Common Startup Frameworks and Why You Need One
Navigating startup uncertainty requires clear decision-making tools
Here’s an understatement: startups are chaotic! Founders often find themselves at a crossroads when it comes to making critical decisions. Some rely on gut instincts, taking leaps of faith, while others adopt a more structured approach. With all due respect to leaps of faith, at some point luck runs out and it may be the last leap you take.
In our conversations with startup founders, we found five commonly used startup frameworks that founders implemented at various stages to help them control the chaos. But how do you use these frameworks for own your startup?
Use startup frameworks to go from chaos to progress
We dove into the details of each one to explore the pros and cons as well as real-world examples of successful startups using each startup framework, so you can decide how to incorporate it into your startup.
The Lean Startup Method
Lean Startup emphasizes experimentation, customer feedback, and iterative development. Its core principle revolves around a Minimum Viable Product (MVP) to test assumptions and gather feedback early on.
Dropbox, the cloud-based file storage and sharing service, successfully utilized the Lean Startup Method by releasing a video explaining their product concept before building it. The overwhelmingly positive response validated the market need and served as a catalyst for their fast growth.
Rapid iteration: By embracing a build-measure-learn cycle, startups can quickly adapt their product or service to meet customer needs.
Mitigating risks: Validating assumptions early minimizes the chances of investing significant resources in a product that may not find market fit.
Customer-centricity: This approach encourages entrepreneurs to deeply understand and engage with their target audience.
Limited applicability: While Lean Startup is ideal for many software-driven startups, it may not be as effective in industries where product development cycles are longer or require significant upfront investment.
Lack of long-term vision: Focusing solely on experimentation and iteration might lead to overlooking the larger strategic picture.
Design Thinking is a human-centered approach that prioritizes empathy, creativity, and collaboration. It encourages cross-functional teams to explore problems and develop innovative solutions, placing the end-user at the heart of the decision-making process.
Airbnb employed Design Thinking to immerse themselves in the users' experience and identify pain points, which led them to create a platform that has transformed the way people travel and find accommodations.
Empathy-driven innovation: Design Thinking emphasizes understanding the needs, desires, and pain points of the target audience, resulting in products and services that resonate with users.
Holistic problem-solving: By considering a wide range of perspectives, Design Thinking promotes out-of-the-box thinking, leading to breakthrough solutions.
Iterative prototyping: Rapid prototyping and user testing enable startups to refine their ideas and gather feedback early in the development process.
Time-consuming: The iterative nature of Design Thinking can elongate the product development timeline, potentially hindering startups from launching quickly.
Limited scalability: As the startup scales, implementing Design Thinking across the organization becomes challenging.
OKRs (Objectives and Key Results)
OKRs provide a framework for goal-setting and tracking progress. This results-driven methodology establishes ambitious objectives and defines measurable key results, ensuring alignment and focus across the organization.
Google is well-known for their adoption of OKRs to set ambitious objectives, such as improving search accuracy or expanding into new markets, and tracking key results to drive innovation and growth.
Clarity and alignment: OKRs enable startups to align individual and team goals with the overall company objectives, fostering a sense of purpose and direction.
Transparency and accountability: By making goals and progress visible to everyone in the organization, OKRs encourage accountability and facilitate collaboration.
Agility and adaptability: The flexibility of OKRs allows startups to pivot quickly in response to changing market conditions, ensuring that resources are allocated efficiently.
Potential for short-term focus: The focus on short-term objectives might overshadow the long-term vision, limiting the exploration of opportunities beyond the immediate horizon.
Difficulty in setting meaningful metrics: Defining quantifiable key results that accurately measure progress can be challenging, potentially leading to misaligned expectations.
Business Model Canvas
The Business Model Canvas is a visual framework that helps startups analyze and design their business models. It provides a holistic view of the organization's value proposition, customer segments, revenue streams, key activities, and more.
Spotify, the music streaming platform, used the Business Model Canvas to focus its business model on creating a better user interface and personalized recommendations on top of a vast music library.
Comprehensive overview: The Business Model Canvas allows startups to map out and understand all the key elements of their business model in a single, easy-to-grasp visual format.
Identifying opportunities and gaps: By examining each component of the canvas, startups can identify areas where they can improve, innovate, or pivot their business model to better meet market needs.
Collaboration and alignment: The canvas is a communication tool, fostering collaboration among team members, stakeholders, and investors, ensuring everyone is on the same page.
Simplified representation: While the simplicity of the canvas is a strength, it can also be a limitation, as it may not capture all the complexities and nuances of a startup's business model.
Lack of prioritization: The Business Model Canvas does not prioritize the different elements, potentially leading to an equal focus on all aspects rather than emphasizing the most critical ones.
Scrum is an agile project management framework that emphasizes collaboration, iterative development, and continuous improvement. It provides a structured approach to managing complex projects and is widely used in software development.
Slack, the popular communication and collaboration platform, uses Scrum to develop and improve its product, incorporating feedback from users to refine features that led to widespread adoption.
Flexibility and adaptability: Scrum enables startups to respond quickly to changing requirements and market conditions, allowing for continuous learning and improvement.
Enhanced team collaboration: The framework promotes cross-functional teams, collaboration, and regular communication, fostering a shared sense of ownership and responsibility.
Incremental progress: Scrum breaks down projects into manageable iterations (sprints), providing regular opportunities to deliver value to customers and gather feedback.
Learning curve: Implementing Scrum requires a solid understanding of the framework and its practices, which takes time for teams to fully embrace and optimize.
Project visibility: While Scrum provides transparency within the team, it may not offer the same level of visibility to stakeholders and leadership, affecting reporting and decision-making.
Relying solely on gut instinct leads you down a treacherous path with no guideposts to steer you through uncertainty. That’s the easiest way to fall victim to “shiny object syndrome” that wastes your limited resources running around in circles.
Each framework has its strengths and weaknesses, and choosing the right one depends on your startup's context, industry, and goals. Pick the frameworks that seems right for your situation to help your startup make more informed decisions and track progress effectively.
Complete chart of common startup frameworks
Are you using any of these frameworks today and how have they improved how your startup operates? Do you use other frameworks not listed above?
There are two types of startup founders when it comes to fund raising; those that still think it is 2021 and others that are waking up to reality. For the latter, they are mostly doing what they can to stay afloat by reducing burn, getting to profitability, and holding off on fund-raising, or raising small bridge rounds, till the market settles. For the former, they are facing a hard reckoning as they talk to investors.
While fund-raising at the seed stage is active, later stage financing has dropped off a cliff. Below is the chart just for North American and the scene is not any better across other regions
Venture funding trends in North America up to Q4 2022
We came across an excellent blog post by Elad Gil, a well-known Silicon Valley investor, where he talks about what that hard reckoning will look like for startups in the coming few years. His conclusion based on what he is observing in the current investor market is the following:
Ultimately, the current conditions for startup financing for later stage startups is decoupling from the macroeconomic fundamentals. In other words, no matter what happens in the economy over the next couple of years, startups are going to get repriced to pre-2021 valuations.
We definitely recommend reading more on the scenarios Elad lays out for startups in this situation and asking yourself the hard questions on what your strategy is for moving ahead.
Mark has been on the 42Geeks LATAM tour the past week traveling to Brazil and Uruguay, and just starting the Argentina section of the tour this week. Check out some of the posts from the road to learn more about these different startup ecosystems:
Uruguay startup ecosystem
Report on LatAm Startup Ecosystem
Brazil startup ecosystem
First day on 42Geeks tour
Announcing the 42Geeks LatAm tour
From the Uruguay startup tour in Montvideo