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With all the innovations in technology over the last many years, including whole new ways to manage the development process, there seems to remain at least one bastion where experience still rules — setting corporate strategy. The first challenge typically comes from what the word ‘strategy’ actually means to an organization — by definition it is a ‘plan of action designed to achieve a particular goal’. It’s a military term which essentially means lots of structure, discipline and focus.  I rarely meet a young company that has this kind of strategy in place — or said more properly, the people who work for the company know about the strategy that is in place, let alone operate with structure, discipline and focus.  When I was running PlateSpin, we had a detailed strategy in place along with a more detailed operational plan — it was well communicated and available to everyone, but mostly nobody seemed to be able to articulate what it was — except those in the immediate circle of the leadership team. Somehow we had structure, discipline and focus. I suppose this is all common place, human nature, meant to be — i don’t think technology is going to change this aspect of human behavior, or should i say misbehavior.

Anyway, my point is meant to focus more on how a corporate strategy is set. Does it come from a consensus event? Does it come from one person’s vision? Where do you start in creating a strategy for your company? It may be something you think you have a handle on but for the most part, a typical leadership team is largely incapable of sorting through the issues in an efficient way to create a strategy for themselves. It often falls to an outsider to facilitate the discussions, ask challenging questions and flesh out the salient points for the team to consider. It’s a thinking process, one that requires clarity of thought, logic and often broad experiences to make sure the relevant issues are reviewed.

The first place to start is usually the end — what do you want your company to look like 3-5 years out (any further is usually too magical to treat as a serious goal)? Many first responses include gargantuan revenue numbers, or to have been sold, or to be world-wide leaders bigger than Google and Apple combined. Did I say strategy is synonymous with dreaming? I like working back from an overall positioning statement. It forces everyone to start creating a path in their head from where the company is today to where it wants to be in the future. It can be revenue oriented but often some details underneath a revenue number need to be explored as well — like how many deals would be needed to get to the 5 year number? Is it an achievable number or so much higher than the current deal flow, no realistic operating plan could get you there.

Working back and forth between today and the future is a good way to iron out the details of a strategic plan. Integrate true corporate strengths as you go (your DNA). For each key point about the future, you should have some statements that order how you would get there, include some measures whenever you can. Once a few of these paths are drawn, they start to tie together other issues all by themselves, like people and skill requirements, perhaps new ways to get to market, strategic partnership needs, funding needs, etc. It’s a bit like knitting a sweater, you have to start with a pattern, know how many stitches fit each row adding and dropping as appropriate, switch tactics as the stitches change to make certain patterns, etc.  Soon pattens start to emerge without doing anything other than following the plan. You have to have and follow a plan of attack before taking up knitting a sweater or you wind up with tangled yarn.

The best strategies can normally be articulated in a single PPT slide. The best companies live and breath their strategies. The best teams focus on the goals at hand, have the right measures to tell them if they are on track or not, and also have some decisions already made if things do not go well. Setting a corporate strategy is important — but only useful if set in the right way.

Any comments would be appreciated.

One of the things I find most compelling about the entrepreneurial world is how it divides into those who are vision led and those who lead through consensus (market study, everyone’s opinion). On first glance, this might seem like an odd way to divide the startup world as surely wannabe successful businesses must study the target market to become successful in the first place.  Surely they must gather opinions, weigh them and choose from the analysis. My angle for this article comes from a macro observation, perhaps very relevant to the Canadian investment market, but also one that invades the US investment market as well — vision and insight are two qualities that those without insight or vision find uncomfortable!

It’s difficult to invest in a vision-led idea because the traditional business evidence to support the founding investment is essentially unattainable.  This sounds like a contradiction to many who invest as one of the key tenants of building successful businesses appears to be immaterial — maybe it is. What this observation says is that often the true entrepreneur actually knows what needs to get done without first spending time validating the opportunity. In fact, I would assert this is really what a true entrepreneur is supposed to be — someone who can come up with business ideas almost purely from their vision and perspective of the world.

So where does this  assertion lead to? It most cases, it leads to the “build and they will come” model which many startup entrepreneurs often run as their business plan. Many if not most businesses fail this scenario, the founding idea is wasted as is any money that went into it. The businesses based purely on market study tend rarely to be market leaders, but they can differentiate on ability to execute which is often the key distinction of leaders as measured by revenue and also-rans. I think Microsoft is a good example of this — a company built largely from studying existing markets, ultimately out-executing whoever formed the market in the first place.

So why is this assertion even important for me to write about and you to read (hopefully you will read the rest of this post)? This assertion is important as we need to figure out how to identify the pure entrepreneur so we can support them properly from both an investment perspective and also an execution excellence perspective. I was a panel member at an E&Y event today where the moderator was citing that Canada spends the lowest amount as a % of GDP (1%) on R&D compared to most other countries who are members of the O.E.C.D (2.5% average).

It’s not that we are cheap or short sighted, I think it is largely that our investment community lacks the skills to properly evaluate and assess the value of the entrepreneurs they are working with.  They treat the visionary as someone who must prove their vision to gain proper support, which is a contradiction given vision is often about a future need so quantitative research is often unavailable.  Next the investor looks at the team to see if they can confidently execute but often the investor is not much more knowledgeable than the team they would invest in, so accurate judgement is hard to come by. The team makes mistakes while the investors sit back and watch, looking for ways to slow things down to the point of operational uselessness. The visionary has to fall back to market study as the way to take the next steps — lead by consensus instead.

We need to fix this if Canada is to realize its full potential as an innovative society. If government would recognize the value of great and experienced people to help sheppard investment money into the right places, that would be a good start.  If private investors would network properly with experienced and successful mentors for their businesses, that would be a great start. If all investors would allow the fundamental way in which businesses are governed by a Board to change (e.g. the CEO/Board relationship), that would be a great as well.  If managing by consensus was removed from the equation (for the most part), more would happen faster — more good things, as long as experienced oversight was actually in place.

Let’s get started — before no one wants to live the Canadian stereotype any more.

As I develop some time-dependent experience being an Advisor, one thing is clear — if there is no skin in the game for the CEO or management team, very little value is obtained.  Only one of the companies i work with does it right. I speak to the CEO once a week, like clock-work. We review all relevant business issues, both past, present and upcoming. We talk out alternatives, we explore different ways to think about business challenges. We share successes and we explore pain points. We talk about the industry. In fact, I’ve never actually met the management team of this company, we have developed our working relationship exclusively on-line — mostly on the phone.  The great thing is that they are doing well and seem poised for fast growth which is exciting to watch, even if from a distance.

I’ve come to the conclusion that all Advisor relationship need to include a monthly fee and an option package to get the team to treat the relationship seriously. Their should be a statement of work that both parties bye into and some accountability for providing the time needed to make it work. Bringing on board an advisor for their name or to be a figurehead on a slide is cheesy. In fact, if startup teams don’t understand how easy it is to make many mistakes growing a business,  they will probably not realize how much they are failing until the surprise wears off of why investors won’t give them more money.

Vent.