7 things Australian companies must do to become world class

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Change and confusion create short-term commercial opportunity, but most success stories take a decade or more to write.

Are you building a business that will continue to thrive in 2028, not just one that will win a pitch competition in 2018?

Launching a new business is exciting, daunting, stressful and rewarding in various measures.

It may require one of the biggest leaps of faith that you will make in your career, or you may become a founder almost by accident.

Either way, you will find naysayers who talk down your successes long after you have reached critical mass, and optimists who encourage you to keep going when you would be better advised to quit.

You will find good news and opportunities where you least anticipate them, and unexpected hazards that emerge from left field.

Wherever your founder’s journey leads, one thing is guaranteed: you will emerge with much more wisdom, business experience and commercial acumen than you could ever accumulate working for someone else.

We know.

In the 15 years since we launched Pottinger, we have seen extraordinary change and opportunity.

In that time, Airbnb, Facebook and Uber were founded, Apple launched the iPhone and iPad, and SpaceX launched the world’s first reusable orbital rocket.

Solar energy has moved from cruising yachts to urban rooftops, and the best cars are now electric.

Much of the world’s knowledge is captured in Wikipedia, most of the world’s music can be streamed to your phone and many subjects can be studied online for free.

In business, new products, new competitors and new business models have emerged, and new technologies are reshaping telecommunications, energy, healthcare and other major sectors.

For the first time, three of the top 10 U.S.-listed companies are less than 25 years old.

Opportunities for entrepreneurs

Most large businesses now live in fear of disruption.

Transformation projects have become the latest corporate obsession as incumbents scrabble to keep up with the pace of change.

As often as not, little is achieved by these processes, leaving startups to deliver what their older, wiser and better-financed competitors could not.

Looking forward, automation, digitisation and artificial intelligence are poised to drive the most extensive industrial restructuring ever seen.

This situation opens up a huge playing field for entrepreneurs, along with many risks.

Change and confusion create short-term commercial opportunity, but most success stories take a decade or more to write. You need to build a business that will continue to thrive in 2028, not just one to win a pitch competition in 2018.

Today’s fad may fly with deal-hungry angel investors, but it is highly unlikely to carry you to $50 million Series B financing, let alone a rewarding exit.

To succeed, you must focus resolutely on the long term, just as Google and Berkshire Hathaway have done, despite the many distractions posed by an obsessively short-term world.

You must also carefully consider the societal impact of your business, particularly as the impacts of robotisation spread through the global economy.

So, how can you make sure you concentrate your energy on the right opportunities?

How can you keep your investors and co-founders happy, not to mention staying connected with your friends and family, whilst building value in your business and staying sane?

As you navigate through the forests of commercial opportunity, here are seven guiding stars to follow if the startup foal paying peppercorn rent for a garage is ever to mature into a billion-dollar unicorn.

1. Address the future, not the present.

To gain traction with your product or service, clearly you need to address a problem where people feel pain today, to ensure that there are enough early adopters to help you begin to grow.

But the scale of the opportunity and length of the growth pathway is much more important than how rapidly you progress in the first 24 months.

Facebook’s early revenue growth was relatively slow, but the glue of its relationships with consumers—an online social network—has proved exceptionally resilient in the face of dramatic changes.

2. Start the race you want to run.

(Photo by Jason O’Brien/Getty Images)

Where you launch your business defines the mountain that you will need to climb. For example, startups in the U.S. and China benefit from huge domestic economies, and hence many more opportunities to gain early commercial traction.

They have larger prizes to win from early sales, and much broader and deeper investment markets to finance growth.

Phenomenal businesses can also be built from other centres, particularly if you have a way to drive early adoption with large customers in your home market.

But, as Atlassian has demonstrated, you will need a rock-solid approach to international marketing, business development and sales if you are to make it on the global stage, not to mention the appetite for a lot of long distance travel.

3. Recognise that you must win in the U.S. or China.

ChinaFotoPress via Getty ImagesA child playing in Tiananmen Square.

Wherever you start, to reach meaningful global scale, you will need to establish a strong position in either the U.S. or China.

So far, virtually every large-scale success story is centred on one of those markets.

Businesses in Australia benefit from a natural affinity with both those countries, but before long, you will need boots on the ground and major customers in one or the other.

This need is of profound importance to your customer development strategy and marketing plans and may have important implications for your product and platform, too.

4. Realise that scalability is as important as scale.

Your products and services, operational platform and business model all need to be scalable.

In the early days, it is tempting to cut corners as you race to machine a ‘minimum viable product’ and push to demonstrate that you have ‘product market fit’.

But no matter how critical these steps are, remember that, if you start to achieve real traction and rapid growth, there will be even less time to re-engineer your technology platform, operations and market approach for scalability and enterprise-grade reliability.

So, design and build in anticipation of this from day one.

5. Focus outwards on your customers.

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As your company grows, remain resolutely focused on your customers’ needs and how they perceive the solutions you offer to their problems.

No matter how phenomenal you think your product might be, if you start to focus inwards on your technology and intellectual property, you will begin to let massive opportunities slip through your fingers.

These missed opportunities may seem small at first, but may grow large enough to disrupt your entire business.

And, as the march of automation and artificial intelligence continues, exploit these technologies to increase human interactions with your customers rather than just cutting cost.

6. Understand startup maths.

A complex equation links founders’ equity, early traction, revenue growth, company profile, talent attracted, perceived risk, capital raised, profitability, exit value and investors’ eventual returns.

This equation plays a fundamental role in whether you can raise capital, not to mention at what valuation, and thus drives your ability to access the financial oxygen your company needs to breathe and grow.

With the stars aligned, some companies can raise Series A funding at 30x revenues or more, giving huge firepower for very modest dilution, and making later, much larger funding rounds easier to structure.

Conversely, if you give up too much equity before you achieve material revenues, investors will worry that the founders do not have enough skin left in the game, making it harder to raise further investment—the ultimate Catch-22 for startups.

7. Consider the endgame from the beginning. Think through carefully how you will personally make money out of your venture.

And if you are not relentlessly commercial, find someone who is.

Even if you are not driven by financial results, financial sustainability is critical to the ability of your business to achieve maximum impact.

Develop a commercialisation strategy from the outset so that you understand how all the different jigsaw pieces can be brought together.

This strategy will help you to build the business that started out as a flash of inspiration in your mind in a way that realises your dreams.

These seven guiding stars traverse many business disciplines and topics, so if you can only remember one thing, remember this: Strategy + Investment + Risk + Disruption + People = Success.

This is the formula that drives great businesses of all sizes and types, and it is the bedrock of the multidisciplinary advice we provide at Pottinger.

Marketing, team building and other issues

John MacDougall / AFP / Getty ImagesAustralia’s womens rugby sevens team celebrate gold against New Zealand in 2016.

Of course, many other issues should be considered. You need the right business model, technology stack, sales strategy, pricing structure, team and culture, to name just a few.

You must have a clear strategy for “crossing the chasm” — navigating the marketing abyss that lies between the small number of enthusiastic, natural early adopters and the high-volume mainstream—so read the iconic book by Geoffrey A. Moore, Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers.

Although positivity is critical in a startup, you must also be realistic about factors that can stand in your way.

Many of these are entirely outside your control, as we have explored in our white paper, Entrepreneur or GoneTrepreneur.

You cannot anticipate all the problems or know all the answers.

Ideally, your founder team will include two or three individuals who combine strategic vision, technical excellence, selling skills and the ability to build and lead a team.

If you are lacking one of these critical elements, consider adding to the founder group if you can find the right person.

And remember that your team does not stop at the office door. Finding the right external collaborators, advisors, promoters, mentors, investors and board members will, to a large degree, determine whether your business flies or dies.

Generously reward partners who make a real difference to your profile and growth—this will be one of the best investments that you will ever make.

Finally, no matter what people say about the benefits of failing fast, losing is enormously less rewarding and much less fun than winning, even if the latter takes longer than you first planned.

We wish you phenomenal success in unlocking the full potential of your business.

Whether that is realised via an IPO on the ASX, or a trade sale to one of the world’s leading companies, or through another path entirely, we hope to be there to help you celebrate the milestones along the way.

Nigel Lake is co-founder and CEO of global consulting firm Pottinger. This was first published in Entrepreneur’s Guide – Startup | Scaleup | IPO – found online free of charge here.

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