Brilliant ideas, energetic founders and supportive investors can help startups get off the ground. But keeping the company flying is a different challenge, especially in these tough and uncertain markets. In a McKinsey analysis of nearly 1,800 startups, 78% of those who launched a successful product failed to scale it. Why? It’s not just about ideas or capital, but much more driven by whether the founders can build a strong organization and culture. In fact, investors attributed 65% of the below-expected performance in their portfolio companies to issues related to people and organizational set-up. Hyper-scalers are poised to outperform the industry, remain resilient during downturns, maintain strong cash positions, set a high bar for corporate performance, and take well-planned bold moves.
Five factors emerge from McKinsey’s experience with founders in India and around the world who have built organizations that are resilient:
They build a structure designed for growthThe principle is that the operating model should be flexible enough to allow for future growth and stable enough to manage it. This requires a change in mindset – from ‘growth for funding’ to ‘growth for sustainable scale’. This means creating an organizational structure that encourages innovation and risk-taking, but with clear accountability and decision-making authority. Too many founders say they want to delegate and do so on paper, but the ones who are successful actually empower their teams and enable them to make their own decisions. In addition, startups whose operating models allow for multidimensional growth beyond their core business or geography are 97% more likely to outperform, our study shows.
they create new ways to collaborate: Start-ups are keen to bring in customers and revenue by all means. However, as they grow, they face the complexity of dealing with multiple channels, platforms and partnerships. Communication becomes fragmented and silenced. Founders who are older tend to be more deliberate about building cohesive teams (in products, operations, compliance, tech) with specific operating metrics that drive, with daily meetings focused on solving immediate issues. are responsible for doing. They transparently use data to drive operations, and don’t allow historical friendships and personal equations to get in the way.
they get the talent right: Startups can often lock everyone in a room, and have the founder-CEO interview all the new prospects. ‘Scaleed innovators’ acknowledge that there comes a time when this is no longer sustainable, and they may need different types of candidates than when their startup was ‘the next new thing’. At this point, systems come into play to articulate a talent management strategy and define a differentiated employee value proposition. A digital commerce company used advanced analytics to identify what skills it would need over the next three years. It then revised its hiring and training programs and redefined key roles based on this scenario. It’s hard to say how much this matters: A McKinsey survey of more than 600 companies found that organizations that reallocated talent frequently were twice as likely to outperform their peers.
They promote a specific culture: Startups build culture quickly; With maturity, however, it needs to become more deliberate. It is important to acknowledge that the culture that enables startup success may need to evolve to drive the next stages of growth. They communicate their growth mission and reward those who live their core cultural values, and let go of those who don’t, even if they are current high performers. Digital entrepreneur James Bylefield, who helped grow Skype’s global business, put it this way: “Failing to maintain a clear focus on core values and principles during the scaling process can result in unacceptable behavior and other harmful effects “
They adapt their leadership model: In the startup phase, the leadership team and the company are almost the same thing. But growth requires more layers, diverse talent, and more structured growth paths. For example, one online food-delivery platform created a targeted career development program on 140 of its people, with customized leadership journeys for each. By doing so, the founders of the platform got a highly motivated and skilled team of talented individuals who were now able to grow together at scale.
Founders who believe in the myth that aggressive, authoritarian behavior drives performance may find some initial success, especially if they have raised money based on their ‘idea’. But they have successfully figured out how to create 100-200 leaders who act like owners themselves, have a high level of mutual trust and hold each other accountable for achieving company goals. .
Look at the journey of the unicorn in India over the past decade. Founders who have grown and created value have not only talked about these five factors, but also executed them with the proper focus and determination. They will keep flying through both the good times and the tough times.
Claudie Jules and Kate Lloyd George contributed to this article.
Alok Kshirsagar is a senior partner at McKinsey & Company, and co-leads McKinsey’s global practice focused on founder-led companies.
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