Company Targeted Excellence
There's a high level of synergy between your Product and People strategy when you constrain instead of expanding your impact.

I've been thinking about this concept I call targeted excellence, guiding our impact toward those we want to impact.
How to apply targeted excellence to a company? How to build a company that can guide who is impacted by its work, and who isn't?
It's hard. Let's explore some of the challenges.
Challenges of impact scaling
One first impression is that the smaller the company, the harder it is to have targeted impact: the company is small, you have a myriad constraints, you need any money you can get, the company doesn't have credibility yet and so you have to take any money available.
In my experience, it's not true in practice.
It's much harder to keep choosing your impact as the company scales. As the company's serviceable obtainable market (SOM) starts getting smaller and tougher, it's tempting to remove its self-created constraints and open your impact to bigger markets to keep growing.
The downward pressure on growth from selective impact targeting is hard to offset by specialization. This creates challenges in capital acquisition and operational efficiency.
From a capital acquisition standpoint, the amount of general-purpose money in the market is still significantly higher than impact investing. While there are no official figures, Venture Capital (VC) investing seems close to $400B, and Private Equity (PE) to $1.8T, per year.
Some estimates put impact investing at about $1.2T total assets under management (AUM), meaning the annual investment of general private opportunities (PE+VC) is about twice the size of the total deployed impact investment for all time.
Doesn't mean you can't get impact investment capital, but it's a lot more difficult. The latest GIIN (Global Impact Investing Network) quotes interest rate and inflation as the two biggest macro-level issues affecting impact investing, showing it's (of course) not disconnected from economic factors either.
And besides, there are only some specific types of impact you can really compete with on impact investing: healthcare, green energy, education, etc. It's typically not a lever you can pull if you just want to be in a particular industry, say cloud computing or communications software, but with more constraints on who you sell to.
The other challenge is operational efficiency. There's a reason why the rule of 40 exists: the more profitable you are, the harder it is to grow, and vice-versa.
If you have to focus on profitability, you will necessarily yield some growth opportunities, which will reduce your access to capital, encouraging you to focus on profitability, and so on..
While it's not a given that every investor prefers growth to profitability, it's easy to see why many of them do: investors believe (PE firms especially) that you can always turn on the "profitability knob" once you've grown enough. But there's no growth knob. And certainly no impact growth knob.
The market between the targeted excellence and the regular company then is similar to the VC vs bootstrapped company: one is burning millions of dollars in capital to provide services, and the other is competing while trying to spend only what it makes.
Historically, the VC startups beat the bootstrapped ones at scale. So if you're building a targeted excellence company, you're just choosing to bet against the odds.
But say you're still committed to improving the focus of your company's impact, though. What are some levers to pull?
People strategy advantage of targeted excellence
There aren't that many levers to pull to increase your company's competitive advantages if you're constraining your target market, unlike your competition. But there are a few:
The first two are around Talent Acquisition and Motivation.
The more targeted your company's impact, the bigger a competitive advantage it is in your talent acquisition and overall People strategy.
If a company creates games for kids, and another creates educational games for kids, the educational games company has a smaller customer market but a competitive advantage in the talent acquisition market. Said plainly, top performers will prefer to work on areas that they believe have a more positive impact.
Because your competition will have competitive advantages over you, like higher compensation since they aren't as constrained to operational efficiency and more enticing stock options given their higher growth prospects, you must use your unique advantages the best way you can.
Employee motivation also plays a huge part in company outcomes, and impact targeting can have a significant effect. If your work provides health services to the underserved, you'll work harder than if it provides convenient groceries to the privileged.
Build two companies in the same market but with different levels of motivation, and the one with the targeted impact is likely to outcompete the general impact one.
The other talent acquisition factor that affects targeted excellence companies is loyalty and retention. Some people are passionate about an area, and you're competing only with other companies in that space for that talent.
One of my friends, for example, who's an astounding software engineer, worked at a general excellence (well-known) startup before getting into green energy. Even though sometimes the companies he joins aren't as good as his previous one, he still stays, and only leaves them for other green energy companies.
These factors will allow a targeted excellence company to, at least, have a good fighting chance of building a top-tier team.
The other competitive advantage your company can pursue comes through specialization.
Specialization advantage of targeted excellence
Building a product that helps everybody well is much harder than one that helps a subset of those customers really well.
As your market expands, your product assumptions start to break. Suddenly, these new professionals need Gantt charts in your project management system, or these new marketers need social media integration with data warehouses.
Counter-intuitively, a Product that does more than a customer base needs is a much worse fit for them. While you may think you can build a product that serves everyone and customers will just choose what they need, it won't work.
In practice, a Product that serves only a customer base and no other will be much superior to one that serves several.
And of course, if you have extra capital, you can optimize your product for that demographic, creating an even bigger moat around your product's competitive advantage.
This is also where your talent strategy comes in: People who are passionate about a particular area of impact will often bring in domain-specific expertise that general impact companies lack.
If your company is in the business of mobile software for the underserved, not just your product but your employees will be fine-tuned to that customer demographic and technology.
There's a high level of synergy between your Product and People strategy when you constrain instead of expanding your impact. This can be a significant competitive advantage to prevent general impact companies from outcompeting you despite their larger available capital to deploy.
In the end, a People and Product targeted impact strategy won't even the odds, but you must leverage it in order to put up more of a fight.
Thinking about Company Targeted Excellence
While part of the reason for my writing about Company Targeted Excellence was to help company leaders understand how to make their companies more targeted, my main objective was just understanding and articulating its dynamics.
It's not hard to come across friends at other companies who complain about the lack of targeted impact at their employers. I'm reminded of Fumio Sasaki's delusion of working as a book editor in his book Goodbye, Things.
Ten years ago, I was eager to get into publishing. I wanted a career in which I could think about big ideas and cultural values instead of always being focused on money and material objects. But that initial enthusiasm gradually faded. The publishing industry was going through a difficult period, and for our company to survive, we needed books that would sell, first and foremost. If we didn’t publish commercial books, it would be impossible to publish anything, no matter how culturally or intellectually valuable we thought it was. Faced with the realities of the business world, I grew up quickly. The passion that had been burning inside me when I first joined the company began to cool, and I ultimately gave in to the mind-set that in the end, it’s all about money.
Sasaki, Fumio. Goodbye, Things: The New Japanese Minimalism (p. 20). W. W. Norton & Company. Kindle Edition.
It's also one of the labyrinths in the novel The Cat Who Saved Books, where a cat helps the protagonist go through different dangers books were in to save them. In one of them, he has to face the CEO of the book company, who argues persuasively that, as a publisher, he can't prioritize books that are good over books that sell or he'll go out of business.
So this is my advice to you: when thinking about targeted impact, particularly at tech startups, remember the main constraints are:
- Access to capital: Without the scaling assumptions of a general impact company, you don't have as much access to investing.
- Operational efficiency: Without access to capital, among other constraints, you must operate profitably.
These two constraints can put you at a significant competitive disadvantage in virtually any market because your competition won't be under similar constraints.
Additionally, depending on which investing your company got and its requirements, it may be virtually impossible to achieve the board's growth assumptions under these constraints, making it a non-viable strategy for that specific company.
But, if you want to make your company more targeted, and are looking for the biggest advantages to doing it, I think the main ones are:
- People Strategy: In particular, talent acquisition, but also motivation and retention, can be greatly enhanced by a sharper impact focus.
- Product Strategy: Building a great product is much more feasible for a constrained demographic, and the constraints help you keep your product relevant to those customers.
Targeted excellence is a spectrum, and you can improve it by playing around with these levers.
If you want to have more control over the impact you're making, you'll have to learn how these work.
In the end, targeted excellence is about embracing the right constraints and crafting the right strategy to shape the world into something closer to the one you want to see.