Houston We Have a Problem: Building Grass Roots Support

In this series we are focusing on six factors critical to success for founders of startups within a larger organization. In the last post, I discussed the need to ensure that the goals and strategies of the new venture are nested within the goals and objectives of the host. In this post I will offer an efficient and effective way to build through grass roots support.

Building a startup venture within a larger organization is, in many ways, different than building your own company, but very similar in others. Time and resources are precious and limited during the early stages of any new venture. Working with limited funds, founders must find clever ways to acquire the necessary resources to start and build the venture with speed. Quick, impactful successes are important to the morale of the founding team. They also send a signal to the market, stakeholders and prospective customers that the new venture is the real deal. It is no wonder that one of the first questions asked by a prospective investor is, “How much traction are you seeing?” Having unlimited resources is helpful. So is having a magic ring, but the chance of having either is slim.

Often, folks involved in a “skunk works” venture expect the larger organization to fund all of its needs. Even if the initiative is seen as an organizational imperative, which is seldom the case, funds are often very limited. When first charged with building Drexel University’s Baiada Center for Entrepreneurship, I met with colleagues responsible for building entrepreneurship competencies in universities around the world. Most of these leaders “grew up” in Higher Ed, accustomed to the ways of large institutions. The common theme encountered in all my conversations was an expectation that the larger organization should fund all its needs. These folks were true believers who couldn’t understand why their senior executives didn’t see the urgent need to move quickly and decisively. After all, didn’t they put them in these positions because they saw the need? The troubling reality is that, even in the rare case where the initiative is seen as an organizational imperative, attention and resources are limited. These senior executives have an entire university to tend to.

These initiatives are viewed as a chance to test the waters for opportunity, with resources provided based on evidence of success. Instead of feeling entitled to  funding, a leader’s strategy should be to inexpensively build a minimal viable product (MVP), and gain market acceptance and stakeholder buy-in quickly. In the case of building the Baiada Center, gaining stakeholder buy-in meant persuading staff members from the host organization and business executives from the region, that they were helping to make a meaningful, positive difference in the world. I will talk more about this in a later post.

Gaining market acceptance meant building a strong reputation regionally and nationally. I was unwilling to delude myself into believing that offering senior executives a compelling business case would provide the necessary funds to execute on the plan. It just doesn’t happen that way. Even if I were a stellar pitchman, I would not have gotten their attention. Without their attention I would not get their support.

Instead, my goal was for one or more key influencers from a respected peer institution or the business community, in conversation with the University President, to comment on the great things Drexel was doing in entrepreneurship. Once a critical mass of support is achieved regionally and nationally, the larger organization begins to take notice. The Baiada Center quickly gained recognition from influencers in the region as a positive force in the entrepreneurial ecosystem. Nationally, the Baiada Center went from being unranked to being ranked Top 25 by Entrepreneur Magazine/Princeton Review in three years. By year five we were ranked 3rd in the nation. Do I have your attention now?

While this is a harsh and challenging reality, there is a significant advantage to not having the attention of the host organization. As long as you understand and honor the Sacred Cows (10/20/14 post), and you keep your strategies well nested (10/24/14 post), you can enjoy enough autonomy to build something meaningful with speed and agility.

In the next post I will opine on the type of fiduciary control required to succeed.

Houston, We Have a Problem: Putting out a BOLO on the host organization

In this series we are focusing on six factors critical to success for founders of startups within a larger organization. In the last post, I discussed the unique challenge these founders face in trying to move quickly while ensuring that the goodwill of the host organization is protected. In this post I will discuss a close cousin—the need to ensure that the goals and strategies of the new venture are nested within the goals and objectives of the host.

When starting a new venture, it is easy for founders to become seduced by the weightlessness of space flight. Not bound by the gravity of the host organization’s normal bureaucracies, and empowered with a growing domain expertise different from that of the host’s, founders run the risk of believing they are the smartest guys in the room. This newfound autonomy can be catastrophic without a strategic roadmap consistent with the goals and objectives of the host.

“When I was a boy of 14, my father was so ignorant I could hardly stand to have the old man around. But when I got to be 21, I was astonished at how much the old man had learned in seven years.”  Samuel Langhorne Clemons (A.K.A Mark Twain) could have just as likely been describing the attitudes often exhibited from the founding team members of a spin-off. All too often, these people act out like children testing the newfound freedoms of adolescence. They suddenly feel enlightened, and convinced that mom and dad are, at best, clueless or at worst, stupid. It shows up in both their decision-making and in their interpersonal relationships with members of the host organization.

I saw this dynamic play out several years ago as a founding member of a startup joint venture, where I witnessed otherwise savvy professionals behaving like rebellious teens. These seasoned corporate executives; formerly with a Fortune 50 company that happened to be one of the venture partners, and our largest prospective client, were frequently combative and renegade in their decision-making. Our early performance was astounding, far exceeding our best-case scenarios. We experienced meteoric growth, going from the initial 12-member team to roughly 6,000 employees in just three years. This unprecedented growth only fueled the renegade behavior of many of the founders. Instead of viewing our success as an opportunity to create allies within the parent company, they saw it as the perfect opportunity to gloat to the naysayers and haters, which were prevalent during the launch and early years.

Anyone who has been fortunate enough to experience this type of success knows that, sooner or later, something is going to go terribly wrong.   At the end of year-three we stubbed our toe badly, and two months later only three of us from the founding team remained. The rest of the founders were removed by the board and replaced by a new team of seasoned executives.

The moral of the story is not to shrink from the freedom of space travel. The moral of the story is that with freedom comes responsibility—the responsibility to ensure that new programs and initiatives are always in line with and/or nested within the overarching goals of the host organization. To do this you must thoroughly understand the strategic intent, goals and objectives of the host. Here are three suggestions for gaining this understanding:

  • Study—Carefully study and internalize the strategic plan. Know it as well as your own, and you will likely know it better than many of the folks in the host organization.
  • Observe—Dialogue extensively with the senior executives from the host about their goals and objectives. More importantly, observe the strategic decision-making. The best way to do that is to follow the money. For where your treasure is, there your heart will be also.” (Matthew 6:21) If you pay attention to where investments are being made, you will quickly learn the strategic intent of the organization.
  • Communicate—It is not enough to develop strategies consistent with the host organization. Whenever and wherever possible describe your strategic decisions in the context of the host organization, helping others see the positive correlation and your contribution to their success.

Starting a new venture from within an existing organization can, and should be, all consuming for the founders. Like starting a new business, the tendency is to expend all of your effort on becoming expert in the market space you occupy, and building a sustainable venture. When you are building from within, it will more likely succeed if you put out a BOLO on the host. BE ON THE LOOKOUT for the strategic intent, goals and strategies of the host organization, with an eye on how your strategies rationalize with them. In the next post I will speak to a tried-and-true method for acquiring necessary infrastructure support for your startup venture.

Houston, We Have a Problem: Understanding Sacred Cows

Founders of successful startup initiatives within a larger organization experience something akin to astronauts in space. Even though they rely on the infrastructure and support of the larger organization, maintain communications, regularly monitor systems and provide feedback, the founders operate with a level of autonomy and accountability that is palpable. Issues must be addressed and opportunities pursued with agility and speed. Decision-making tends to be streamlined and results, both good and bad, come quickly. With it comes both a sense of weightiness of purpose and weightlessness from the larger organization’s gravitational pull.

In this series we are focusing on six factors critical for success. I asserted in the last post, that in order for the startup team to move quickly through space, it is essential for them to be given the latitude to make decisions outside of the host organization’s normal approval process. For anyone who has started his/her own company, this assertion is obvious. The benefit of speed to market far outweighs the risks of making a bad decision. When the startup is part of an existing organization, though, the risks associated with a bad decision can be much greater.

When a startup has a miss-step, it is usually not catastrophic. First, because of a small constituency, few people suffer the consequences of a bad decision. Secondly, people usually understand the experimental nature of innovation, and tend to be more forgiving.   The host organization, however, will have a larger constituency and brand equity to protect, which presents a unique challenge for the startup venture within a larger organization. Many startup ventures within larger organizations fail to launch based on how they address this very dynamic. Out of concern for the host organization’s health, startup ventures from within are often expected to eliminate risk, resulting in either limited growth or certain death. To increase the odds of success, a more strategic approach would be for the team to develop a deep awareness of larger organization’s “sacred cows” and powers reserved.

Over time, established organizations develop sacred cows. Sacred cows can be things we honor and protect or things we avoid at all cost.   In politics we hear the term, “third rail.”  This is a reference to the third rail of subway track that is electrically charged, and refers to issues too politically charged to risk taking a strong position. These sacred cows are developed over time to uphold the established values of the organization, maintain goodwill, and build/protect a positive corporate reputation. While it is useful from time to time to challenge these sacred cows for currency and to remain relevant, they have an important role in the organization, and the responsibility to challenge them falls on the leaders of the host organization—not the startup from within.

The challenge for leaders of the startup team is to dig deep into the history and past decision-making of the host organization, and to have a keen awareness of the current sacred cows. A good place to start is to understand existing powers reserved. These refer to decisions made only with the approval of the host organization leadership. That is, the power to make the decision is reserved, in advance, to a pre-specified leadership position. Powers reserved should be limited to decisions that have a significant impact on the host organization. Significance can be defined based on legal and/or financial liability or risk to corporate reputation. The startup leader should also make considerable efforts to dialogue with senior leaders in the host organization to gain an understanding of the most important protocols and organizational imperatives.  This will inform his/her decision-making on a daily basis.

To the entrepreneur this may seem cumbersome and bureaucratic, but for the startup leader within a large organization it is liberating. It provides him/her the freedom to act quickly and decisively—the freedom to fail fast, in order to fail forward.

Houston, We Have a Problem: 6 factors critical for success

Founders of successful startup initiatives within a larger organization experience something akin to astronauts in space. Even though they rely on the infrastructure and support of the larger organization, maintain communications, regularly monitor systems and provide feedback, the founders operate with a level of autonomy and accountability that is palpable. Issues must be addressed and opportunities pursued with agility and speed. Decision-making tends to be streamlined and results, both good and bad, come quickly. With it comes both a sense of weightiness of purpose and weightlessness from the larger organization’s gravitational pull.

In order for the initiative to have a successful launch and orbit there are six factors critical to success. In this post I will address the need for the first.

Latitude.

Much like scientific discovery, new venture creation requires an iterative process of establishing key assumptions/hypotheses, and then testing and modifying those assumptions as needed until a successful model is articulated.  While the process requires discipline, it is often messy and circuitous. Discovery is as much about finding what does not work as what does. In order to save precious time and resources, speed is of the essence. Startups within larger organizations need a certain level of autonomy in order to develop and modify products and services until the model works. Said differently, new venture creation requires a “fail fast to fail forward” approach. There will certainly be setbacks. The idea is to move through the process before too much time and energy is expended.

The good news is that when a startup stubs its toe, it is usually not catastrophic. First, because of a smaller constituency, fewer people suffer the consequences. Secondly, people usually understand the experimental nature of innovation, and tend to be more forgiving.

Conversely, established organizations focus on ensuring appropriate controls are in place to protect the organization’s image, and for good reason. They have something of value to protect. Startups need be more concerned about building brand equity than protecting it. A bicycle lock is of little value for someone with no bicycle.

The ability to make judicious decisions quickly requires a streamlined approval process that is separate and distinct from that of the host organization. These space-travelers cannot navigate new frontiers if they are bound by the “earth’s” gravity, so they require far more latitude to explore and make decisions. This increased level of autonomy, however, must carry with it an increased level of accountability.

There are always consequences resulting from our decisions and strategies, and those executing the strategies should be held accountable for their decisions.   Keep in mind that even though this is a new venture, it is associated with an established host organization with brand equity and an image to uphold, so the stakes can be high. In my next post, I will offer some suggestions on how to minimize the risk of this increased autonomy to the host organization.

Houston, We Have a Problem: Feeling alienated as a startup

As mentioned in a previous post, startups within a larger organization often operate in a realm outside the core competencies of the host organization.  This can cause some level of dissonance around actions, decisions and strategies. Let me illustrate with a hypothetical. Imagine you are an alien being who just materialized in the emergency department at Children’s Hospital of Philadelphia (CHOP). You immediately find yourself disoriented and confused, seeing what appears to be some kind of receiving and distribution center for offspring of adult humans. On the wall you see in very large letters the word CHOP, creating a disturbing juxtaposition behind the cherubic faces of these offspring.

Suddenly, you hear a howl as your attention is drawn to one offspring experiencing intense pain from his abdominal region. This offspring is being quickly carted into another room, surrounded by adult humans wearing masks that conceal their identity. It soon becomes disturbingly obvious why these adults want to shield their identity as they take turns inflicting some kind of ritualistic punishment to this offspring. It starts with a form of voodoo where a needle is inserted into the offspring’s body, followed by ritualistic markings with amber colored ink. Just when you think you have seen all you can bear, the apparent chief of this sadistic tribe is handed a small, but extremely sharp, weapon, where she proceeds to make a life-threatening incision it the abdominal region. Convinced you just witnessed a human sacrifice, you think in horror, “No wonder this place is called CHOP!”

In reality, you witnessed a child being saved from a life-threatening ruptured appendix. Without prior knowledge of the human anatomy or earthlings’ medical protocols these actions, decisions and strategies appeared confusing, cruel and inappropriate.

If the differences in domain knowledge between a host organization and its startup initiative are significant enough, the startup can at times feel alienated from the host. If you have ever found yourself in this situation you may have even received glib comments like, “what planet are you on?”

In previous posts I offered some operating principles and governance suggestions to create a successful startup within an existing organization. In future posts I will detail six factors critical to success.

Houston, We Have a Problem–Governance for Startup Initiatives

When building a startup within an existing organization, the initiative often falls outside the competency wheelhouse of the host organization.  This requires a unique governance focus. As mentioned in the last post, it is important for the startup leader to meet weekly with the report-to executive from the host organization in order to stay connected with the mother ship. The report-to executive will be a valuable champion who can provide a host organization perspective of the startup leader’s strategies and activities. He or she can also be very effective in running interference. Remember, speed is of the essence, so any help keeping away the ankle-biters should be welcomed.

 

It is equally important to engage thought-leaders specific to startup’s domain. Early in the process, it is advisable to assemble a small advisory team made up of leaders experienced in the specific domain to provide outside accountability, advice and counsel. It is important that these advisors challenge the startup leader, and provide input without pulling punches. While advisory boards are often set up to provide access to influencers and funding, it should be only a secondary objective here. Startups outside the orbit of the host organization are often blazing new frontiers, which can make adequate governance a challenge. Advisors experienced in the arena or ecosystem in which the startup operates are essential to ensure sound governance. A word of caution: you want these advisors to be brutally honest with you, so be prepared to check your ego at the door before meeting with them.

Houston, We Have a Problem–Operating Principles for Startup Initiatives

Building a startup initiative within an established organization offers opportunities and challenges.  The following are some operating principles, based in part on my previous experience with startups within established organizations.

  • Until the initiative is proven successful, resources will be scarce, so find only the best, most resourceful people to help build the center.  Someone able to use their position, or a significant budget to get results is not enough.  Include people on your team with the talent and interpersonal skills necessary to get things done through charm, dogged determination and persuasiveness.  Another important attribute is a strong need-to-achieve.  I will offer more in a later post on building the right team.
  • Position and job title provides no guarantee of support. To receive adequate support from the host organization the leader must gain trust and generate buy-in of purpose from all levels of the host organization.  A common mistake of many leaders is the belief that their position, or the endorsement from higher-ups, is sufficient to garner the necessary support from members of the organization.  While support from an organization’s leadership in necessary, it is certainly not sufficient.  If folks within the larger organization do not want to help you, they will find very clever and covert ways not to.  It is always better to engage people throughout the organization in a way that they want to help you.
  • Work only on items/activities that can be directly linked to strategic objectives.  Time is the great equalizer.  We all have the same amount of it each day.  In order to build something meaningful that is outside the core competency of the host organization you will have to build momentum and show results quickly.  That means you cannot afford to spend energy on anything that is not directly tied to your strategic objectives. I offer more details in later post regarding tips for accomplishing this objective.  As an aside, this objective is one that every organization should strive for.  In this fast-paced, competitive world, your most precious resource is time.
  • Schedule weekly 15-minute meetings with your report-to executive in the host organization to stay connected with the mother ship.  I learned an important lesson, while a mid-level executive with IBM managing a site team in Colorado that reported to a headquarters executive in New York.  Always being a self-starter, and someone who prefers a great deal of autonomy, I made the mistake of making decisions and delivering results without “wasting my bosses time”.  After all, she had much on her plate, and there were others who needed her attention more than I.  While it seemed like a good strategy at the time, I learned (rather painfully) that it needed fine-tuning.  With effective accountability metrics and a capable team in place, bosses don’t need to be involved with the day-to-day decision making of the team, but they need to stay informed.  These weekly 15-minute meetings serve another purpose.  They provide an opportunity to reinforce the vision and strategic objectives of the team, and to highlight progress.  Remember, the work you are doing is less important to the host organization than it is to you.  For the host organization it is just one of many initiative.  For you it is everything, so it is helpful to find opportunities to bring it top-of-mind for the host organization.  The saying, “out of sight, out mind” definitely applies in this case.
  • Speed of execution is essential—better to ask forgiveness than to ask permission.  As mentioned above, there is typically a small window of opportunity to convince the host organization that your initiative is worthy of continued support, so speed is of the essence.  In order to keep pace it is better to make decisions judiciously and quickly, which often means making them without asking permission.  Ask yourself this simple before making a decision.  “Do I feel comfortable enough with this decision that I am willing to be held completely accountable for the outcome?”  If the answer is “yes”, just do it!  But don’t make any decisions before reading the next two objectives.
  • Ensure strategies are well nested within the overarching strategies of the host organization.  This is a great way to feel confident in your strategic decision-making.  It will require a thoughtful understanding of those overarching strategies.  If you are looking for more face-time with the senior executives of the host organization, this is a good use of that time.  It will not only provide an opportunity for them to articulate their vision and strategies, it provides you an opportunity to speak to your strategic objectives within the context of theirs.  This creates a rare opportunity for buy-in from the host organization, and provides necessary context for your decision-making.
  • Do NOTHING that would jeopardize the reputation of the host organization. When in doubt, seek advice.  If anyone tells you “there are no sacred cows in this organization” don’t believe it.  Every organization has them, and many successful organizations go to the trouble of codifying them in the form of policies and/or practices.  Organizations, like people, rely on goodwill (a favorable reputation) to thrive.  When building a startup initiative within a larger organization, the surest and quickest way to certain death is to do something that damages the host organization’s reputation.  Don’t do it!

Houston, We Have a Problem — Introduction

Whether it be the early beginnings of IBM’s PC Company in 1981 or the creation of Drexel University’s Baiada Center for Entrepreneurship two decades later, founders of successful startup initiatives within a larger organization experience something akin to astronauts in space. Even though they rely on the infrastructure and support of the larger organization, maintain communications, regularly monitor systems and provide feedback, the founders operate with a level of autonomy and accountability that is palpable. Issues must be addressed and opportunities pursued with agility and speed. Decision-making tends to be streamlined and results, both good and bad, come quickly. With it comes both a sense of weightiness of purpose and weightlessness from the larger organization’s gravitational pull.

Over a the next few weeks, I will offer a series of posts suggesting critical some factors critical to creating and sustaining a successful startup initiative within a larger organization.

Diamonds Abound

As we plow in to the New Year with an uncertain economy, and troubling world events I am reminded of an excerpt from Earl Nightingale’s Lead the Field. I find it inspirational and thought I would pass it along to you. I hope you are finding the New Year prosperous.

In 1843, a man was born who was to have a profound effect upon the lives of millions of people. His name was Russell Herman Conwell. He became a lawyer, then a newspaper editor and, finally, a clergyman. During his church career, an incident occurred that was to change his life and the life of countless others.

One day, a group of young people came to Dr. Conwell at his church and asked him if he would be willing to instruct them in college courses. They all wanted a college education but lacked the money to pay for it. He told them to let him think about it and to come back in a few days.

After they left, an idea began to form in Dr. Conwell’s mind. He asked himself, “Why couldn’t there be a fine college for poor but deserving young people?” Before long, the idea consumed him. Why not, indeed? It was a project worthy of 100 percent dedication—complete commitment.

Almost single-handedly, Dr. Conwell raised several million dollars with which he founded Temple University, today one of the country’s leading schools. He raised the money by giving more than 6,000 lectures all over the country, and in each one of them, he told a story called “Acres of Diamonds.”

The story is the true account of an African farmer who had heard tales about other farmers who had made millions by discovering diamond mines. These tales so excited the farmer that he could hardly wait to sell his farm and go prospecting for diamonds himself. So he sold his farm and spent the rest of his life wandering the African continent searching unsuccessfully for the gleaming gems that brought such high prices on the markets of the world. Finally, the story goes, worn-out and in a fit of despondency, he threw himself into a river and drowned.

Meanwhile, back at the ranch, or farm, in this case, the man who had bought the farm happened to be crossing the small stream on the property. Suddenly, there was a bright flash of blue and red light from the stream’s bottom. He bent down, picked up the stone—it was a good-sized stone—and, admiring it, later put it on his fireplace mantel, as an interesting curiosity.

Several weeks later, a visitor to his home picked up the stone, looked at it, hefted it in his hand—and nearly fainted. He asked the farmer if he knew what he’d found.When the farmer said no, that he’d thought it was a piece of crystal, the visitor told him he’d found one of the largest diamonds ever discovered. The farmer had trouble believing that. He told the man that his creek was full of such stones—not as large, perhaps, as the one on the mantel, but they were sprinkled generously throughout the creek bottom.

Needless to say, the farm that the first farmer had sold so that he might find a diamond mine turned out to be the most productive diamond mine on the entire African continent. The first farmer had owned, free and clear, acres of diamonds, but he sold them for practically nothing in order to look for them elsewhere.

The moral is clear: If only the first farmer had taken the time to study and prepare himself—to learn what diamonds looked like in their rough state—and, since he had already owned a piece of the African continent, to thoroughly explore the property he had before looking elsewhere, all of his wildest dreams would have come true.

Each of us, at this moment, is standing in the middle of his or her own acres of diamonds. If only we will have the wisdom and patience to intelligently and effectively explore the work in which we are now engaged, to explore ourselves, we’ll usually find the riches we seek.

©Mark P. Loschiavo

A Billionaire in Gardener’s Clothing

When I was in High School I had a small business selling and servicing swimming pool cleaners. In the early 1970s a robotic pool cleaner that operated unattended was a cutting edge technology, and I was the sole distributor in the Greater Cincinnati area for a company out of Florida that invented and manufactured these little gizmos. It was by far the easiest item I ever had to sell. They were such a novelty at the time they sold themselves.

My clients ranged from the upper middle class to the very wealthy. One Saturday afternoon I had an appointment to demonstrate my product to the second wealthiest man in Cincinnati. As I drove up to his estate in my yellow 1965 Ford Falcon I noticed what appeared to be the gardener at the front of the main house. Hunched over in the bushes with his tattered shirt and a Camel cigarette hanging from his mouth, he seemed only mildly interested in this visitor in the yellow car. Because my dad always taught me to treat everyone with dignity and respect, I stopped in front of the man with the dirty face and said, “Good afternoon sir, sorry for the interruption, but I was wondering if you could tell me where I might find Mr. Heekin?” He said, “What do you want him for?” “My name is Mark Loschiavo, and I have an appointment with him about a swimming pool cleaner” I answered. His response startled me when he said, “I’m Herb Heekin, and I’ll take it”. “Nice to meet you Mr. Heekin, but you haven’t even seen it yet”, I stammered. “Young man, you treated me like I owned this place, even when you thought I was a hired hand. I admire that. I’ll buy the damn thing even if it doesn’t clean my pool?”

I went on to sell him a pool cleaner that day, and in the weeks and months that followed I sold—or more accurately he sold—many more of my pool cleaners to his friends, family and associates. Remember to treat everyone you encounter with dignity and respect. You never know when you may be talking to a billionaire in gardener’s clothing.

©Mark P. Loschiavo

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