Know When to Stop: Business Functions That Don't Need Disruption | Startup Tips

In the infinitely chaotic startup universe, "disruption" is the term that echoes through every co-working space, venture capital firm, discord chat, and video conference. It's the siren song that lures entrepreneurs into believing that every aspect of business needs a revolutionary overhaul. Thanksfully, not everything in business needs to be disrupted. In my opinion, some functions are better left untouched, operating on tried-and-true methods that have stood the test of time.

As someone who's been in the depths of startups since the dot-com boom, I've seen my fair share of unnecessary disruptions. I've witnessed startups crumble under the weight of their own innovative ambitions, forgetting that some wheels don't need reinventing. So, let's talk about the art of non-disruption - counterintuitive, yes but is crucial for the longevity and success of any startup.

Payroll Processing: The Backbone of Employee Satisfaction

First on my list of "no touchy-touch" business functions is payroll. Payroll is never the sexiest part of running a business, but it's definitely one of the most critical. Think about it: what's the quickest way to demoralize your team and potentially run afoul of labor laws? Mess up their paychecks.

Payroll is a complex beast, involving precise calculations of taxes, benefits, and various deductions. It's subject to a pile of regulations that change by state and country and year and phase of the moon. The consequences of getting it wrong can be severe, ranging from unhappy employees to hefty fines from tax authorities.

Many startups, in their quest for innovation, have attempted to create their own payroll systems or drastically alter existing ones. More often than not, these efforts end in tears - or at least in a lot of overtime for the poor soul tasked with fixing the mess. Instead of trying to reinvent payroll, startups would do well to focus on choosing the right payroll service provider. Look for one that offers reliability, compliance with local laws, and good customer support. Your employees will thank you, your CFO will thank you, your investors will thank you and you'll save yourself from a world of unnecessary stress.

Regulatory Compliance: Navigate, Don't Innovate

Next up is regulatory compliance. In an age where data privacy and security are paramount, compliance with regulations like GDPR, HIPAA, or industry-specific standards is not an area where you want to get creative.

Regulatory bodies don't look kindly on "innovative" interpretations of their rules. The fines for non-compliance can be astronomical, not to mention the potential damage to your reputation. I've seen startups try to skirt around regulations, arguing that their innovative business model somehow exempts them from standard rules. Spoiler alert: it doesn't end well.

Remember Theranos? While their downfall was primarily due to fraudulent claims, a significant part of their troubles stemmed from playing fast and loose with regulatory compliance. They tried to disrupt not just blood testing technology but also the regulatory framework surrounding medical testing. The result was a spectacular implosion that serves as a stark reminder of the importance of regulatory adherence. Fun fact: Elizabeth Holmes and I are practically neighbors as she's incarcerated pretty close to where I live in Texas!

Instead of trying to disrupt regulatory compliance, startups should focus on efficiently navigating the regulatory landscape. This might mean:

1. Investing in compliance expertise, either by hiring in-house or consulting with specialists.
2. Implementing robust systems and processes to ensure ongoing compliance.
3. Staying informed about regulatory changes and adapting accordingly.

Compliance isn't just about avoiding fines; it's about building trust with your customers and partners. In many cases, strong compliance can be a competitive advantage, especially in industries where data security is a major concern.

Accounting Practices: Stick to the Standards

Accounting is another area where startups should tread carefully when it comes to disruption. The generally accepted principles of accounting (pun intended) have remained largely unchanged for decades, and for good reason. They provide a standardized way of recording, reporting, and analyzing financial information.

I've encountered startups that tried to reinvent accounting practices, often with the misguided notion that traditional methods were too conservative or didn't reflect the "true value" of their business. This approach is not only risky but can also be illegal if it veers into creative accounting territory.

One particularly memorable case involved a startup that decided to recognize revenue in a "unique" way that didn't align with generally accepted accounting principles (GAAP). Their argument was that their reseller model was so innovative that traditional revenue recognition rules didn't apply. Millions per year in revenue turned out to just be pass-through income. Whoopsie.

Instead of trying to disrupt accounting, startups should focus on:

1. Implementing robust accounting software that adheres to standard practices.
2. Hiring qualified accountants or outsourcing to reputable firms.
3. Ensuring transparency in financial reporting.
4. Using accounting data to gain insights for business decisions, rather than manipulating the data itself.

Investors, partners, executives, employees, and potential acquirers will all expect your financial statements to follow standard accounting practices. Deviating from these norms can raise red flags and erode trust - the last thing any startup needs.

Basic Infrastructure: Don't Reinvent the Server Rack

Not Invented Here Syndrome has existed longer than most tech companies in the world. While rethinking fundamentals can be the right move for your core product or service, it's rarely necessary or advisable for basic infrastructure.

I've seen startups waste precious time and resources trying to build their own server infrastructure, develop custom internal communication tools, or create proprietary project management systems. More often than not, these efforts result in subpar solutions that divert attention from the company's core mission.

Instead of disrupting basic infrastructure, startups should focus on:

1. Leveraging existing services for computing and storage needs.
2. Using established collaboration and project management tools.
3. Adopting industry-standard security practices rather than trying to develop proprietary solutions.

The goal should be to create a stable, scalable foundation that allows you to focus on your core business. Remember, companies like Amazon, Google, and Microsoft have spent billions perfecting their infrastructure offerings. It's highly unlikely that your startup can do better.

Customer Service: Enhance, Don't Overhaul

Chatbots, LLMs, and Vector stores to the rescue, right? There's a strong temptation to completely automate and "disrupt" the customer service experience. While technology can certainly enhance customer service, completely overhauling human interaction is a horrible, awful, terrible, awful, bad, bad mistake. I believe there's a special place in Business Hell for companies that either completely remove humans from the support chain or expedite responses by forcing reps to use canned/LLM generated responses.

Instead of trying to completely disrupt customer service, startups should focus on:

1. Training support staff thoroughly and empowering them to solve problems.
2. Using technology to augment human support, not replace it entirely.
3. Implementing efficient ticketing and query management systems.
4. Regularly soliciting and acting on customer feedback, and by feedback I don't mean NPS.

Good customer service is a major differentiator, especially for startups trying to establish themselves in competitive markets. It's an area where the human touch, empathy, and problem-solving skills are practically gold.

The Art of Knowing Where to Innovate

Now that we've covered the areas where startups should tread carefully, let's talk about the art of knowing where to focus your disruptive energies. The key is to identify areas of your business or industry that are genuinely ripe for innovation.

1. Identify Real Pain Points: Look for problems that existing solutions aren't adequately addressing. These are often hiding in plain sight, causing frustration for customers or inefficiencies in the industry.
2. Focus on Your Core Offering: Your main product or service is where you should be channeling most of your innovative efforts. This is what sets you apart in the market and where disruption can have the most significant impact.
3. Listen to Your Customers: Often, the best ideas for innovation come from your users. Pay attention to their feedback, complaints, and suggestions. They're telling you where disruption is needed.
4. Stay Ahead of Trends: Keep an eye on emerging technologies and changing consumer behaviors. Sometimes, disruption is about being the first to effectively implement a new technology in your industry.
5. Look for Inefficiencies: Are there processes in your industry that are needlessly complex or time-consuming? These are prime targets for innovative solutions.
6. Consider Sustainability: With growing awareness of environmental issues, finding ways to make your industry more sustainable can be a powerful form of disruption.

Conclusion: The Wisdom of Selective Disruption

Our obsession with disruption has led to insane innovations. These innovations have changed our lives - for better or worse. Not everything needs to be or should be disrupted. The true art of entrepreneurship lies in knowing when to push boundaries and when to respect established practices. By leaving certain business functions like payroll, regulatory compliance, accounting, basic infrastructure, and core customer service mostly uninterruped, startups can build a stable foundation. This approach allows you to focus your disruptive energies where they can have the most significant impact: your core offering and the real pain points in your industry.

As we embark on our entrepreneurial journies, we should carry with us the wisdom of selective disruption. Be bold in our vision, but pragmatic in your execution. Respect the fundamentals that keep businesses running smoothly, and channel the innovative spirit where it can truly make a difference.

Also, don't forget to leave your own dent in the universe!

-Sethers