So you decided to start a technology startup. Excellent.
Let me start with the good news. For all startups that are started, technology startups have a far greater chance of surviving five years after they are founded. In Switzerland, for example, about 50% of startups survive five years after they are founded. But in case of technology startups, almost 90% are still around after five years. Due to the more aggressive time-to-scale or time-to-fail in the US, the timeline may be shorter, but the proportion is likely the same.
The bad news is that there are a lot of problems that can result in the company failing, but which result in the ultimate failure getting dragged out by years, rather than a swift demise, as is the case with platform startups. I’ll capture some of these problems below.
One of the most common challenges of tech that’s transitioning to manufacture is that this is led by tech people. This correctly implies that the thinking driving this is tech-focussed in nature. To be aware of this thinking may enable you as a tech person to recognise the box you’re in. As a non-tech person, this helps you to recognise how tech persons think early enough to take steps.
Tech teams often tinker in their labs, much much longer than required and definitely longer than they can afford, particularly after funding comes through. The mindset of tech teams is that they go to their labs every morning and expect to do something different. Manufacturing, on the other hand, focusses on doing the same thing a million times, a billion times, without any variation. In other words, freeze the tech, work the logistics.
Tech teams have a dangerous pre-disposition to try and save money by designing and making the machine required for producing products in-house. To complicate things further, their view is to create the process by writing the software on the custom-designed machine. This is like saying that instead of getting a coffee machine, you start with a metal box, and put containers for coffee bean and water, and for good measure, add the software required to control how much water at what temperature is pushed through the nozzle through the coffee, which in turn is ground based on another software instruction.
The manufacturing mindset is to outsource as much as is possible, and definitely get the suppliers to provide guarantees. They correctly recognise that the important element is to focus on the core competence, and outsource everything that is off-the-shelf. This is because it is the core element that captures the value-added. Everything else is a commodity, and cost-plus.
Tech founders often delay entirely too much to get a manufacturing mindset into the game. All the tech founders I have spoken to over the past decade have recognised this delay. The only exception is software companies, where the focus is to do the solution once, since replicability is seamless.
In summary, the one simple advantage of manufacturing thinking over the tech mindset can be eloquently summarised thus: Done is better than perfect.
Send your questions on your challenges in your own entrepreneurial journey and I’ll try and answer them.
I wish you the very best for your own entrepreneurial journey.