I previously wrote about how having fewer resources was actually a benefit that startups have over their larger entrenched competitors because it forces them to do fewer things better - to focus. Another counter-intuitive benefit that startups have over large companies is their lack of existing customers. Not having an installed base frees a startup of the burdens of supporting old products and enables them to focus all of their resources on new innovation.
Sometime in the year before EqualLogic sold to Dell, Paula Long, the co-founder and VP of Product Development, presented to the Board a very sobering projection of where our precious product development resources were going. Two years before, when we only had hundreds of customers, we dedicated well over 90% of our product development resources to new features and only ~10% to supporting the base. At the time of the presentation, we had grown from 100's of customers to 1,000's of customers and our ratio of new features to support went from 90/10 to close to 50/50. But what was truly sobering was her forecast for the future. Just a couple of years out, nearly 90% of our product development resources would be focused on supporting the base. It's no wonder we were able to sneak-up on the big-boys of the storage world and create the market-leader in iSCSI. They were too busy supporting their base to effectively go after the opportunity.
It's not just with product development, legacy can have a detrimental impact on almost every part of a business from go-to-market to the core business model - name a successful enterprise SW business that is also a leader in SaaS. When I was in marketing at Apple early in my career, one of the constant debates about opening up new channels of distribution was about the problems of channel conflict with our then existing "legacy" channel partners.
This challenge is something every successful organization goes through - Paula Long referred to it as our "success-tax" at EqualLogic. If not actively managed, the very things that make a company successful can be the achilles heal that hobbles it's growth later. Most disruptive innovations are made possible because incumbents, like EMC and NetApp in the case of EqualLogic, spend all their time on servicing their legacy customers, updating their legacy products, and supporting their legacy partners. This leaves the door open for startups to put their foot in, but startups need to make sure they aren't making decisions that will hamstring them and burden them with premature legacy.
Rarely does the life of a startup travel along a straight path. With most of the opportunities a startup faces, come a set of tradeoffs, some obvious, and some not so much so. These tradeoffs need to be weighed carefully and not taken lightly. The no-brainer decision today - "They're paying us $X and it will only cost us half that to deliver." - could end up having tremendous legacy costs down the road. One of the ways I evaluate how good startups are at focusing their limited resources is by hearing how they weigh the tradeoffs they see in some of these decisions. If they truly understand the opportunity costs associated with a particular decision they have made, then that will be evident in their discussion of it and in how they worked to minimize those costs. If they don't understand the opportunity cost associated with a decision, then chances are they have made plenty of other decisions like it and all of those decisions are setting the boat-anchor of legacy that the company will be paying the price of for years to come.