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The 9 Mistakes Venture Boards Make

This article was originally posted on The Future Shapers where I’m a regular contributor.

Although in principle everyone agrees that corporations need to get better at mimicking the venture capital world when it comes to taking investment decisions in ventures, in reality this is proving harder to apply. 

One of the vehicles corporations created internally to be able to make better and faster decisions with respect to their innovation pipeline (and measure their innovation efforts) is the Venture Board. But there is a long way to go between establishing a Venture Board and have it work effectively. Below are 9 common pitfalls we have observed with companies complaining about their Venture Boards not yielding the expected results:

Sporadic meeting. In order to build momentum, and a common ethos behind innovation which will ultimately lead to an embedded culture of innovation Venture Board meetings need to happen regularly. If the meetings are to happen sporadically the wrong message is being sent out, ie innovation is important but not that important for us to make time on an ongoing basis. This behaviour will trickle down to the innovation teams which, not feeling a sense of urgency, will get entangled with low impact activities or the wrong activities for the maturity stage of their idea. 

For companies which staff their innovation teams with part-time employees (which we rarely advise) sporadic Venture Board meetings are particularly detrimental as the people will get pulled closer and closer to core business activities until innovation becomes a distant memory. Furthermore, with Venture Board meetings taking place with constant cadence the pressure and anxiety – on the innovation teams – of being in front of the higher-ups of the company vanishes.

In DNV GL – one of world’s largest classification and certification societies, Nina Rygh, Head of Business Process noticed that: ‘having the Venture Board meetings happen regularly is helping both the teams and the Venture Board members. The Venture Board members will be less likely to go into a status meeting mindset since they are constantly meeting the teams. And the teams will feel less anxiety when presenting to the Venture Board since they are doing it more frequently not just once every quarter or every six months. They will also get constant feedback, therefore, the expectations are better aligned’ 

The frequency to which meeting should be held really depends on the circumstance of each company. These circumstances primarily include the market the company is in and the organizational structure of the company. In flat hierarchical companies active in a B2C we’ve seen 3-week intervals working the best. However highly B2B regulated industries where the time needed to run an experiment is longer, 3 weeks intervals will probably not be enough for the teams to present any progress.

Status meeting. Another big issue we’ve spotted with novice Venture Boards is that they tend to transform the Venture Board meeting into a status meeting. The difference between the two being that a Venture Board meeting is a place where the innovation teams come in and present their progress and how they are derisking the business model, while the status meetings are a bit more generic in nature. To mitigate this we always encourage venture boards to stick to predefined scripts gravitating around two questions: What have you learned? How did you learn that?If the first question is looking at the assumptions the team has tackled since the last meeting, the second question is looking to make sure the evidence can be trusted.

Ideation session. Much like the pitfall we talked about previously, there is a risk of Venture Board meeting to transform into an ideation session. And similar to the previous scenario when the session became a status meeting, the solution is to stick to a pre-defined and pre-communicated script focused on outcomes and impact.

Pitching contest. Many of the ways a Venture Board meeting can go astray are interlinked. The risk of the meeting becoming a pitching contest or a meeting looking more like a Demo Day from an accelerator program than a Venture Board meeting can be attributed to many factors. For example, if the meeting is taking place sporadically teams will fight for attention instead of presenting facts and outcomes. Not being strict on sticking to a predefined script might also make the session become a pitching contest.

To mitigate the risk of the meeting becoming a pitching contest, an ideation session or a status meeting we encourage the use of standardised templates. These templates can be either slide format or document format, as long as the purpose remains the one of focusing the conversation and building discipline. From experience, we have seen that using standardised templates helps by removing the possibility of the teams curbing the Venture Board’s opinion due to their PowerPoint and pitching skills alone. Standardised templates focus everyone in attendance on the facts and the evidence.

No decision being taken. Another pitfall we have seen with Venture Board meetings is that no decisions are being taken with respect to the ventures that just presented their progress. A decision can take one of three forms: stop (the venture should be stopped), persevere (the venture should continue gathering evidence for the critical success factors of the current phase of the product life cycle or progress to the next phase) or lastly pivot (meaning that in the face of evidence the venture should consider making some major changes to the business model which most likely imply moving back in the life cycle to start again gathering evidence)

Wrong attitude. Sometimes, in some companies, depending on the company culture the wrong attitude is displayed by the Venture Board. Thus this will influence the way teams conduct themselves, what they chose to present and what they chose to leave out during the meeting.

The atmosphere in the Venture Board should be one of inclusiveness, trust and support. The meeting is not there to punish teams. These meetings need to happen regularly and should also serve the role of coaching meetings for everyone involved. The communication in the meeting should be both ways not just top-down from the members to the teams. The teams should never feel like they are punished because they are asked to present there. Teams need to feel a warm atmosphere where it’s safe to be honest about the things that have worked and the things that haven’t pinned out the way they thought they would. Good and constructive decisions can only be taken in an atmosphere of trust.

Wrong skills. Assessing new ventures is different than managing an improvement project. The degree of uncertainty that comes with breakthrough innovation is highly different than the one in incremental innovation. Furthermore, this elevated degree of uncertainty accentuates known decision-making biases:

  • Sunken cost bias: The everyday expression for this bias is ‘throwing good money after bad.’ The idea is that once we’ve invested time and/or money in something, we become vastly less likely to abandon it, even once it should be clear that the project will ultimately fail. The result is we frequently end up losing far more than if we had taken the hard decision to cut our losses early.
  • Survivorship bias: Success stories are easy to spot. Failures that sunk quietly into non-existence much less so. That’s why we commonly over-estimate the likelihood of success in risky ventures. Just ask any startup veteran who has been disabused of his starry-eyed optimism over several years in the industry if you don’t believe me. This is also why we often put too much stock in the strategies of particular successful people — like dropping out of school. We remember the Bill Gates and Mark Zuckerbergs of the world and forget to factor in the vast numbers of quietly struggling dropouts when we mentally calculate how likely an action (ditching school) is to lead to an outcome (striking it rich as an entrepreneur)
  • Safety bias: Safety bias refers to the all-too-human tendency to avoid loss. Many studies have shown that we would prefer not to lose money even more than we’d prefer to gain money. In other words, bad is stronger than good. Safety biases slow down decision-making and hold back healthy forms of risk-taking. One way we can mitigate the bias is by getting some distance between us and the decision — such as by imagining a past self already having made the choice successfully — to weaken the perception of loss.
  • Experience bias: The tendency to take our perception to be the objective truth. We may be the stars of our own show, but other people see the world slightly differently than we do. Experience bias occurs when we fail to remember that fact. We assume our view of a given problem or situation constitutes the whole truth.
  • Expedience bias: We prefer to act quickly rather than take time. Expedience bias tilts us toward answers that seem obvious, often at the expense of answers that might be more relevant or useful. The privileging of immediate data can take many forms. In digital publishing, it might be measuring writers solely on traffic numbers, rather than the quality of the writing. In sales, it could be solely focusing on revenue targets, without considering how the quality of client relationships drives future business. Put another way: While it’s true that what gets measured gets managed, measurement should not be confused with management. Therefore investing in the training of the managers that will weigh in on the ventures is important if the innovation accounting system is to work.
  • Poor time management. For the Venture Board meeting to be effective every team presenting needs to be given an equal time slot. From experience, we have seen that 15 to 20 minutes are enough for the team to convey their progress and the members to ask clarifying questions. The more time is added to the hourglass the higher the chances the meeting will become either a status meeting or an ideation session. You can think of the time constraint as a silent guardian, making sure that the meeting does not get hijacked or sidetracked.
  • Not data getting recorded. For an innovation accounting system to work it’s very important that data is getting recorded following every meeting. We are going to talk about which data should be collected and recorded in the following pages, but for now, remember that a Venture Board meeting where no data is being recorded is as terrible as a meeting where no decisions are being taken.

The Venture Boards are the interface level between a company’s strategy and its tactics. They make sure the innovation strategy is being executed while at the same time providing feedback on that strategy. The Venture Board meeting is where a company knows if their innovation strategy holds water in the market or it needs to be changed. We are not saying that without the Venture Board meetings the company will not get feedback on their strategy we are just saying that without these meetings the feedback will be slow and it will only be visible in the financial accounting books. The Venture Board meetings shorten the feedback cycle on the innovation strategy – they serve as an early warning system of the strategy not working well. All while mitigating one of the conundrums of the financial accounting system: accounting-based financial reports show only the final outcome of asset deployment: revenue & earnings.

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