I was on a panel recently sponsored by the NACD, the National Association of Corporate Directors. I was joined by Diego Rodriquez, Global Managing Director of IDEO, Barbara Mowry, board member of the NACD and curated by Catharine Merigold, independent board member and board member of NACD.
It forced me to reflect on the Techstars corporate programs we have run and how our programs, and more specifically our founders, have influenced the corporations they work with and how the board was involved.
The primary impact of our programs on our corporate partners is a disruptive transformation of those entities, usually in ways they did not imagine. I like to think of it as entrepreneur driven pragmatic disruption.
We see the greatest impact when our programs are led by the CEO and direct report CXO staff and even more so by the chairman of the board and board members. This has been the case in our programs with Barclays, Nike, Microsoft, Ford, Target, METRO, COX and Disney.
So, how can a board member influence innovation? Here are a few suggestions:
- Build specific objectives, such as implementing and running innovation programs, into the objectives of the CEO and executive staff members. Make sure these objectives have measurable outcomes.
- Do not base these engagements on venture investments, but on new products or offerings either through partnerships or trials.
- Make the CEO’s pay tied to progress against these objectives.
- Innovation cannot come from within your existing management and operating infrastructure (the innovator’s dilemma clearly defines these challenges).
- To support business sustainability, you must encourage testing of products and services that are disruptive and potentially cannibalistic to your existing offerings.
Build opportunities for partnerships with entrepreneurs. You can do this effectively without disrupting your current operations and then deepen your partnership with those startups that prove effective.
Encourage Transactions with Startups
- The most effective ways you can transform your company is to hand over some of your company operations to a startup operator. For example, digital account planning, AI analysis of logistics, drone inspections, robotic audits, or improved employee health.
- Work through your procurement process to ensure effective vetting of startup services, but simplify the procurement and contracting process for them. You want to encourage procurement for innovative services.
- Define a target volume of business that the executive team must transition to an external startup entity.
- #givefirst is the Techstars mantra. It seems very egalitarian at first, but in today’s world it is essential.
Some of the most disruptive ideas and subsequent solutions have come from serendipitous conversations with complete strangers. Open your door to those who really want to engage.
- Encourage your executives to allocate time to mentor, to discuss concepts on panels, to judge presentations and to contribute their domain knowledge to those building the new companies of the future. Encourage, but do not require mentorship. Not everybody is cut out to be a mentor.
- Define targets for each senior executive around engagement. It might include mentorship, blogging, developing a new initiative, or a board seat on an entrepreneur focused non-profit. The personal learning as well as the open reputation you develop will result in the kind of engagement that can lead to success for all parties.
Lastly, demand agility. When I hear the corporations I work with say we just need to be more agile, my response is, you can’t, because it’s hopeless. There is simply no way that a large organization can move like a small, nimble startup. It is cognitive dissonance.
I have been on both sides of this innovation transformation for 10 years, let the startups be agile. Build in agile processes in procurement, product evaluation, implementation and legal to support engagement at a startup pace. Leave your existing, price, efficiency, and risk mitigation procurement processes in place for your standing vendors.
Managing externally driven innovation and disruption is a discipline that must be developed. The primary fiduciary responsibility of a corporate board is the sustainability of that corporation as a going concern. Maximizing rents is a noble goal but certainly not achievable when it’s not feasible even to survive.
Today’s corporate board must hold the executive team accountable to the pragmatic disruption of their business. Disrupt or be disrupted.
Techstars is building the best global ecosystem for founders to bring new technologies to market.
The last few years have seen amazing growth for us as we’ve expanded throughout the world. We are now regularly investing in 16 cities in five different countries, and running Startup Weekend, Startup Week, and other community events in over 600 cities and in 168 countries. Our portfolio of accelerator companies has now raised more than $3 billion and is valued at more than $7 billion, and we have seen well over 100 exits by merger or acquisition to date from our portfolio. We’re now managing $300M of our own capital and have been fortunate to be first round investors of companies now worth upwards of $85 billion.
We’re very proud of the team we’ve put together globally. Techstars now consists of 160 people living and working in the locations where we are investing and building startup communities. As we’ve expanded what we do far beyond just running accelerator programs, we decided it was time to rethink our board of directors and bring in some additional expertise.
We’re thrilled to announce that we’ve added Arthur Lev to our Board of Directors. Arthur is the former Chairman of Morgan Stanley Investment Management as well as a former Managing Director and the Head of Alternative Investment Partners at Morgan Stanley.
As the Techstars ecosystem becomes more global and has more opportunity to invest in great startup communities around the world, we expect that we’ll soon be able to invest $1B+/year in Techstars portfolio companies. We believe that Arthur will be invaluable in helping us develop the right capital strategies for the long term at Techstars.
We’re also very excited to add Wendy Lea, the CEO of Cintrifuse, to the Board of Directors. As a Techstars mentor since 2007, Wendy understands the value of our mission. In 2016, she was instrumental in bringing the most recent Techstars founder event, FounderCon, to Cincinnati, an emerging startup hub in the midwest. Cintrifuse operates an innovative model that integrates large global companies and the startup community in unique and mutually beneficial ways.
As Techstars continues to bring larger corporations into our global ecosystem, we plan to lean on Wendy for strategies that make this a win-win for founders, startup communities, and corporations with a desire for innovation.
The Techstars Board of Directors now consists of me (David Cohen), David Brown, Mark Solon, Brad Feld, Jason Mendelson, Arthur Lev, and Wendy Lea. As a group, we’re excited to help build the global ecosystem for founders and take Techstars into its second decade.