THE VALUE OF TIME
My point here is to deal neither with the economics concept of time preference, dear to the neoclassic theorists, though it is a related form, nor the notion of time and motion that the factories and banks were fond of using in the 1950s-1960s to attempt to improve productivity. My focus here lays in the value of time as a fundamental factor of value creation in startups, therefore in an uncertain world.
1. Why time matters
“Time is money” and “it will save you time” are old wisdom sayings we have heard for generations with the view that reducing the time to accomplish any type of task has monetary value. It is certainly a shortcut; not always, but often, true.
a. Common perception of speed-to-launch: the rush to be first to market
Tech startups have been keen on accelerating time to market and preempt competition. It has been common belief that being first-to-market would propel a company to own its market, despite illustrious late-to-market examples that did ultimately own the market. The first-mover advantage, as initially described in 1988 by M. Lieberman and D. Montgomery, from Stanford Business School, is a costly proposition, when educating and evangelizing a market rests in the hand of the pioneer.
It became however a mantra for all startups, and even more for investors whose first question to founders was “how much sooner can you be ready to launch if we add more money to the venture?”. Temptations of the kind would often lead to cutting corners. Adding to the thrill was the noise campaigns by competitors announcing far in advance the launch of similar product, even as no such product was in development.
Therefore, in the only industry that can afford to launch unfinished products, software startups adopted the new paradigm of shipping products-in-the-making to early adopters honored to serve as paying guinea pigs. “Ship, ship, ship” was the slogan of the industry. The rationale was to occupy territory as quickly as possible.
Hard Tech startups need not concern themselves with it.
b. Time to plan vs. time to execute
As short as one would like the time-to-market to be, it remains always critical to plan flawlessly. It is the time to execute the plan that matters. The more detailed the planning, the shorter the execution.
2. There is more to it than meets the eye
a. The startup world is a sum of uncertainties
To prepare for a product or service launch, just like in any project, every startup ought to design the optimum critical path, highlighting all dependencies between tasks, hence identifying the critical activities. The number of tasks is an order of magnitude larger, but the principle and the approach are the same. The time for each task or event is estimated, hence creating a massive possibility of wide gaps that could, in abstracto, extend the whole launch considerably. The focus is on sharpening each estimate in order to work within narrow windows of accuracy, while using statistical models to arrive at a full estimate.
Controlling critical activities is of the essence.
What goes for the launch of a product goes for the activities of the startup as a whole. That is why time is the number one scarce resource to exploit in startups.
b. Managing time is not taught in business schools
Business schools give a lot of clout to individual time management for leaders, much less so far to startup time optimization. Yet, it seems intuitive that the latter is a better tool to warrant the survival of a business in an uncertain world and a brutal competitive environment.
Everyone in charge of building a business based on products or services must assess the options at hand in the potential distribution between labor -or rather talent as the term is more appropriate within a startup-, capital and time. The goal is to optimize the allocation of these three resources, first to launch a unique product/service that solves a recognized problem and own a nascent market before competitors have a chance to have their head out of water, and later to manage all aspects of the business. It is the essential advantage CEOs can draw from maximizing the value of time.
The major points to emphasize relate:
- to allocate the time of executives and other employees with multiple functions, as is current in startups. This is where successful startups edge their rivals;
- to position the control points where any error could imperil either a commercial launch or the business;
- to constantly iterate and test iterations, according to changes in the environment at large.
If the process is conducted expertly, chances are you leave competitors behind.
Beware of the conventional approach that posits if a startup CEO compels her team to adopt 14-hour workdays for a long period, say 1 year, the company will outpace competition. Productivity is much more than the product of headcount by time. Burnouts, so common among tech startups, are not a sign of a high productivity, rather a sign of short-sighted “leaders”. They can sink a project or at least seriously delay it. I know of a firm in the Silicon Valley where the leader still today thinks he can exert a maximum work time from each member of his team despite undefined milestones and product definition that are moving targets. Talent attrition is coming to ruin this over-funded company. Either they reform, by bringing real managers, or they will become history, though they have great expectations as a category leader. An ephemeral category leader, no doubt.
c. Is time a finite resource like talent and capital?
The short answer is no. It is together an elusive resource and a factor that affects the use of capital and talent.
3. Don’t obsess with cost, obsess with time
The majority of entrepreneurs and a higher proportion of CEOs excel at cost-cutting. What works in a big organization rarely works in a startup. If a CEO of a startup claims she will cut cost, we can assume the venture is not really a startup, or it is doomed to fail. Startups are lean by nature. Cutting the lean, in the absence of fat, would immediately imperil the business.
More relevant is a smarter way of allocating resources, talent, time and capital, the latter acting as the oil that lubricates the value creation engine, if it were an ICE. The strategic building blocks affecting the optimal resource allocation are:
- a well thought-through business model;
- the right and timely approach to talent acquisition;
- a relentless communication policy within the team as to the hierarchy of priorities and goals, therefore avoiding jumping from one emergency to another; and
- a strong leadership able to stop the planning process and move to execution, and to maintain a high motivation culture.
To close on this note, founders and CEOs must not embrace the simple rule that correlates success with the fastest speed to access or create a market. The lean startup -a tautology very much in favor – is a flexible entity that reacts to unexpected events, capable of reinventing itself to tackle changes. Having devised alternate options in the distribution of resources, without resorting to additional expertise, leads to flash execution of Plan B or C, something all startups must have in their sleeves.