Oct 052011

Building the Company vs. Building the Business

Building the Company vs. Building the Business

I was being interviewed recently for a book someone is writing on entrepreneurship, which focused on identifying the elements of my “playbook” for entrepreneurial success at Return Path.  I’m not sure I’ve ever had a full playbook, though I’ve certainly documented pieces of it in this blog over the years.  One of the conversations we had in the interview was around the topic of building the company vs. building the business.

The classic entrepreneur builds the business — quite frankly, he or she probably just builds the product for a long time first, then the business.  In the course of the interview, I realized that I’ve spent at least as much energy over the years building the company concurrently with the product/business.  In fact, in many ways, I probably spent more time building the company in the early years than the business warranted given its size and stage.  This is probably related to my theme from a few months ago about building Return Path “Backwards.”

What do I mean by building the company as opposed to building the business?

  • Building the business means obsessing over things like product features, getting traction with early clients, competition, and generating buzz
  • Building the company means obsessing over things like HR policies, company values and culture, long-term strategy, and investor reporting

In the early years, I did some things that now seem crazy for a brand new, 25-person company, like designing a sabbatical policy that wouldn’t kick in until an employee’s 7th anniversary.  But I don’t regret doing them, and I don’t think they were wasted effort in the long run, even if they were a little wasted in the short run.  I think working on company-building early on paid benefits in two ways for us:

  1. They helped lay the groundwork for scaling – what we’re finding now as we are trying to rapidly scale up the business, and even over the last few years since we’ve been scaling at a moderate pace, is that we are doing so on a very solid foundation
  2. The company didn’t die when the product and business died – because we had built a good company, when our original ECOA business basically proved to be a loser back in 2002, it was a fairly obvious decision (on the part of both the management team and the venture syndicate) to keep the business going but pivot the business, more than once

Starting about four years ago, for the first time, I felt like we had a great business to match our great company.  Now that those two things are in sync, we are zooming forward at an amazing pace, and we’re doing it perhaps more gracefully than we would be doing it if we hadn’t focused on building the company along the way.

I’m not saying that there’s a right path or a wrong path here when you compare business building with company building, although as I wrote this post, my #2 conclusion above is a particularly poignant one, that without a strong company, we wouldn’t be here 12 years later.  Of course, you could always argue that if I’d spent more time building the business and less time building the company, we might have succeeded sooner.  In the end, a good CEO and management team must be concerned about getting both elements right if they want to build an enduring stand-alone company.

  • Robert L. Blumberg

    A thoughtful, insightful, and correct insight.

  • http://www.fx-exchange.com/ Bowmanave

    Great article. Of course the question is not "brand" or "business". To me it's not either/or, but and/and. Strong businesses can only be built while building strong brands at the same time. But what your article stresses so eloquently is that there are boundaries on what a singular brand can contribute to a business or a company. IMHO that's where brand-portfolio management comes in : deciding on when the conditions are ripe for a brand extension, for sub-brands or for a new separate brand. Coca Cola is an example in case : under the Coca Cola brand umbrella are more drinks than only Coke – and within the CC company are more brands than only Coca Cola. Most of them have a clear territory, adding value to CCC's business while contributing to the brand's position.

  • drue Hontz

    I totally agree with your "backwards" thinking. Another way to refer to what you described could be "long term" thinking, something that seems to be very rare these days. Your company's success is proof that even with a failed product the company succeeded because of strong infrastructure. Congratulations to you and your team, again thanks for sharing.

  • JustSayin

    Building the company is the 'means' to the 'end' of building the business. They work in tandem. Thinking of them a separate is akin to creating functional silo's in the firm. The end consumer is best served when the firm's processes are aligned cross functionally.

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