A key difference between a mature firm and most startups is the existence of repeatable processes in the successful corporation.
It allows people to work together to achieve a thousand times what they could manage by themselves, and is the focus of the classic text The Wealth of Nations.
"This great increase of the quantity of work which, in consequence of the division of labour, the same number of people are capable of performing, is owing to three different circumstances; first, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many." — Adam Smith, The Wealth of Nations (1776)
In traditional crafts such as the pin-making factory that Smith alludes to in his seminal book, or modern fast-food franchises, or even construction sites, the work plan and business processes are mapped out clearly. Thus, each team member knows their job intimately, and the sign-posted completed work hand-offs contribute to a smoothly running system. On the downside, most of these jobs become minimum wage work, with the workers easily dispensed with and replaced.
However, startups operate in an environment of uncertainly, rapidly changing capabilities, and shifting targets. We have access to limited, and generally non-renewable, resources and in the absence of a rented office, most team-members work remotely. The good folks by your side in the startup trenches are also not McDonalds material—indeed, another famous "startup icon," Che Guevera, is known for not having on his team anyone with a rank below that of a lieutenant—implying that they were equal to 40 "normal" soldiers on the opposing teams.
The examples provided by Adam Smith do not resonate with startups. Instead, startups should look further afield, to the privateers and pirates of the late 1700s, and in particular, the history around Admiral Horatio Nelson and Ching Shih, who were two leading "CEOs" of their respective navies.
Nelson and Ching were both effective because they had a belief in simple instructions, practiced delegation, and expended the time and effort required to ensure that their captains understood their intentions. They would not waste time micro-managing. Instead, they made sure that the doctrine of the firm was clearly outlined, and gave everyone a clear role in achieving these goals.
Everyone knew clearly what effects the organization was looking to achieve, what effects they needed to strive for themselves, and the reason why these needed to be achieved. Such a style of leadership promotes decentralised command, freedom and speed of action, and encourages initiative. These leaders built processes, but ones that were agile, based on clear communication, allowed for individual autonomy and initiative and assured successes under fluidly developing scenarios, which are very similar to those experienced by modern startups.
In modern firms, no one likes authoritarian rule, especially if you happen to be an entrepreneur (or a pirate!). Autonomy is one of the biggest motivators for us folks. By removing unnecessary rules and offering flexibility, your team can determine how much they need to be in the office on a given day, or whether or not they’ll be able to take a vacation next week.
Structures like strict work hours, location requirements, limited vacation time, fancy titles, and even employee reviews scream one message: employees are working to satisfy rules, and please the boss. This takes the focus off meeting company goals. Instead, everyone should know their goals, and be kept up-to-date on internal and external changes. Indeed, automating the external scans for threats and opportunities is one of the core business drivers of the firm I work with, Gnowit Inc.
The outcomes of Nelson’s and Cheng’s management were historic. Nelson led 27 British ships to defeat 33 French and Spanish warships in the battle of Trafalgar. The Franco-Spanish fleet lost 22 ships without a single British vessel being lost. The crux of Nelson’s strategy was to have Collingwood (his second in command) retain control of his own division, and to attack the enemy independently. Nelson is currently immortalized with a statue towering over Trafalgar Square in central London. You can only understand the gratefulness of his nation when you see the height that they raised his statue to, and how it dominates the flags of all the embassies scattered around the square.
Ching did the same time, but at a much larger scale. She (yes, Ching was a woman) commanded over 1,800 ships and had a crew of about 80,000 pirates. She was undefeated by the British, Portuguese and the Qing dynasty, who were the strongest naval powers in her region. She focused on processes, and branched out from simple attack-and-pillage traditional pirate jobs to protection schemes, blackmail, and extortion. Ching's influence also extended to the mainland, where she set up an extensive spy network and developed economic ties with farmers who would supply her men with food. Operationally, you could not have asked for a better, more forward-thinking strategist.
Ching’s pirate team repelled attack after attack by both the Chinese navy and the many British and Portuguese bounty hunters hired to capture her. By 1810, the Chinese government was exhausted, and they tried a different tactic: offering the pirate queen universal amnesty in exchange for peace.
Ching jumped at the opportunity and signed on a killer deal at the negotiation table. Fewer than 400 of her men received any punishment—only 126 (from a count of over 80,000) were executed. The remaining pirates got to keep their booty and were offered military jobs. A perfect M&A transaction and a successful exit.
The secrets to their success lay in Nelson’s "naval doctrine" and in Cheng’s "code," and their communications-driven, personal-initiative-unlocking business processes. Both stories are full of lessons for today’s startup strategists.