StartUp vs. ScaleUp

This entire playbook reflects experiences collected while working at multiple companies, all of which have been ScaleUp businesses with sustained growth. Depending on the stage or scale of growth, some Product Management principles might differ, so we think it’s worth defining the type of companies we are addressing:

Understanding Stages of Businesses

Companies, both B2B and B2C, typically go through several stages, each with its own characteristics. We don’t want to discuss the details of each phase here; instead, we want to highlight some key aspects.

Startups in the seed stage or early funding stage are typically small teams pre-revenue. Their primary focus is on experimenting and iterating their offering to find product market fit. Less mature operations also characterize this, typically more ad hoc processes and organizational roles not yet well defined. Beyond the product, also the business model might still not be clear yet.
Compared to that, ScaleUp (or growth stage) companies already have larger teams, with some initial organizational structure and areas of responsibility. Most importantly, ScaleUps have shown a product-market fit from which they generate significant revenue streams. As the name suggests, their main goal is to scale their business and reach a broader audience — for which additional funding is often raised. In addition, ScaleUps will constantly improve their maturity regarding operational processes such that the organization can efficiently handle the growth. Given the existing revenue, the main elements of the business model have been established and will be optimized. Depending on growth investments, these organizations may or may not yet be profitable.
After ScaleUp, companies may move into the expansion stage focused on maintaining their growth trajectories while improving profitability. Often, that includes expanding into new geographies, extending product lines, strategic partnerships, and mergers and acquisitions.
A mature company has reached a plateau in business, market reach, and profitability. It’s well-established and has a proven product and business model and steady revenue streams based on a stable customer base. The main focus is maintaining its market position, potentially supported by partnerships or acquisitions.
Finally, a company at the decline stage will experience declining revenues, market shares and/or profitability. Disruption is a key aspect here, when markets change completely, new technology is being introduced, and competitors emerge — most likely being StartUp or ScaleUp companies.

From Founder-led to Spider in a Web

Founders are responsible for defining a StartUp’s vision, mission, and long-term goals. For that, most input into strategy and roadmap will come from them. In fact, some of them will act as Chief Product Officers — regardless of whether they have that title or a different one. Additionally, the company is small enough to allow founders to directly engage with everybody.

At a later stage, a Product Management team will be in place, acting more like a Spider in a Web: The PM team will shape all aspects of the product but to be successful, they need to collaborate across the entire company. And, vice versa, whenever a problem occurs in these other departments, the PM team will notice.

For example, poor quality or bad user experience will result in Customer Success being flooded with complaints — who then, in turn, will come back to the product team in order to address these issues and prevent churn.

From Early Ideation to Customer Discovery

In alignment with StartUps still being very much founder-led by their very nature, most ideas for solutions will also come from founders. Actually, this is why they founded the company: they believe they could build a (better) solution to serve customers' needs. At this early stage, many ideas will be produced all of which need to be validated against the Four Key Risks, but most notably to make sure that there is an actual value for the customer.

When the company is more established and already has a relevant customer base, involving these customers in product discovery becomes key. Whatever frameworks and tools are used (see part 3 of this playbook), Product Management has to implement an appropriate process to collect and validate ideas and test solutions.

From Focus on Value to PMF and Beyond

When ideas are being generated at a high pace in an early-stage StartUp, the main objective is to quickly provide a unique value to customers by offering solutions for underserved needs. Returning to The Four Key Risks, the main focus here is on value — because if a solution is of no value to customers, everything else doesn’t matter.

Once a working solution for a customer problem has been found, it is crucial to address Product-Market Fit (PMF).

This implies that not only do customers want the product but also that appropriate strategies for Marketing and Sales are in place and the product can be built, sold, distributed, and operated in a profitable manner. Hence, the responsibilities of Product Management go far beyond just building features:

From Seed Funding to Serious Investors

Typically, companies are going through various stages in terms of financial investors. While there are no strict boundaries and many variations in that process, a ScaleUp company will usually have way more demanding investors. They will challenge strategy and execution and require more formal decision-making as well as specific reporting structures; they might even participate through Boards of Directors. Specifically, the Product Management leader, most notably a Chief Product Officer, must speak up, convince, and win that group.

From an Idea on a Napkin to a Well-Shaped Strategy

At an early stage, it is important that founders are aligned around their core vision as well as key values that are important to them. Not much formalization is required, everything fits on the proverbial napkin.

Once the company has grown to be a ScaleUp, it’s essential to define its mission, vision, and strategy precisely.

Even beyond that, communication of the strategy and how it impacts the roadmap becomes a key responsibility of the Product Management team so that these are fully transparent to every single employee. Every. Single. One. Of. Them.

More on that topic in part 2 of this playbook.

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