Show Notes

As startups continue to grow, the time comes when they need to start creating cross-functional value. This is when it becomes necessary for different departments to work together. Various departments might be grouped together into buckets and work together toward a common goal. This is what startup coach Roland Siebelink of the Midstage Institute likes to refer to as value engines.

On this week’s episode of the Midstage Momentum Startup Podcast, Roland spoke with fellow startup coach Martin Fuez about the concept of values engines and why they become necessary when startups reach a certain size.

• The four value engines that every startup should consider.
• How value engines can make it easier for CEOs to delegate.
• Why value engines can help with both organization and governance.
• How everyone at the company can fit into one or more of the value engines.
• How value engines can help shake things up and create new goals every quarter.

Transcript

Roland Siebelink: One of the lessons we teach our startups and scaleups is that we want them to start thinking at creating value cross-functionally rather than just within functions. Usually, by the time we start working with them, they've already figured out the basics of how do I run an engineering department, how do I run a product department, how do I run a marketing department, sales department, and so forth. That doesn't mean there's nothing else to be improved there. But usually, you can just rely on those leaders and managers to be in charge of that and to be doing a good job within function optimization. But as soon as a company starts growing beyond 50 people, what starts creating value for the customer starts depending not just on one department but the coordination between departments and the value being created in what we call a value stream, where each department plays its certain role, all adding value to the same products. And that's why we always insist on more cross-functional work as a driver for those quarterly rocks that we often set up with them. But it is also true that a large majority of the cross-functional work is actually in certain buckets that are more predictable than just overall cross-functional. It's not like everyone in the company always needs to work together on everything. And that's why we came up with the concept of engines, which are the intermediate level between overall company and the functions that we have. There's a certain bucketing of functions. It's essentially a grouping of departments into bigger buckets so that you can then, as the CEO, delegate certain problems more to the team that is focused on that output area. These are the four engines I typically recommend that every startup think about. It's really driven by the value chain of any tech company. There's an innovation engine, which is about how do I get some new value, some new products onto the market that impresses the market. There's an acquisition engine, which is all about signing up your customers. It starts with marketing and sales. There's even a solutions consulting aspect in there sometimes for large enterprise companies. And then there's the post sales component. It's all about delivering on the promise that was made in the sales process. Assuming you were bragging about how much your product can do it, then at some point in time, they sign up and then you need to deliver on that promise. And that can be as little as making the product available and that's it. Or it can be as big as there's a whole team coming in to get you onboarded, to get people trained, and stuff like that. Usually, departments we see in that area are customer success, professional services.

Martin Feuz: It's almost like an organization within the organization, like a ghost organization. How is this in terms of governance?

Roland Siebelink: Yeah. It's a good question. We don't necessarily want to stress that this is a governance mechanism. It is true that some, especially more advanced scaleups, start using this a little bit to organize around. Sometimes that means that they want to have one CTO responsible for anything to do with innovation. One CRO for anything to do with acquisition. And then maybe a CSO or CCO responsible for satisfaction and fulfillment. You could look at it that way. And especially as a CEO, if you want to delegate more operational stuff to people below you. To get out of the weeds, you need to get out of the conflicts. Who else is going to manage those conflicts for you? It could very well be an executive in charge of each of these areas. However, to start there I don't think is the right approach because then you set up everyone for "Who's going to be the big honcho in this area? Is it going to be me or is it going to be them?"

Martin Feuz: Would you want the whole team into these engines or is it a select group of people get to enjoy the privilege of being part of an engine?

Roland Siebelink: No, it's more the grouping of the whole organization. If you want to simplify, then you could say, product and engineering is in innovation, marketing and sales is in acquisition, customer success is in satisfaction. And then we'll talk about the enablement functions afterward. But over time, I would say you don't want to stick to that one-on-one mapping too precisely. As you can see here already, some engineers will need to work in the satisfaction bucket every now and then. The same goes for product people. Over time, it doesn't become such a one-on-one mapping. In larger organizations, you could then start mapping certain roles to the engine. Even if they report into sales, their role may be just to be a farmer of a previously sold customer, and so that might mean they are actually in the satisfaction engine. Or that one business developer who helps to find beta clients for the next big thing might still report into sales but is actually part of the innovation engine. I think ultimately there are more perspectives of what value do we provide rather than organizational structures. And that's how I like to use them. When there are conflicts between marketing and sales, then go back to the key question being asked by this engine. Are you acquiring new customers? Is the thing you're fighting over, is it going to help us acquire more customers or not? Is it gonna help us acquire more dollars or not? Same with any post sales process. People can often get really bogged down in all the post-sales processes and who does what. In the end, it's about is it going to satisfy the customer more or not?

Martin Feuz: And would you say that these engines are being headed by someone or is it more a virtual organization?

Roland Siebelink: I would say virtual, at least to start with. I would often see a duo of people in charge. Just say, "Hey, marketing guy and sales guy, you are running the acquisition engine. Hey, engineering girl and product girl, you are running the innovation engine together. I want you both to agree on certain things and only come to me when you can't agree. But don't come too often.

Martin Feuz: What is the experience you've had so far? First of all, are many scaleups using this?

Roland Siebelink: I'd say about 80% of the startups, scaleups we work with have adopted this model one way or the other. And I think the most valuable part has been providing that bigger perspective of what we are all striving for in this area. If it doesn't help us innovate, why are we doing it? If it doesn't help us acquire customers, why are we doing it? I do think it makes sense to have standing teams. One is focused on new products, innovation. One is focused on acquisition. One is focused on satisfaction. But there's also a risk in making these teams too stable because then they become entitlements and. Then it's becoming very often one person who's always leading it. Part of the magic of setting new rocks every quarter is that we shake things up. We are able to evaluate. Did that previous person do a good job or not? Maybe we should have somebody else in charge for a while without having to necessarily demote people or offend them one way or the other. And then the last part we didn't cover yet is the enablement engine. The difference is that this is the one engine that's not serving customers, but it's serving employees. That's where all the traditional back office functions are located like finance, HR, legal, administration, IT. There's a couple more that we can imagine there. I think one other key aspect there is that they are not just serving but also controlling employees to some degree. It's usually a mixture between service functions and policing functions, and that's very specific for those functions. The best balance they would have is if they have minimal policing and enough service so that people don't feel bogged down but also not too much overhead. But that's why I put it outside. It's still an important part in scaling journeys. For example, to set up shared systems so that people don't have to hunt down spreadsheets all the time and stuff like that. But it's about the overall efficiency of the org and less about specific projects that are more run in these other engines. This is the kind of stuff that does have to start from the top. Not even with those executives. It has to start with the very founders saying, "This is what I expect from you people as groups, as subgroups." And start having the discipline. For example, when one of the topics on a quarterly agenda is the conflict between marketing and sales that they can just say, "This is not something the whole team needs to be involved in. This can be sorted out between you two or you three." And then you can start holding these people accountable for it. And then you can have them start organizing around it. In some of the more advanced startups that have been using this model for a year or two, you will see that before every quarterly business review, a group of middle managers from that area comes together and starts proposing company rocks, as well as what they call rocks for this particular engine, engine rocks. And they start saying, "In order for us to make our priorities next quarter, this is what we need from the company. And this is what we will prioritize for ourselves.

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