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| Navigating the talent triangle |
September 3, 2001 |
By Sean Wise, Ernst & Young
More start-ups have been launched in the last few years than in the entire decade prior. It sounds like an amazing statistic, and it is, but the stark reality is that most will not succeed.
I am often asked to explain this outcome, and while there is no simple, all- encompassing answer, I have found that successful ventures all tend to have one common element: a well-balanced management team.
In a previous article I wrote about the four Ps-people, product, placement and plan (“What it Takes to Make Your Plan Stand Up and Stand Out,” Backbone, January 2001). Of these, people are by far the most crucial element to business success. In fact, venture capitalists spend as much time evaluating a startup’s management team as they do looking at its key product, placement in an industry and go-to-market plan.
So what exactly are the attributes of a successful management team? There are three: business acumen, operational experience and domain knowledge. These form the corners of the talent triangle.
A management team with all three elements will structure its business to ensure each segment of the triangle has both the responsibility for its portfolio and the authority to make decisions on issues within its bailiwick.
To illustrate how this works, let’s take a look at an imaginary start-up, AbleAutomobile.com, which is in the business of selling cars online.
ELEMENT 1-Business Acumen:
Most often titled CEO, president or chief financial officer (CFO), a person with business acumen has the skill, knowledge and experience to make the key business decisions.
These people are focused on human resources management, investor relations and overall corporate development. Often they are charged with ensuring the venture focuses only on core competencies. They may have an MBA or years of experience running a business, but they must have the ability to make top-level decisions appropriate for the growth phase of the company. For instance, a CEO with years of public company experience may not have the ability to lead a start-up venture.
At the new AbleAutomobile.com, the Business Acumen leader would need to have start-up experience, but not necessarily experience in the car business or in online selling.
ELEMENT 2-Operational Experience:
People with operational experience are focused on infrastructure and logistics. They often carry a title like chief operations officer (COO), chief technology officer (CTO) or vice-president of administration. They make decisions that relate to how the venture will implement and execute its business plan.
These people need hands-on experience in setting up delivery chains and inventory management, and selecting and managing outsourcing partners.
At AbleAutomobile.com, the operational experience leader is not only charged with designing the Web site but must also choose the Internet service provider, co-ordinate the delivery of vehicles sold on the site and manage cash flow.
ELEMENT 3-Domain Knowledge:
The individual who brings domain knowledge to the team must understand the industry’s key value drivers, be aware of the domain’s inherent hurdles, ensure the supply chain is not interrupted and possess the necessary relationships in the market to make sales. Domain knowledge experts are often titled vice president of sales, vice-president of business development or president.
The domain knowledge expert must have years of hands-on experience in the target industry. It is this person’s job to ensure that the start-up’s product and value proposition meet, and possibly exceed, the needs of end users.
In-depth knowledge of the car market and an understanding of relationships between manufacturers, their dealer network and the car-buying public are the key requirements for the domain knowledge leader of AbleAutomobile.com.
Beware missing links
What happens if one of the elements ofthe triangle is missing?
All three elements must be present for a properly balanced management team. A business that lacks domain knowledge, for example, often creates a venture that is well run and has an excellent Web site and delivery model, but achieves minimal sales and has a product that is not attractive to the marketplace.
A start-up with insufficient operational experience can lead to a venture with a good product and lean infrastructure, but minimal ability to execute and fulfill sales.
Without the necessary business acumen, a venture may end up with great product and efficient delivery methods but a bloated infrastructure, high staff turnover and large burn rates.
Sean Wise (sean.wise@ca.eyi.com) is the managing director of Ernst & Young’s Entrepreneurial Business Centre in Toronto, which focuses on assisting emerging growth companies in their formative stages.
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