A Strategy for Execution

Thinking through the financials and our assumptions behind them with Adrianto this past week is helping to iron out many of the outstanding question marks related to how our venture will operate.  When doing the financials a lot of our assumptions kept going back to our operating plan.  For example when thinking about sales and revenue assumptions we were looking back at our operating plan to see how our marketing and production strategy should translate into sales.  This process of building the financials subsequently also helped us strengthen our operating plan. 

Personally I put a lot of weight on a venture’s operating plan, particularly when asking for money because it fundamentally explains how much money a venture is asking for and what they are planning to do with it.  Once this is known I think it is easier to put some of the other pieces of the venture plan in context, such as the management team (are these the right people to execute the operating plan?). 

The question about who will be the right people to execute the operating plan is not a simple one.  I came across an HBR article recently Strategy vs. Tactics from a Venture Capitalist by Arthur Rock who points out that good execution, good management, and good people are rare.  This article is mainly focused on what are the characteristics of ‘good’ people for a startup and one characteristic that I found particularly interesting was related to financial management.   Arthur suggests it is better to have a CFO that will scrutinize the operation closely and impose controls rather than a CFO that is focused solely on making a short-term sales quota because this mentality can often ruin the hopes of establishing a long-term revenue stream.  So in this case finding the right person to manage the financials of an operating venture seems to be more critical that getting the financial projects right upfront before the venture is established. 

In any case as Arthur suggests good execution comes down to good people.  So where do you find good people?  I think one place to find good people is through the networks of some of the funding sources we discussed in class, particularly venture capitalists.  Personally I have always been of the opinion that VCs are nothing but vulture capitalist and I’d just assume that I’d never want to be part of a venture that they were involved with but perhaps that is too pessimistic of a view, particularly when I start thinking about the added value beyond cash a VC can bring to the table in their network.  With this in mind I continue to ponder the question might it make sense to partner with an institutional investor so you can have access to their network even if you don’t really need the financing?