Strategic Debt Is the Silent Killer of Startups

With everything you have to do every day, it is so easy to neglect strategy. Not because it’s not important, but because it seems less urgent than everything else you have to deal with right here and now. But much like code, your product strategy also requires maintenance. And when left unhandled for too long, you might barely notice, but the impact can be deadly.

You probably know that hypertension is called “the silent killer”. It causes 60,000 deaths a year in the US alone – hence “killer”, and it has no symptoms until it’s too late – hence “silent”.

Startups also have a silent killer. It’s what I call a “strategic debt” that is built over time, and at some point, it is impeding any potential progress.

The strategic debt is building itself quietly and slowly. You typically don’t feel it in your day-to-day (honestly, you are probably too busy to feel anything unless it is demanding your immediate attention). Unaware of it, you let it slide – and it grows and grows until the entire company is impacted. Still, because startup life is so hectic – it might feel like business as usual. Unfortunately, it’s not. And the sooner you understand it, the higher your chance to change it before it’s too late.

Note: everything I say here is true for mature product companies as well. The reason I’m talking here primarily about startups is that they are much more volatile than larger companies. In larger companies, the impact of strategic debt is still severe – it would harm your ability to grow, and it would cause good people to leave – but it won’t kill the company altogether. For startups, this can be the end. 

So even if you are in a more mature company, everything I say here is relevant for you as well. 

How Strategic Debt Is Created

When a startup is founded, the founders think about their idea in and out. They don’t want to start before what they have is crisp enough. So they do all sorts of validations and deep analysis processes: market research, business plan, competitive analysis, and so on. They think hard about what makes them special, and what it takes to succeed.

And guess what? It works. If they do it well they are able to raise money, build the product, and the first customers are coming in. This is usually when they hire a product leader and you join the game.

At this point, everyone is extremely busy. You are running fast in order to get to the next achievement. Everyone knows market feedback is a must so that’s where you are going – working with your customers, listening to them, and implementing a lot of what they say.

There is so much work to do, you don’t even have time to create a roadmap. When the CEO is asking for it, you are doing something quick and dirty, putting on paper your general thoughts and organizing work items you already know of. We all know it’s going to change anyway pretty soon. We are a startup, after all.

That’s where the first symptoms begin.

You are asked strategic questions that you only have a general answer to. Sometimes you don’t even understand the question. So you explain again what you already know, and you are hoping to get “them” (the CEO, marketing, investors) off your back. You hope it’s enough.

At this point, you might be starting to feel doubt. If you are honest with yourself, you know that it would have been better if you had the time to dive deeper into these questions and make sure your answers are solid. But there is so much work with the existing customers, and acquiring new ones, maybe another funding round, and the idea itself is good so having so much work must be a good sign – so you put the doubt to sleep and go back to work.

You are in a constant reaction mode, and since you did everything right up until now – there is so much to react to.

You have additional plans for the product, but they are barely making it into the sprints. Other, more important things are always there first.

So your product serves the existing customers (who keep wanting more stuff), but perhaps new customers are not coming as smoothly. They always need something you haven’t developed yet.

Slowly, both the product and the roadmap reflect only what the customers are asking for. And nothing else.

Unlike what one might think, this is a really bad sign. Because your customers aren’t product leaders. They only know themselves. It is your job to make sure the product goes in the right direction, but when you have a strategic debt, the right direction is a very vague term.

Why Strategic Debt Is Deadly for Your Startup

In this crazy game called startup success, there are so many surprises and unknowns, that if you don’t have a clear strategy you are busy overcoming surprises instead of making progress. Some surprises you must fight to overcome, but if your strategic debt is too big, fighting the surprises is all you are doing. You would be working very hard, but not moving forward.

It’s as if you are trying to cross the jungle to get to the peaceful, beautiful coast that resides on the other side. Before you start, you prepare a map. You read everything you can about this jungle and try to make sure your map is accurate. You even memorize it so that you don’t need to look for it in the moment of truth.

And then you start walking. As you go, you realize some of the paths are blocked. Tigers are showing up every now and then, so you are fighting with them to stay alive. You do that as you are trying to avoid getting a deadly mosquito bite or falling into the river where hungry alligators are waiting.

Soon enough, you forget about the map altogether and your focus becomes making a safe next step. It’s crucial. Surviving takes everything you have to give.

But you will not be able to get out of the jungle this way.

And even if you survive all the animal attacks, avoid the mosquito bites, and stay out of the river – you will eventually find yourself still in the middle of the jungle but without any food or water. And that would be just as deadly for you.

Strategic debt is a silent killer because it is not “in your face” like all the other things you must solve. Losing a customer is painful now. Strategic debt is something you can live with for quite a long time – until you can’t anymore. But that moment might be too late to do anything about it. Since startups depend heavily on external funding, if you weren’t able to demonstrate significant progress in the right direction, you simply won’t be able to raise any more money. The end.

3 Signs You Have a Strategic Debt

Your Roadmap Doesn’t Make Sense

It’s either containing lots of features that are not connecting to a coherent bigger picture, or you don’t have enough resources for making any real progress.

Most of the work plan is devoted to putting off fires coming from customers and sales teams. There is simply not much left to work with, and you are unable to convince anyone that other things are important too.

You Don’t Have Good Answers to Questions People Are Asking You

The CEO, marketing, investors, and customers all have questions that you know you need to be able to answer, but you simply aren’t. They poke holes in your story. These holes aren’t big enough for the whole thing to fall apart, so you can cover them with the answers you already have.

But deep down inside, if you are 100% honest with yourself, or if you were an external consultant, you know that these holes are not going anywhere, and you will have to figure it out at some point to succeed.

Unclear or Disconnected Business Goals

The company’s business goals seem to have nothing to do with the items you are working on and those you are planning. The goals are very high-level, and the features are super tactical. You can’t see the connection.

The discussion about goals remains vague, despite your effort to bring the goals down to earth.

Sounds familiar?

Don’t be alarmed. Instead, start closing the debt today.

The First Step in Closing Your Strategic Debt

Select a major long-term business goal. It can be a revenue goal, the next funding round, or acquiring a strategic customer segment.

Forget about everything you already have, and focus on top-down thinking. Ask yourself: “what does it take to get there?”.

For example, let’s say your goal is $1M in ARR, and today you have $180K. How would you make the $1M? Is it by upselling to existing customers? Acquiring many new similar ones? Targeting an adjacent customer segment? Betting on a major pivot?

The answer is probably a combination of some or all of these. Do the math to see how it all works out. Don’t continue before you fully understand it at that level.

Then, break it down further.

Let’s say one of the components in your plan is acquiring many new similar customers. To be able to do that, your funnel must work perfectly, and be as low-touch as possible. Assess where you are at today, and outline the gaps.

Note: not all the gaps are product gaps. Some of it might reside in marketing, sales, or customer success. Help the company by outlining those as well. If you come up with a good top-down explanation of why it is important, it will be easier for you to help everyone see what they must do to succeed.

Another component could be to break into a new market segment. Ask yourself what would it take to succeed in this segment. There could be product gaps, technology gaps (for example scale), regulation gaps, or even branding gaps.

You can learn that to meet your revenue goal, you must sell your product at a much higher price (because of limited market size for example). Ask yourself what would make your product worth that higher price. This is a good opportunity to think about the holistic customer journey – maybe some of the opportunity resides in a major uplift of the post-sale experience, for example.

Think holistically and create an A-Z breakdown of the goal to its main components.

Take the breakdown to management, get their feedback, and create alignment. This strategic map includes the critical path for your success. Remember that it’s not enough to beat the tigers, you need to get out of the jungle before you starve to death.

With this in mind, see what tradeoffs you can make in the existing work plan. Find the items which are not must-haves, and replace them with items from your critical path.

I know that everything in your plan is already a must-have. But you need to make the shift in your head and start seeing that items from the strategic plan are must-haves as well, they just don’t scream as hard.

Whenever I talk to CPO Bootcamp participants or to my consulting customers about prioritization, I say that your role as a product leader is not to prioritize between the important and not important stuff. Anyone can do that. Your role as a product leader is to prioritize between things that are all very important. It’s hard, but that’s why you are here, and it’s the only way to succeed.

Our free e-book “Speed-Up the Journey to Product-Market Fit” — an executive’s guide to strategic product management is waiting for you

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