How to Build a Great Company" Series (16/18): Best Practices (Stage 3)

Sub-Stage 3.4: Best Practices

Now you’ll learn how to make your venture a best-practice company! 

To scale your company, you want to ensure you are set up according to best practices. It’s the only way to ensure operational excellence in your company. That, in turn, will make your company not only successful but also sustainable. Because a best-practice company is one that’ll be successful in the long term. 

For overall context, we’re now far into the SCALE stage, the third and final stage. Remember: the 100 Tasks is divided into SETUP, LAUNCH, and SCALE. 

And we’re in sub-stage 4 out of 5, which means that we’re now in the second to last sub-stage. In other words, you’re almost done with the 100 Tasks! Congrats for having made it this far! I know it has been a challenge. 

The two previous sub-stages, “Learn from Data” and “Optimize Functions”, set the scene for this sub-stage, “Best Practices”. In the previous two sub-stages you essentially applied what you learned from your own data to optimizing the functions of your value chain. This sub-stage, “Best Practices”, is different from the previous two sub-stages in that you apply what you learn from outside experts or other ventures to your entire company. 

So, let me give you a brief overview of the six tasks of this sub-stage. And then, let’s bring them to life in a real-life case!

All Six Tasks

As you’ll see below, the tasks of “Best Practices”, tasks 91-96, all build on one another. Importantly, the tasks mostly apply to ventures that are part of a launchpad (venture studio, company builder, incubator, accelerator, VC). However, there are some tasks that can definitely apply to standalone ventures, notably: 

• Task 92: Define Best Practices for Each Function
• Task 93: Implement Best Practices
• Task 96: Create Self-Explanatory Internationalization Blueprint

So, if you’re a standalone startup, feel free to focus on the tasks that best apply to you.

Without further ado, let’s jump straight into the tasks! :-)

• Task 91: Designate Functional Experts Across Launchpad & Ventures

This task sets the foundation for the upcoming tasks. And since it always starts with people, this task is all about finding the right people to bring best practices into the companies. These so-called “functional experts” are subject matter experts on a particular function of the value chain (operations, marketing, product, etc.). The functional expert is the most knowledgeable person in your universe of companies for a specific function. That person is in charge of her function across the entire launchpad and all of its ventures.

• Task 92: Define Best Practices for Each Function

After the functional expert has been designated, she must define the best practices for her function. She first structures her function into 3-6 major topics. Then, she reconciles her internal research with external research in order to distill it into the most high-impact best practices. Next she writes down those master best practices and shares them with all other functional leaders across the launchpad and ventures. Finally, she periodically updates the master best practices because innovations occur in every function.

• Task 93: Implement Best Practices

After the functional expert has defined the best practices for her function, it’s time for her to drive their implementation. More specifically, she works hand-in-hand with all ventures in her universe in order to push her best practices into those ventures so that they achieve operational excellence. To be concrete, she collects data from her ventures, analyzes it, and then synthesizes her deep-dive into actionable recommendations for the venture. Finally, she uses a project roadmap to guide the venture to successful implementation of her best practices.

• Task 94: Implement Ongoing Knowledge Sharing

To complement the functional experts pushing their best practices into all ventures, it makes sense to have ongoing knowledge sharing among the ventures. In other words, while the best-practice push is managed top-down and one-directional (i.e. from functional expert to venture), knowledge sharing is self-managed and multi-directional. 

To be more concrete, to facilitate successful knowledge sharing, two things need to be created: the infrastructure and the culture. First, the infrastructure for knowledge sharing — consisting of email mailing lists, a Slack channel, and different types of in-person summits — needs to be set up. Second, the functional experts must create a culture of ongoing knowledge sharing by, for instance, proactively sharing new knowledge and ensuring that the ventures’ functional leaders are continuously learning from one another.

• Task 95: Benchmark Ventures Across Major KPIs

To make your ventures even more successful, you should — in addition to instilling best practices and a culture of knowledge-sharing across your ventures — benchmark your ventures across major KPIs. Since you set up a consistent data warehouse infrastructure for all of your ventures (see Task 60), you can now reap one of its greatest benefits. You can now easily create reports — ongoing or ad hoc — that will compare ventures across KPIs of your choice. It will again look like a heat map, but this time the colors (green, yellow, and red) will focus on how ventures rank. 

For example, a report comparing ventures’ performance last month for cost per order (CPO) will show the lowest CPO as green and the highest at red. Benchmarking ensures transparency across all ventures, encourages learning between ventures, and spurns a healthy competitive spirit among your ventures.

• Task 96: Create Self-Explanatory Internationalization Blueprint

Finally, in order to bring your best-practice infused, high-performing venture to new markets, you have to create a bullet-proof internationalization blueprint. First, you need to decide which market to expand to. For that, you should define your parameters, score various potential countries (or cities), and then rank the countries based on your final MPI (market potential index). Then, your venture’s functional team leaders write the top 20 steps needed on how to set up their function. They clearly delineate what happens centrally at HQ and locally in the countries (or cities). 

Examples of content that needs to be included in this blueprint are scripts for sales and customer care, processes for operations, steps for the complete tech “i18n” (internationalization), and a local target org chart and hiring roadmap. Ultimately, the internationalization blueprint must be extremely self-explanatory, functionally comprehensive, and confidentially accessible.

Great! You’ve now truly taken your venture to the next level! It’s instilled with best-practices, continuously improving through knowledge sharing and benchmarking, and ready to internationalize. 

Let’s now jump right into a real-life case that clearly shows us the tasks from this sub-stage!

Case: A quantum leap for IoT ventures

In 2019, Atul reached out to me via LinkedIn. Atul heads a well-funded launchpad focused on IoT (the Internet of Things). Based in the UK, it has 14 ventures, all of which were in the SCALE stage. 

Atul said that his goals were to take all of his ventures to the next level in terms of operational excellence and to take full advantage of the “portfolio effect”. (The term “portfolio effect” comes from the field of investment management and refers to the decrease in risk in the overall group of companies the more companies you have.)

When I took on this project, I quickly saw that Atul was facing a mountain of challenges. Four key challenges stood out among Atul’s 14 ventures:

1. Highly variable levels of functional expertise: The quality of the ventures’ functions was really very unequal. For example, while one venture was great at sales but bad at product, it would be the opposite situation with another venture. The cause was not only the people in charge of those functions in the ventures (i.e. the functional leaders). Another cause was that some ventures had simply grown so fast that they had built up “debt” in certain functions. That is, some ventures’ functions needed more re-work now than would have been required initially
2. Ventures worked in silos: Despite the ventures sharing one floor of office space, it felt as if the ventures may as well be in different countries. With the exception of chance encounters, people from different ventures did not interact — let alone share best practices
3. No transparency of performance across companies: The launchpad did not have clear oversight over its ventures. It could see the ventures’ KPIs separately, but it lacked the big picture on how they all stacked up against one another
4. No idea how to internationalize: The ventures lacked a framework on how to decide which countries (or cities) to expand to next. And once that decision would be made, they wouldn’t know how to best internationalize.

So what did we do to rectify all of which was holding the ventures back? We implemented the tasks from this sub-stage!

First, for each function from the value chain (tech, customer care, finance, sales, HR, operations, etc.), we designated one functional expert (Task 91). Atul and I always chose the person who understood and was driven to improve his/her function the most. 

The functional expert for tech, for example, was Michael. He was CTO of one of the 14 ventures. Michael was now responsible for ensuring the tech function was excellent in all ventures. He now had oversight over tech for all ventures. That meant, he had functional — not disciplinary — authority over the people in charge of tech in all ventures.

Then, each functional expert had to define the best practices for his/her function (Task 92). Michael, for instance, first structured the function of tech into 3-6 major topics. Those topics had to be MECE (mutually exclusive and collectively exhaustive). Michael divided tech into the following major topics: organization, hardware, security, scalability, availability, and speed. 

He then coupled his own expertise with outside research to come up with the most important best practices. The resulting master best practices — 15-30 per major topic — he wrote down into the launchpad’s repository (Confluence for all tech leads), which all ventures could access. He also provided links to useful internal or external resources. And he also made it clear to all of the other ventures’ tech leads that there is a comprehensive review of the best practices every year, but that urgent and important best practices can be fast-tracked.

Next, each functional expert had to implement the best practices he/she defined (Task 93). That meant making sure all 14 ventures are adhering to them. 

Michael, for example, first collected data about the ventures. He asked the ventures tech leads to fill out a questionnaire, he interviewed the tech leads, and he pored over all reporting that they could give him. He then deeply analyzed everything he gathered. Michael then turned his analysis into actionable recommendations for the ventures. Each venture, of course, received different recommendations, all of which they had to implement within six months. 

Finally, he had a touchpoint with every venture’s tech lead every week or two. That way, Michael could ensure that he could help every venture along the rocky path to implementation. 

Atul then institutionalized ongoing knowledge sharing among the ventures (Task 94). He first set up the right online and offline infrastructure. He created an email mailing list and a Slack channel for every function. Michael and his tech leads would use [email protected] (as an example) and they would have their own #tech Slack channel. 

Atul’s team also organized functional summits — like all venture tech leads doing a two-day strategic off-site — as well as venture summits — like the most advanced ventures presenting their learnings to the least advanced ones. That — plus the functional experts’ initiative — helped to engender a culture of knowledge sharing. 

In parallel, Atul hired a data team, which helped him implement sub-stages 2.4 and 3.2, “Set Up KPI Reports” and “Learn from Data”, respectively. As a result, all ventures had the same data warehouse and data structure. That allowed Atul to generate at least one report per function, comparing all ventures across some function-specific KPIs (Task 95). Michael, for example, worked with Atul to set up a weekly report that benchmarked (and ranked) all 14 ventures on how they were doing on critical tech KPIs — like speed and downtimes. 

Finally, Atul tasked the most advanced venture, of which Deborah was CEO, to create the first internationalization blueprint (Task 96). Deborah filled out the market prioritization matrix for her top 10 countries. Based on the MPI (Market Potential Index), Germany was the clear next country to expand to after the UK.

Deborah then worked closely with the launchpad’s functional experts to write a self-explanatory guide. The functional experts, in collaboration with the functional leaders of Deborah’s venture, together wrote down the top 20 steps on how to set up each function. They also clearly marked what had to be done centrally in UK HQ and what should be done locally in Germany. 

They made the internationalization blueprint as clear and easy-to-understand as possible for the new Germany Head. The booklet included a target org chart and a hiring roadmap for Germany, scripts for sales and customer care, and processes for local operations.

The impact of all of these actions was immensely positive. 

• All functions among all ventures were now operationally excellent — with rare and minor deviations

• The ventures were constantly learning from one another, continuously improving. If you just get better by 1% per week, you will be 67% better after only your first year

• Atul and the ventures had KPI transparency across all ventures. That further encouraged learning and spurned a healthy spirit of competition

• Lastly, by having a first self-explanatory and comprehensive internationalization blueprint, other ventures could quickly adapt it to themselves. They were thus ready to internationalize — whenever they wanted to! 

Atul maximized the benefits arising from the “portfolio effect”, he felt.

When I circled back with Atul several months later, Atul reflected on what he learned during our time together. He said, “If you want to generate a quantum leap in performance, you should tap the know-how inside the people of your ventures.” 

He warned against bringing in expensive external experts as an initial reflex; instead, use those external experts only as a last resort. Chances are, if you have well-performing teams in your portfolio companies, you have more than enough expertise in-house. You just need a clear system on how to tap it — and that’s what this sub-stage of the 100 Tasks is all about!