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Labor Productivity and Startup Failure

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Sep 27, 2020

What kills most startups is simple productivity loss - not being able to do, with sufficient efficiency, what is needed to be done. This is precisely why everyone talks about execution over ideas. While we generally attribute startup failure to various reasons such as lack of product-market fit, bad timing, running out of money, etc, a failure to produce results is at the center of all these challenges. Charlie Songhurts puts it beautifully in an interview with Patrick O’Shaughnessy:

“So I think the dominant sort of failure mode for startups is the same at each different stage. So at sort of pre-seed to seed, you basically have a failure to achieve labor productivity, which is just a polite way of saying the team doesn't come together. Doesn't gel and produces good output. Usually, a team that just produces good work will generate enough sort of kinetic energy to get continuing funding. Once you sort of going from seed to series A, it's another single cause, which is failure to get product market fit. You're basically on the search for demand curve. And you either find one where you don't find one. And this is where you've got the highest element of pure chance in a startup. It always feels akin to sort of gold perspective in the California gold rush, which is you can be good or you can be bad. You can do the right thing. You can do the wrong thing, but there's some irreducible amount of chance. Why the wisest prospector with the best maps, the most intelligent strategy, sometimes just won't find it. And someone will just fall asleep, put the pan in a stream and gold will come out. And there really is a little nexus of serendipity at this stage. Then when you move to series A, it's really all about labor productivity, but in a different form, it's “can the manager scale?” And one of the fallacies is most early stage startup founders think they're managers. And they're actually not. What they actually have is a team that's actually managing them. Because when you're managing say 10 or less people and spending time with them every day, what's actually happening is they're managing you by influence because they know you well enough. And they talked to you enough to work out what your desires are. So as long as you're articulate and energetic and sort of engaged, you actually don't have to manage. The team manages you up.”


Notes 

This is a helpful perspective. If you can bring down your reason for failure to simple productivity failure, it allows you to design interventions to avoid that from happening. Now productivity is not about getting things done alone. It is of course about getting things done on time but it is also about getting the right things done. You are accomplishing the right things for the right reason - that is productivity. Now that requires some system in place so that you not only build a culture of getting things done in a timely manner but also you as a team picks the right things to do. 

In most enterprises of decent size, the aspect of productivity, at least in the context of Bangladesh, is often left to chance. You have standard HR systems but that seldom covers for ensuring what is being done and for what purpose. Startups should design systems and processes with an eye to maintain productivity. There are excellent processes such as OKR. You can also develop your own systems. 

Productivity in a startup is equally a matter of culture. One particular productivity killer is distractions. Lack of focus kills far more companies than anything else. While accountability in the form of developing systems and processes is critical for companies to ensure productivity, distraction, even seemingly productive ones, can drain any productivity gains from implementing a good system. 

Photo by Minh Pham on Unsplash


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Ruhul Kader is a technology and business analyst based in Dhaka, Bangladesh. He is also the co-founder and CEO of Future Startup and author of Rethinking Failure: A short guide to living an entrepreneurial life. He writes about internet business, strategy, technology, technology policy, and society. He can be reached at ruhul@futurestartup.com

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