The following is a heuristic description of how we do business development. It serves to guide our discovery of how to do business development in a specific context and to increase our probability of doing so successfully. This description is to be used in ‘brain on’ mode. The map is not the territory. Knowing how we are structured will be useful to understand the context we are operating in.
TL;DR: Anyone can do business development and start a new academy (i.e. market-oriented team). Use the advice process. Describe the new academy in a proposal to the whole company. Gain support. Recruit members. Go change the world.
Our academies are cross-functional covering our entire value chain, including sales and account management. Because each academy is formed around and focussed on one user need, developing and implementing new growth opportunities outside this user need is out of its scope. This post explains how we develop new growth opportunities instead.
How much and what kind of business development do we want?
A healthy innovation portfolio consists of a mix of
- Core innovation: Optimization and improvements to proven business models based on existing assets and customers that currently provide profits and cash flow
- Adjacent innovation: Development of adjacent products and markets based on current capabilities that are likely to generate sustainable profits within a couple of years
- Transformational innovation: Development of entirely new markets and products which requires new capabilities that may result in profitable growth in several years down the track
Innovation Ambition Matrix — graphic by HBR
According to a study by Bansi Nagji and Geoff Tuff, companies with a balanced portfolio in these innovations outperform their peers. This ratio heavily varies depending on industry and maturity of the business. For mature businesses this turns out to be a ratio of around 70–20–10%. As a high-tech startup — that wants to stay that way — we are currently striving for a ratio of 30–40–30%. This means, over time we need to keep adding academies tackling the latter two, since both adjacent and transformational innovation — if successful — will eventually become core innovation once they reach product-market-fit.
Who does business development when?
Short answer: Any Gini, anytime. Naturally, people in sales or account management roles are most likely to come across opportunities for new user needs we could address that are interesting for our partners. Likewise, people in user experience or product ownership / product management roles are most likely to come across opportunities for new user needs we could address that are interesting for our users. But every Gini is expected to do business development and raise market opportunities they see.
Anyone may use part of their time for business development as long as they coordinate and clarify this with their academies. This work happens outside the academies. This means that it doesn’t show up on an academy’s board or backlog and isn’t discussed during an academy’s standup. People can discuss ideas about new user needs (and academies) with other interested Ginis any time. Our regular open space or brown bag lunches are good options to reach a wider audience.
If we find that we don’t have enough organic adjacent or transformational innovation and we need to be more deliberate about finding growth opportunities, we might form a new academy whose first job it is to identify a user need and a vision.
Market requests are handled by new academies that are still in search of a vision. If there is no such academy, those requests are handled by people in sales and account management roles within existing academies. They coordinate this effort via the sales faculty.
How do we decide to start new academies?
Anyone can pitch (read: advice process) a new academy to the team by providing a proposal for
- an academy vision based on a user need,
- a list of assumptions (e.g. a Lean Canvas); you don’t need all the answers yet to start; turning these into facts is the initial task of the new academy,
- a rough plan for the required initial investment (budget, time, staffing) and
- decision checkpoints (time, success criteria) to decide if the academy wants to proceed
Describing and visualizing these assumptions helps your colleagues support your idea for a new academy.
The team (mainly in form of the investment committee and the strategy faculty) challenges the formation of new academies and calibrates the decision across the company. They act as sounding board making sure we collectively don’t take on too much (or not enough) risk in form of new ventures. Criteria are: alignment with company vision, feasibility, potential, and a healthy portfolio of innovation — not personal preferences.
After consulting the team and other affected academies, the final decision whether to start an academy lies with its founding members. Ideally, this new academy is staffed cross-functionally so its members can carry on the academy themselves without relying on having to recruit new members to continue.
For further guidance, people wanting to start an academy are encouraged to talk to members of other academies who have gone through the process already.
How do we choose the right amount of business development?
Limits to Growth pattern
Starting new academies (1) is our main tool to grow the company. Ideally, this generates new users and partners (2), which leads to new opportunities (3), which in turn triggers starting even more new academies (4). This creates a reinforcing feedback loop (left) that leads to growing the company. This growth is limited by a balancing feedback loop (right) consisting of our lack of excess capacity (5). Starting new academies (4) leads to a lack of excess capacity (5), which in turn reduces our ability to start new academies (4). Improving our hiring (6; how fast we can bring in people that fit) and our processes (7; how effectively we use our time and how well we coordinate a growing number of academies) impacts our excess capacity (5) and in turn our ability to start new academies (4). This is known as the Limits to Growth pattern in systems thinking, which suggests investing in improving hiring (6) and processes (7) to increase our ability to start new academies (4).
How do we decide to proceed with an academy?
We use quarterly OKRs to define and communicate academy goals. These objectives are set to be bold and difficult to reach. Before a product reaches product-market-fit, the OKRs will be aimed to get there as quickly as possible. Steps towards product-market-fit may look something like this but will vary depending on the academy vision and innovation level.
A first checkpoint may be the qualitative verification of the idea (e.g. a letter of intent from a partner). At this early stage, there are most likely only few academy members that tend towards being generalists (i.e. Hustler – Hipster – Hacker). This may require an initial investment of 2 months and 60k€.
A second checkpoint may be the quantitative validation of the idea that indicates traction of the product in the market (e.g. 70% retention rate). At this stage, the academy may have grown to 3–6 members. This may require an investment of 6 months and 300k€.
New academies present monthly on their progress and decision checkpoints during the team exchange — like the other academies.
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In the context of growth opportunities we use several related terms. Here is what we mean when we use them.
Business Development is what we call finding new business opportunities and selling a product the first time.
»Business development entails tasks and processes to develop and implement growth opportunities within and between organizations. […] Business development is the creation of long-term value for an organization from customers, markets, and relationships.«
Sales is what we call selling a product the n-th time where n > 1.
»A sale is the exchange of a commodity or money as the price of a good or a service. Sales (plural only) is the activity related to selling […]«
Account Management is what we call making our business partners happy.
»An Account Manager is a person who works for a company and is responsible for the management of sales and relationships with particular customers. An account manager maintains the company’s existing relationships with a client or group of clients, so that they will continue using the company for business.«
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If this sounds like an environment where you would thrive, have a look at our open positions and get in touch.