Growth boards provide a focus for consistent, sustainable and transparent decision making to support internal startups from early ideas to scaled products and services.
During a recent Innov8rs Connect event on Innovation Governance, Jonathan Bertfield shared examples from global corporations to examine what exactly is a growth board, how its members makes decisions, the relationship between the board and startup teams and the metrics to evaluate growth board success.
Below you'll find some snippets from this in-depth conversation.
Accelerator events with teams pitching their ideas rarely translate into innovation being executed.
The teams are all happy, they learned something- but then it's really hard to get the funding for those initiatives. As Jonathan suggests, we want to move away from that as much as possible and get out of the habit of thinking that the theatrical aspects of innovation and the excitement that that can sometimes bring to an organization is enough. Because it's not. Instead, we should think of forming a smaller group making decisions about what to focus on and what not, based on evidence.
For us as innovation leaders, it's essential that we understand the relationship between the strategy as we define it in our organization, and what we do in our innovation groups.
What are we trying to achieve? What does success look like, and what are we going to do to get there?
Some of the components that we want to talk about and have clarity around are how does it relate to what the larger business wants to achieve? What are the arenas that we're going to play in? What is the scope of the investment we're willing to make as an organization?
Instead of writing a big check on day one, which Eric Ries called "entitlement funding", we're going to respond to the traction that emerges from the startup teams over time. We're going to release funding based on that traction, which we call "metered funding". Think about this as a VC-model, where funding checks are being written based on traction.
What happens more often than not inside of an organization is that, because a team has started, the machine just let us ramp up our support for that team. Let's get expanding the team. Let's start doing marketing. All of that gets into place. And it's really hard to stop. It's really hard in many organisations for us to stop that perpetual motion that is happening because it started. So we want to get away from this.
We think about innovation governance as a way to move us through a funnel. Teams are moving over time successfully through that funnel, if they demonstrate evidence that supports their continued progression and continued funding. Early in the funnel, we want lots of ideas- lots of small bets that are getting small amounts of funding. At some point, we're making decisions, which say some of those are not going through because they didn't demonstrate the traction to support that ongoing investment. So we're making intentional decisions about what it is that we're funding based on the evidence that the teams are presenting to us. This is what a growth board does.
There are some dynamics that are really critical to a successful growth board.
We want single digit numbers of people in the room, we don't want 50 people as that makes it very hard to make a decision that is accountable and relevant. Also, we want to make sure we've got representation from different areas who can ask hard questions and can understand the answers that are coming back at them. Also, all of this is highly transparent, we don't want this to be an adversarial relationship.
Then, we want to make sure that we're not trapping the startup teams into really difficult questions. We're telling them in advance, these are the questions that we're going to ask of you, and we want to make sure you've got the right evidence, because collaboratively, we want to make our way through this funnel. And if not, if we're saying no, we're going to be really clear about why we're saying no, so that you as individuals can learn and maybe you join another team and go after another opportunity.
To make those decisions, the people forming the growth board have to have the authority, but also they need to be able to keep coming to these meetings. If they're too senior, they're never going to be able to come to them to growth board meetings that are focused at early stage initiatives.
Finally, they need to embrace e growth mindset to learn these new habits, whilst being disciplined about this process. You don't want to hear "I'm in this position, because I've had success over the last two, three decades, s therefore, I know all the answers".
These are the three balls that are in play when a decision is being considered:
- Team Evidence – traction and churn rate, revenue, and margins.
- Market Knowledge – at the beginning all numeric evidence is zero so use market research (e.g., focus groups, pilot sign-ups) in the ideation stages.
- Strategic Alignment – keep checking direction of travel is properly aligned.
When a team is presenting evidence, what's really hard is that the decision makers are faced with the opportunity to make a decision in real time. And they're juggling a lot of different dimensions, a lot of data that is coming at them, and they've got other things going on that isn't even being presented in the room. So how do we keep all of these things in play?
We want to make sure that we give the decision makers and the teams the right tools to enable them to get to a high level of competency around this three ball juggle. On top of that, we also need to mitigate against the legacy biases that leaders bring. They shouldn't ask about the p&l when it's an early stage product.
Bringing in VCs or other external players who can bring that perspective of what's going on in the market is really critical for when you're dealing with issues outside of the comfort zone of the team.
They also bring some of the perspective: what does this look like compared to the things that they're seeing in their portfolio.
Would you like to understand how to properly set up and run growth boards to better manage your innovation funnel and portfolio?
This is one of the main topics for our upcoming Innov8rs Connect on Governance, Portfolio Management & Program Management, 28-30 September, where Jonathan will be hosting a Ask Me Anything session on properly setting up and running growth boards for innovation.
Click here for the latest agenda and to apply to join.
