Posted on February 18, 2020
At Shadow Ventures, many of our Limited Partners (LPs) are investors in other venture funds that compete with us. The feedback on our competition is that they don’t provide much strategic value in helping their LPs screen and deploy new technologies within their companies. But there are two problems with the expectation that they should. First of all, screening a startup is indeed part of the VC’s job; however, their screening is for investment purposes rather than customers’ purposes. Secondly, a typical venture firm does not have a team of people with operational experience to deploy any technology (much less a startup’s technology).
Quite frankly, an LP should not expect their VC to help them deploy technology within their firm. To become truly innovative in their field, they should build that ability as a core competency. I joke that it is the difference between the desserts that a restaurant buys from a vendor versus those made by their in-house pastry chef. The executive chef (CEO) needs to be great regardless, but a great pastry chef (Innovation Executive) can create a differentiated experience.
In my 2011 book BIM for Building Owners and Developers, I gave a pretty detailed outline on how to deploy BIM (Building Information Modeling) within a company. Nine years later, most of the principles still apply. And the burning desire for innovation in the built environment was never like it is today.
Here’s how you can lead innovation in your company by deploying a successful pilot:
The Project Charter: What is success?
The definition of success is very important. Develop a written project charter for the pilot. Define the project scope, the stakeholders involved, and what is expected from them. Catalog the stakeholders’ individual definitions of success. This discovery phase is important to create a deep understanding of the organization’s needs, a boundary of scope, and social buy-in from the stakeholders. I like to develop this document with my stakeholders, add their names to the document, and then get the CEO’s signature on the document. Think of this as creating your SoW (statement of work).
It’s important to create a communication cadence for each stakeholder and stick to it. At times, I will editorialize a bit to make sure that I know everyone is reading it. Once your organization has agreed to the project charter, then share this with the startup. Of course, they will say “yes.” You are a paying client (if you are unwilling to pay for a pilot, then your project charter is terrible), so the startup is excited to start. Push the startup to make sure they understand your expectations of success. They are a partner and not a vendor.
The Execution Plan: What resources are required?
Since you have a solid project charter, it is now time to develop a detailed execution plan. The execution plan should include costs for internal/external human resources, equipment, software, and outside consultants. It should also include the timing of when those resources will be required. In some organizations (like architecture, engineering, and construction firms) the finance department can share hourly rates for your internal team. In real estate organizations, this can be a little tricky. I generally use $500 per hour for the C-suite, $250 per hour for director level and up, and $125 per hour for anyone below a director. Create plenty of budget for events/meetings as part of your communication cadence.
For your internal teams, remember that they have a full-time job. Keeping their motivation high is sometimes an emotional game. I once had an innovation leader for a major grocery store chain bring homemade baked goods to her meetings. Attendance at her meetings was always very high. I suggest creating your execution plan in Excel or a PM tool. This is also a document that you should share with your startup. Make sure there is agreement on all the resources that are required to be successful on either side. I would be surprised if the resourcing from the startup doesn’t increase at this point. Startups generally underestimate the resourcing required to work with a much larger entity. This execution plan becomes the basis of a contract with the startup.
Be sure to include a payment schedule and project check-in points. These check-in points are opportunities to modify the project charter and execution plan. These can also serve as project termination points in the contract if the project is not going well. While the startup is always challenged in their part for execution risk, I have more often seen the larger company struggle. Between internal organizational shifts, re-org/re-assignments, or budget changes due to a bad quarter, the large company is typically the highest driver of change on a pilot project. Once you total up the budget, add 25%. Why? You will need it. Trust me. This execution plan should get formally approved by leadership.
The Execution: Managing the execution plan.
Communication, communication, communication. The reality is that the plan was wrong the day after leadership approved it. Managing the execution plan is like driving down an icy road. You are trying to move fast enough while avoiding swerving into head-on traffic or ending up in the ditch. Throw the word “precision” out the door.
Why does this work? I have led hundreds of pilot projects on either side. This is not a detailed view, but it’s a great framework. If you need help? Ask.