had a VP of media and a VP of federal. While this is a pretty extreme approach, in certain situations — particularly when the businesses are pretty far apart — it might make sense. We had two different distribution businesses atop a shared product foundation.

I hope this post has given you a few ideas on how to test your own focus, how to sharpen it, and how to report on it.