A woman dies. As she encounters Saint Peter at the pearly gates she says,
“St. Peter, it is good to see you, but how did I get here?”
“Welcome Dr. Fluesham, your position as the Head of Emergency at Flipsum Memorial Hospital is what got you here.”
“Please, call me Lucy, but I thought I would have to at least make Chief Medical Officer at the hospital in order to be guaranteed a spot in heaven.”
Saint Peter gave a warm chuckle, and said,
“Perhaps I should explain further. As the result of a horrible car crash, you sustained traumatic brain injury, and were rendered unconscious. The EMTs transported you to Flipsum Memorial. Dr. Headstrom was on call, and determined you needed a decompressive craniectomy in order to get your ICP below target levels, and save your life.”
After receiving this information, Lucy became agitated, surprised and indignant, exclaiming,
“This makes no sense! Flipsum Memorial is best in class when it comes to brain trauma. I should know. I am—or should I say was—head of ER. Did the EMTs screw up transporting me? Did Dr. Headstrom botch the craniectomy?”
“No, my dear. The EMTs immediately recognized the potential for brain edema due to raised intracranial pressure. They knew that Flipsum Memorial specialized in brain injury and the Dr. Headstrom, the best of the best, was on call. They called ahead to make sure Dr. Headstrom knew you were on the way. The ER was prepped and ready, and you were transported in plenty of time to be saved. Dr. Headstrom performed brilliantly, quickly determining that IV fluids and oxygen infusion would not suffice to reduce the brain swelling. Anticipating the possible need for a decompressive craniectomy, he arranged to have an Operating Room prepped before your arrival.”
“It was at this point that your position brought you to heaven. Because decompressive craniectomies are a last resort, and very expensive, you issued a directive last week indicating that none shall be performed without your approval. If only you weren’t unconscious.”
As far-fetched as this little parable may seem, leaders frequently allow boundaries based on position to govern the performance of their team.
Rule #4 for building a high-performing team is that there are NO boundaries based on position. If your subordinate believes you are about to make a bad decision, or believes a better course of action is in order, you want them to speak freely. If there is not time to discuss it with you, and she is the expert, she should make the call.
The perception that hierarchy and position are in place to ensure proper decision-making is a throwback to the industrial age. Hierarchy and position are in place to provide direction and adequate resources. One of the most hierarchical organizations in the world, the United States military figured this out a while ago. Generals describe strategic objectives, and highly trained soldiers on the field determine the best course of action to accomplish the mission. Few would argue that there is a better example of high-performing teams than the U.S. military.
In today’s highly competitive, fast-paced and complex world, the person doing the job must be more expert at the job than anyone, including his boss. Even if his boss had the job first things change fast enough that his domain expertise quickly becomes dated. With HPTs, knowledge, training and perspective are what matter most—not position.
The late George Harrison frequently paraphrased the Cheshire Cat in chapter 6 of Lewis Carroll’s Alice in Wonderland by saying, “if you don’t know where you are going, any road will get you there.” He often used this phrase when describing his good fortune in knowing as a small child that he wanted to play guitar. The most casual music lovers know of George Harrison as one of the Beatles. More serious aficionados of 70s music also know him from his solo career, from his earliest works (Wonderwall Music and Electronic Sound) to his more notable contributions (All Things Must Pass, The Concert for Bangladesh, Living in the Material World).
What few people recognize is that Harrison was one of the greatest guitarists of his time. His studio collaborations were numerous, including co-writes and guest appearances on recorded songs with well-known singer-songwriters such as Eric Clapton, Bob Dylan, Dave Mason, Billy Preston, Dave Lynne and Tom Petty, to name a few. In referring to Harrison, Tom Petty said, “He just had a way of getting right to the business, of finding the right thing to play.” Rolling Stone founder Jann Wenner described him as someone who “played exquisitely in the service of the song”. Said differently, Harrison understood strategic fit within the purpose of the song.
This brings us to rule #3 for building a high-performance team (HTP): When considering new programs we will challenge each other to ensure a proper fit within our strategic map. I will offer a simple 3-step approach for implementing rule #3.
Step 1 – Develop an easy to remember optic to describe the strategic map for the team—the simpler you can make this, the better. When building Drexel University’s Baiada Center for Entrepreneurship we defined our primary focus as having two desired outcomes regarding entrepreneurship; creating interest and passion, and promoting thought leadership and best practices. Once that was determined we created a simple chart with interest & passion on the Y-axis and thought leadership & best practices on the X-axis. Once complete, we looked at every prospective program relative to if/where it fit on the map. This accomplishes two things. First, it ensures that we expend effort only on programs that fit within the map. Secondly, if a fit exists, it also informs where on the map it fits, allowing us to build complementary programs.
Step 2 – When making day-to-day decisions regarding programming and strategies, it is important to consider those decisions in the context of the strategic map. More importantly, that consideration should be made aloud. This helps to reinforce the team’s sense of purpose, vision and mission daily, and also provides an ongoing compass.
Step 3 – Encourage each member of the team to challenge one another regarding strategic fit. Each member of the team falls in a different spot along the spectrum between discovery and delivery skills. For example, I am stronger in discovery skills. As such, my tendency is to continually conceive new ideas for programs to offer our constituents. I am also good at convincing myself that my idea is stellar, which they are not, making it important that I shared my brilliant idea with my partner expending delivery effort. My partner would earnestly listen to my idea,then often question the strategic fit in a professional manner. This process always resulted in one of two outcomes—both good. In some instances it gave me an opportunity to explain the strategic fit, providing my partner a better perspective of our vision. In the early days this occurred with about 2% of the ideas. The majority of instances (98% of the time) it helped me to quickly see that my brilliant idea was not strategic. Another interesting outcome was that over time, my partners understanding of our vision was so complete that if she challenged the strategy, 99.8% of the time it was not a good fit.
Over the years, we have witnessed many excellent management concepts lose potency and currency once acceptance moves from the early adopters to the majority. This happens for two reasons:
- Once a concept starts to trend, many want to jump on the bandwagon.
- Although many want to join the fun, few want to do the hard work necessary to truly understand the concept and put it into practice. In an era of sound bites, instant gratification and quick fixes this problem becomes exacerbated.
In the 1970s we were introduced to the powerful leadership idea of MBWA (Management By Walking Around). As it gained wide acceptance, managers used the concept as an excuse to make “gossip-rounds” or to “check-up” on their folks to make to ensure they were busy working at their desks. In the 1980s the important management focus on quality often produced nothing more than increased layers of bureaucracy. Ironically, after Phillip Crosby’s book Quality is Free became a best seller, companies spent billions on consultants and programs to improve quality. In the 1990s folks used the concept of Empowerment as an excuse to act irresponsibly. More recently, we hear the term High-Performance Team (HPT) awarded as liberally as little league soccer trophies.
Just saying you have of a HPT does not make it so. One good indicator is how those outside the team view you. If outsiders see your team driven by a sense of purpose, enjoying your work, accomplishing a great deal with limited resources, and making it look easy in the process there is a good chance that you are part of a HPT.
It is important to understand that the nature of your team’s relationship with outsiders helps to predict their response to you. If they see themselves as your customer the most likely response is trust and admiration. If they see you as a competitor the most likely response is distrust and disdain. If they see you as a customer or partner their response becomes more dependent on how you treat them than how you perform as a team. If they feel your success benefits rather than threaten them they will likely view you as an ally.
Here are some tips for increasing your chances of being viewed as an ally.
- If you sincerely recognize that your success is due in part to their involvement, and share the rewards and accolades proportionally with them, you may be viewed as an ally.
- If their involvement with you makes them a better team, you may beviewed as an ally.
- If you never ask them to do something you would be unwilling to do, you may be viewed as an ally.
- If you never waste their time, you may be viewed as an ally.
Recently I had the privilege of leading a HPT. Feedback I received in a discussion with a fellow executive were very revealing. When asked how she viewed our team she said, “My team enjoys working with your team for three reasons. First, you always give us plenty of advance notice when you need a big project completed. Secondly, you never asked us to do anything that you do not use. Finally, the things you asked us to do for you often challenged us to stretch, making us become better at what we do.” Her feedback provided evidence that my team was performing at a high level.
This brings us to Rule # 2 for building HPTs: We will never ask anyone outside of the team to develop work, or provide support, for anything we do not fully intend to use.
There is a time and a place for busy work. During summer breaks as a child I quickly learned to never utter the words “I’m bored” in the presence of my father. Even during the school year, if I found myself lying on the couch on a Saturday morning watching cartoons, I always kept a keen ear on the driveway. Most Saturday mornings consisted of dad, a general contractor, checking on some of his jobs and typically returning mid-morning. Because his schedule was unpredictable, I never knew exactly when he might show up. What I did know is that if I was on the couch when he arrived he would find something for me to do. Something certain to be more fitting than zoning in front of the TV—at least in his mind. He had a knack for constructing a list of chores on the fly that would keep me occupied for the entire day.
I have come to learn over the years that each chore had a purpose far greater than having a weed-free lawn and garden, a spotless storage room, a well-swept patio or well-polished shoes. In fact, following his time as a U.S. Marine, I don’t think he cared if his shoes ever shined again. Certainly, he was never going to shine them himself! Although we never discussed it, I think his real purpose was to instill a work ethic, based on a few principles. The first was that any job, no matter how menial, should be done well. Secondly, you can do anything if you put your mind to it. Finally, he believed being lazy was second only to mass murder on the list of bad behaviors.
My dad used busy work as a way to teach me life lessons. Ironically, when I was around 30, my dad informed me that my problem was that I didn’t know how to relax. Funny guy! Busy work, however, has no place in purpose driven organizations, and is a sure-fire path to mediocre performance.
Rule #1 for high-performance teams is that there is no such thing as busy work. We challenge each other to only work on things that matter, and the only things that matter are those tasks that will help us achieve the goals and objectives to fulfill our purpose, vision and mission. When in doubt, ask if and how it fits. The answer “yes, it fits” is not sufficient. It must be accompanies with an explanation of how it fits, so your teammates can connect the dots.
If you adopt rule #1 the team will become much more productive, driven and willing to take on any task. You will also find that the team derives far more enjoyment and purpose in their work. In the next post I will discuss an important rule for dealing with those outside the team.
In the recent series, entitled Houston we have a Problem, I focused on six factors critical to success for founders of startups within a larger organization. They included: gaining and maintain latitude/autonomy, honoring sacred cows, putting out a BOLO on the larger organization, building grass roots support, adopting a distinct fiduciary approach, and building a high-performance team.
Since it is critical in any group dynamic (not just startups), I am dedicating a sub-series on seven rules for creating a culture and atmosphere for building high-performance teams. These rules of engagement will provide fertile ground for building an elite team that produces unparalleled results.
For this to be effective it is imperative that every member of the team possesses a deep understanding of the vision, mission and purpose of the organization. Developing such an understanding requires a process that takes time. I will provide suggestions for how to do this in subsequent posts.
Once your team members have internalized the vision, mission and purpose, each member of the team should enter into a contract to honor the rules, and hold each other mutually accountable to them. Based on your personal leadership style and the nature of your team you can decide if you want this contract to be explicit or implicit.
The general theme of the contract is that the team will only expend energy on items that correlate to, and are aligned with the stated vision, goals and objectives. In the next post I will discuss Rule #1: No busy work.
In this series we are focusing on six factors critical to success for founders of startups within a larger organization. So far, we have discussed: gaining and maintain latitude/autonomy, honoring sacred cows, putting out a BOLO on the larger organization, building grass roots support, and adopting a distinct fiduciary approach. In this and future posts I want to comment on what may be the most critical factor for success—building a high-performance team.
High performance teams offer the ability to accomplish a great deal with very few resources. Often resembling an elite Special Forces team, they move with a level of alacrity, speed and agility to execute strategic goals with dispatch. All while making it look effortless.
Unfortunately, high-performance teams are as rare as the northern spotted owl. In a subsequent post I will offer my thoughts as to why they are so rare. The reasons may surprise you. For now, I want to offer guidelines for putting a team in place.
Developing a high-performing team is imperative if you want to build something quickly that is meaningful and sustainable. The approach used will differ based on whether your team is “inherited” or is built from scratch. While the checklist is similar for both, my focus here will be when starting from scratch.
Simply put, the addition of each new team member must be deliberate in order to ensure a strategic fit. While this concept seems obvious, it is seldom well executed. Because time is of the essence, the temptation is to staff up quickly. Often, the first action a new leader takes is to develop an organization chart, then immediately hire to fill the prescribed positions. The belief is that taking this all-hands-on-deck approach spreads the workload and allows for speed of execution. The leader may recognize that some of the hires will be a bad fit, so will be quick to fire members that don’t work out. This approach has a number of flaws. I will offer just a few.
- Eliminating a member of the team steals precious time that would be better spent strategizing and building the new venture.
- When new hires are quickly let go, it has a destabilizing effect on the entire team. Other team members aren’t given time to evaluate whether or not the termination was warranted, leaving them uncertain of their own security.
- It is largely ineffective to develop an organization chart this early in the build process. Even though we often need to include one as part of a funding request, it is absurd to act on it until the business model has been tested, modified and more fully proven. Keep in mind that proposals and business plans are always wrong. To believe yours is otherwise is either naïve or egotistical. Developing a precise business plan does not make it right. I merely means it will be more precisely wrong.
Instead, the leader should add each new team member based on immediate need and strategic fit. For example, if the leader scores higher on discovery skills than delivery skills, he might look for someone who excels at program development and execution, and possesses strong project management skills.
If you are building a new venture from within a larger organization, your co-founders must demonstrate excellent 360-degree communication skills; have strong interpersonal skills and an excellent reputation within the larger organization. It is also very helpful if the co-founder has experience in the domain you will occupy.
This process will take time. It is important that the leader exercise the necessary patience to choose wisely, have the courage to handle activities during while searching, and faith that the process will yield positive results.
Once the semblance of a team in place, it is important to create a culture and atmosphere that allows for the highest level of performance. I will expand on this in the next post.
In this series we are focusing on six factors critical to success for founders of startups within a larger organization. In the 10/31/14 post, I discussed the importance of building grass roots support. In this post I want to comment on the best way for the host organization of a startup venture to structure fiduciary matters. I will also offer suggestions for the startup team regarding fiduciary control.
Dealing with the budget process of a large organization is like dealing with an adolescent boy. It is clumsy, predictable, and is prone toward bad decision-making. In the quarter preceding the fiscal year, each department is asked to develop a proposed annual budget for its department. The proposed budget is reviewed, challenged, “negotiated” down to a lesser number, and approved. Notwithstanding unforeseen circumstances during the year, the department manages to the budget throughout the year. The advantage to this approach is that it allows senior executive the ability to delegate spending authority within established limits, and more accurately forecast spending for the year. The disadvantage is that it encourages department heads to spend their entire budget each year regardless of need.
My first experience with this dynamic was as a young financial planner for IBM. One crisp autumn morning, as I was leaving a meeting in the Engineering building, I stuck my head into a colleague’s office to say hello. There, I noticed him crouched over an equipment catalogue. My first thought was that he was trying to design a new part, and was looking for some specialized piece of equipment to complete his important work. When I asked him what he was looking for, his response startled me. “I have no idea. My manager told me to browse the catalogues for stuff to buy, so we can make sure to spend all of our budget by year-end.” When I told him I thought that was a complete lunacy, he said, “Yea, but if we don’t spend all of our budget this year it will get cut next year.”
This same scenario plays all the time in most every large institution in the country, where a process designed to manage spending instead promotes spending. I am not suggesting that budgets are bad. Even in our personal lives, it is good to develop a spending budget. It helps us forecast our cash requirements for the year, and provides limits, forcing us to make necessary trade-offs.
“I can either buy that new set of golf clubs or make my mortgage payment.”
With our personal budgets, cash we conserve is carried over into the next year’s beginning balance. This can provide a much needed a reserve for any surprises we might face.
”What do you mean, you’re pregnant!”
For a department in a large organization, though, there is often an inverse carry-over effect. While you may get a pat on the head for spending below your budget this year, next year’s budget may get cut. Why? Because it is easier to scrutinize budgets based on percentages and ratios than on circumstances. It is easier to ask all departments to limit next year’s spending to a 3% year-on-year increase than to actually review the detailed requirements of each department. Much like what we see in government, this shorthand approach to allocating resources creates a survival mentality based on spending more. Instead of encouraging participants to conserve and make smart tradeoffs, it encourages them to spend as much as they can get away with so they will have a bigger base to compare year-to-year. I could devote an entire series on this topic, but it will suffice to say that it does not work for startup ventures.
To build a successful startup from within, you need equal parts prudent leadership and fiscal autonomy. First, you must ensure the founding team has demonstrated an ability to handle the fiscal autonomy given. There is a reason trust funds are not paid out to adolescents. While aptitude and intent are often difficult to gauge, the due diligence necessary to detect the willingness and ability of the leader to handle fiscal matters is rather simple—check his or her record. If her experience is limited to large institutions look for spending patterns over the years. It is easy to find the big spenders. Look for telltale signs around some of the more discretionary items like travel, meals and entertainment. If he has started a business in the past, how effective was he at conserving cash while managing growth? This is straightforward, but takes some digging.
Once you are confident you have a fiscally responsible leader, treat him/her as one. The most effective way to do this is by employing a funding process outside of the normal budgeting process, managing the new initiative much like a Venture Capital firm manages its portfolio companies. Working with the management team of the new venture, determine the amount of financial capital required to start and sustain the new venture until the next significant inflection point for the new venture. It can take five or more years before the new venture will expect to reach an inflection point, so the funding should be set aside exclusively for the new venture and held in a separate account to me managed by the leadership of the new venture. While the funding can be doled out in tranches based on milestones, the leadership team needs the ability to manage spending independent of fiscal year budgets.
When building Drexel University’s Baiada Institute for Entrepreneurship, our small team started with a promise of $2 million over 10 years. The funds were deposited in our exclusive account in increments of $100,000 every six months. Through fiscal diligence we found that we could manage with less than $200,000/year in the early years, allowing us to preserve cash to help fund significant growth during the later years. Because of the success we enjoyed our annual spending exceeded $200,000 by the five-year mark. Our reserves, combined with additional funds generated through our programs and services, we were able to sustain our growth until becoming a university institute (inflection point) in year 11. The beauty of this approach is that it rewarded good behavior, eliminating the cognitive dissonance that often accompanies the annual budget approach.
With the annual budget approach an all too familiar scenario would have likely occurred. Trying to be fiscally responsible, the leadership team would have only spent $115,000 in year-one, resulting in a time-consuming battle for more funds the following year. The leadership team would quickly learn the importance of spending the entire budget—prudence be dammed—to avoid the battle for budget the following year. What makes this pattern so insidious is not just its wastefulness. Spending $200,000/year in the early years would have eliminated any reserves, making it unlikely we could sustain our growth prior to reaching our inflection point.
As mentioned earlier, creating an effective fiduciary approach only works with the right leadership team in place. In the next post I will posit the need for building a high performance team.
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.
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.
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.