How to Manage a Start-up Operation
Managing operations in the incubation phase and entering the growth phase is much easier for a company with multiple products in different phases of the curve than for one that has only one product that it’s trying to commercialize. Not only does the multiple-product company already have a reputation, but also, the products in the growth phase can help fund and fuel those products trying to survive incubation.
The products in saturation can also provide a base upon which to introduce new products. A new company trying to get its first product into the market doesn’t have these advantages. There are special challenges facing a new company trying to get footing in the marketplace.
Operation on a shoestring
Though all businesses face financial constraints, the situation is often more critical in a new business attempting to introduce a new product into the market. Unlike established companies, a start-up doesn’t have a recurring source of revenue upon which to support its development efforts. New companies typically operate on money raised directly from investors or on their own personal cash.
Above all it’s important for a new company to stay flexible. Because of the inability to afford a large staff, the company’s founders often have to take on multiple roles. They must handle not only the financials but also the design, production, and marketing of their product. This requires workers to be flexible and have a wide breadth of knowledge.
In terms of operations management in a new company, you must produce the product with as minimal an amount of cash outflow as possible. Doing so often involves outsourcing much of the initial production to keep costs variable rather than fixed to preserve cash.
Outsourcing is often a difficult decision for many companies that are worried about protecting their technologies from potential competitors. Proper intellectual property protection through the attainment of patents can protect you from these issues. However, the patent process can be very expensive and can take considerable time, eating up valuable resources.
Whether you produce in-house or outsource, maintaining flexibility in your capacity is important.
Transition to growth
If you’re a start-up, perhaps one of the greatest challenges you face is the transition to the growth phase of your product. This transition requires you to meet several needs:
Documented processes: As the complexity of your organization increases, so does the need for defined and documented processes. These processes are necessary to promote smooth operations and planning.
Organizational structure: While in the incubation phase, you probably didn’t have any policies or procedures in place. You may not have needed them because your staff was small, and everyone was up to speed on what was going on. However, with growth comes the need to add staff, giving rise to the organization chart, complete with a need for a reporting structure.
Systematic planning: In the beginning of your new venture, you may have done things by the seat of your pants. Your staff may have acted on any opportunity that came along as quickly as possible. But as your enterprise matures and grows, planning becomes essential because coordinating the organization becomes more difficult.
Task specialization: As you grow, the need for specialized individuals increases. Dedicated resources to such tasks as operations, marketing, and sales become increasingly important, and your firm may establish separate departments. This task specialization makes seeing the big picture more difficult and requires more coordination across the organization.
These changes can be difficult for those involved with a start-up. Larger companies often have different groups that take over product management as a product transitions from one phase to another. This is often necessary because the skills required in each phase tend to be different.
Because the introduction of a new product is so unpredictable and fast-paced, individuals who thrive in such an environment don’t often perform well in an environment that requires more structure, monitoring, and control.
Finally, as your firm grows, more control of the company must be delegated. This loss of control may be difficult for those involved in starting up a business, but without some delegation, the firm’s growth may be stalled.