The Team domain is the final domain in the Four-Way Fit for a reason. Your value breakthrough will be achieved by your team. Your team will optimize that value. Your team will build sustainable competitive advantage. It takes people to design an intelligent, efficient scaling path. The more capable your people are to address the task at hand, the better your outcomes will be.
If you are the CEO, as you move from phase to phase it’s on you to bring together a team stocked with all requisite competencies, arranged into right roles, placed within a serviceable organization structure and empowered to pursue sound business outcome objectives. Team, the fourth and final domain in the Four-Way Fit framework, is the key that unlocks the potential hiding in the recesses of the other three domains. It is made up of three subdomains:
- Roles / Structure / Selection
- Teams / Objectives / Decision Methods
It may seem unusual to think of competencies, roles, structure, selection, teams and decision methods as claims to be put to the test — but that’s what they are. You claim that your situation and stage call for a certain set of competencies. You claim that the people you have selected exhibit these competencies. The scope you assign to each role is a claim, as is the organization structure you create. You claim that the rules by which people are empowered to make decisions is optimally suited to your situation and stage.
Two important benefits arise when you think of Team considerations as claims.
First, doing so reminds you that your “people decisions” can prove either right or wrong. They should be tested and verified. It is prudent to ask your board and fellow senior executives what competencies you will need to reach the next value inflection point. It makes sense to concept-test the scope of roles and organization structure. The selection criteria you use in hiring are themselves claims that merit testing and validation. So too with the hiring process — its initial reviews, its interview sequence, its tests and its background checks. So too with the post-hire ramp process — the setting of performance expectations, performance tracking and accountability disciplines.
Even once you hire someone, that hiring decision itself becomes a testable claim. Did your experience hypothesis prove true? Are expected performance outcomes being met? Your evolving understanding of the competency and capacity of each executive is an evolving hypothesis. You iterate and optimize these hypotheses by coaching and developing every member of the team — and occasionally, when necessary, replacing them.
The second benefit of seeing Team considerations as claims is that you can then integrate them with your claims in the other domains. When you align Team claims with those in the Market, Product and Model domains, you create a comprehensive, integrated and internally consistent set of claims that, if true, makes your innovation objectives achievable. Does your “people plan” fit with your Cash Flow claims— do you have sufficient cash to pay for your employees until the next funding event? Is your team of product managers and engineers sized appropriately and sufficiently competent to test and verify Product Features claims, and then to build those features? Do you have competent salespeople in place, so that you can assess market receptivity to your product without fear the problem was on the sales side?
As is true with product features, testing pre-hire claims can only take you so far. In the end, it is the post-launch testing that matters most. Leaders prove or disprove claims about new hires by tracking performance. For senior executive hires, you seek positive business outcomes, team health, cultural health and the sound direction-setting. For frontline hires, you seek proper execution of the role and achievement of business outcomes above a certain identified threshold.
It’s never easy; the more senior the position, the harder it is. No metrics dashboard will tell you whether your VP of human resources must be replaced. An executive or manager is a walking hypothesis, judged proven or disproven by her boss — and, for the most senior positions, the CEO — through thoughtful discernment and the exercise of wisdom.
This chapter is organized as follows:
- Top team thinking competencies
- Team claims — the canvas
- Team claims — the spreadsheet
Top Team Thinking Competencies
If you want to build an iconic global enterprise, top team competency is a critical success factor. Many executive competencies must be addressed. Certainly, you need your top team to possess the right functional skills. Some need the requisite technical skills to build your product. Some must know how to initiate customer interest; others must be able to turn that interest into sales. Some on the top team must have experience in the market in which you operate. Someone needs to be good at raising money. All top executives need a certain level of emotional intelligence.
But there is another class of requisite top team competencies. I call these “thinking competencies”. A thinking competency is a “right mental model”. It’s “right” in the sense that it is suited to the requirements of the moment. It guides a leader in processing current reality, envisioning a desired future state and mobilizing the transformations required to get there. If members of the top team collectively possess the right mental models for the situation at hand, that team will be more likely to devise an effective path forward. With respect to discovery and rediscovery of the Four-Way Fit, four top team thinking competencies are required:
- Design thinking
- Lean thinking
- Strategic thinking
- Systems thinking
At every stage, all four of these “thinking competencies” are necessary. In fact, the interplay between them is a powerful generative and adaptive force. However, the weighting shifts in predictable ways stage by stage, like this:
Design thinkers seek deep understanding of customers — the meta jobs and supporting jobs they undertake, and the obstacles they face trying to do them. Within prioritized segments they discern a relevant purpose and uncover the most gaping problems and screaming needs faced in pursuing it. In conceiving of product features, they do the work to trek past the mountains of “simplistic” and “complex”, so that they can reach and scale the mountain of “simple”.
Lean thinkers commit to the scientific method, value data-driven decision making and pursue continuous incremental improvement. In product development, they advocate for outcome-driven and self-organized development teams, agile development methods and domain-driven design.
Strategic thinkers understand the seven pathways a company can choose from to build sustainable competitive advantage (cornered resources, counter-positioning, switching costs, network effects, brand, systems power and scale economies). They can ascertain which pathways are most viable given the mission and vision — and then can do what it takes to advance along them.
Systems thinkers understand the integrated nature of things. They can balance now, near and far, and are effective at bringing together people, workflows, technology and money flows to get things done. They understand the power of feedback loops. They recognize systems can exhibit lag between cause and effect, and so they plan accordingly. The systems thinker on your team will ensure your hypotheses are comprehensive, integrated and internally consistent. And she will ensure the underlying capabilities and disciplines of the Four-Way Fit method are in place — such as metrics infrastructure, and disciplined agile delivery methods in product development.
In Part 3 of this book, we will consider in more depth the thinking competencies required at each stage of company-building.
Team Claims — The Canvas
In Phase I, cash is constrained. The team is small. To survive, you must work together to achieve a value breakthrough, and do so before the money runs out. During this phase, team composition is of existential importance. In the beginning, your entire team might consist of three people. By the time you exit the “discovery of a value breakthrough” phase, maybe you’re up to ten. During this initial phase, roles are fluid, the team is one, the objectives are obvious (prove enough customer traction to raise more money) and team decision methods are geared to rapid learning.
To create an iconic enterprise from scratch, the top team must be awesome. If you are considering launching a startup, either as its CEO or co-founder, do yourself a favor and self-reflect. Are you ready, willing and able to do what it takes? Successful founders are very smart. They are passionate and hard-working. They have indomitable willpower. They have high pain tolerance. Are you one? Consider this viability checklist:
Founder Viability Filter
1: The CEO exhibits superior intelligence as shown by the capacity to look three steps ahead, integrate diverse inputs, think holistically and plan in multiple dimensions
2: The CEO and co-founders have the financial capacity to work full time for at least a year for nothing, or at significantly below-market compensation in return for equity
3: The CEO and co-founders have deep, relevant expertise in the market or technical domain within which this product will live
4: The CEO is utterly, passionately committed to getting the product and business model right — and knows this can only be proven by “raving fan” customers
5: The CEO is a strategic thinker. He or she knows that sustainable competitive advantage can only be achieved via one or more of seven pathways, and can plot a route along them
6: The CEO is a systems thinker. He or she is capable of seeing the integrated nature of things — that a company is a system, sitting inside an ecosystem — made up of customers, competitors, partners, investors and other market actors. Systems thinkers think holistically, factoring in people, workflows, technology and money flows inside the company and throughout the ecosystem
7: The CEO and co-founders are lean, agile thinkers. They understand agile practices and pursue disciplined agile delivery methods.
8: The CEO values design thinking, and at least one co-founder possesses this top team “thinking competency”
9: If the product is a “high technical risk” product, the CEO or a co-founder brings a level of technical virtuosity that is “elite of the elite”, cutting edge. No more than five people in the world understand the problem and opportunity as well as this person
10: The CEO and co-founder(s) have worked together before
11: The CEO and co-founder(s) have startup experience
12: The top team exhibits high-performing-team characteristics. It is on a shared search for truth. It has high tolerance for productive conflict in search of truth. Team members share high mutual accountability. They own a shared commitment to getting it right. They are results-focused. They are resilient and are creative problem solvers
13: The CEO demonstrates the capacity to expose his / her mental model to others, and to engage in constructive debate and self-assessment so as to uplift his / her mental model in engaging key decisions and plans
14: The CEO has the ability to execute, break things down into chunks of work defined by outcome objectives and measured in milestones.
15: The CEO is connected to a network of people who live in the problem domain, including multiple future customers, influencers and users
16: The CEO demonstrates a deep, substantive, integrative vision for the product and business model. It may not yet be accurate, but it is thoughtfully and holistically conceived
17: The CEO has the capacity to explain his / her vision and ideas to others in a way that creates understanding and builds credibility
18: The CEO has the ability to attract and hire great people
19: The CEO is connected to the investor community, either directly or through trusted business associates and friends
20: The CEO has the ability to communicate to investors the problem, the solution, and why he or she is the right person at the right time to build a business around solving that problem
You don’t need to check all of these boxes. No successful entrepreneur has everything. But self-awareness is a virtue. By honestly evaluating yourself and your fellow top team members against these criteria, you assess your readiness to lead and succeed. Creating a successful product and company is hard. If this exercise can help you determine that the startup journey isn’t for you, then that’s a good thing — because it frees you to go do something else with your precious life energy, something more aligned with your destiny.
If, on the other hand, this assessment helps you conclude that you and your founding team do have what it takes, that’s also good. Now, as you slog your way past the countless obstacles strewn in the path of your startup journey, you will do so with confidence that you have what it takes to succeed.
The greatest risk in Phase I is the waste of time and money. Many high-impact claims will prove wrong; the faster you can disprove them the better. In this phase, you look to your design thinkers and your market experts to conceive of superior solution claims. Your lean thinkers and your technical leads must rapidly prototype each solution component before committing to build it, and then after building it, they must measure its utility and iterate as necessary. Do you have these competencies on your team? You will need them.
Roles / Selection
In this first phase, roles are loosely defined and malleable. Structure is flat. Your entire company is made up of just a few people; every selection is vital — a fundamental claim. If ever you determine that one of your co-founders is the wrong fit — that you have made a poor selection decision — you have no choice but to act immediately and replace. You are in a race to achieve a breakthrough. You need a team of 10Xers with all the right competencies.
Objectives / Decision Methods
In the first phase of company-building, it’s just one team. The high-level objective is clear: to get to a value breakthrough before you run out of money. But it’s also important that each individual knows his or her responsibility. Since individual outcome objectives can change rapidly, stipulate responsibilities on the canvas. Posting on the canvas keeps everyone accountable, and ensures that you have full visibility into these responsibilities as the work itself evolves.
As to decision methods, some successful founding CEOs operate in the earliest stages with a strong “command and control” approach. Others take a more collaborative approach. In Phase I, the decision method used by the team will reflect the preferences of the CEO.
Team Claims — The Spreadsheet
Now that you have achieved a value breakthrough, your world opens up. With proof of traction, you can raise money. With money, you can build out your product and engineering teams, your marketing and sales teams, and the other support teams necessary to advance value creation and grow market share. As you scale, roles divide and subdivide like cells in a growing body.
But with every expansion of capability and reach, it becomes harder to retain agility and customer-centeredness. Now hiring priorities must extend beyond the spheres of innovation and value creation. You need people in accounting, HR, legal, corporate development and other functions largely removed from the customer. Furthermore, as new hires stream into the company, the ratio of employees who were with you before your initial value breakthrough steadily declines. Too often, the rising enterprise becomes complacent — resting on its laurels — despite markets in flux and competitors rising.
That is why the Team tab is so important. What human factors will help us move from our current stage to the next? How can we continue to optimize value and build sustainable competitive advantage?
The anchor point for this question, as it is with the other three domain tabs (Market, Product and Model), is the next value inflection point. What traction outcomes do we need to achieve? How will we get there? Who will do what work? Every employee in your company, from top to bottom, is a walking, talking hypothesis. That work to move from stage to stage will be done by the people you select and retain — and it’s your job to choose the right people, organize them into the right roles and structure and mobilize them to pursue the right business outcome objectives.
Four types of work impact customer-defined value and the development of sustainable competitive advantage:
- Actions to maintain value
- Actions to maintain growth
- Projects purposed to increase value or growth
- Projects to test value and growth claims
The first three of these arise from the settled assumptions that reside in the Market, Product and Model tabs. The fourth arises from the claims you have determined you must test before they can be invested into and acted upon.
The Four-Way Fit framework’s purpose (in both its canvas and spreadsheet forms) is to guide you towards value creation and competitive advantage. So it is with the Team tab. The focus is not on functions tangential to the customer, such as Accounting, HR and Legal. It’s only on human factors that impact value creation and competitive advantage. The insights you glean will guide you towards an organization design that promotes innovation. When you make value creation and competitive advantage first-order priorities in organization design, you create a powerful antidote to big-company complacency.
As with the framework canvas, the framework spreadsheet is organized into three subdomains:
- Roles / Structure / Selection
- Teams / Objectives / Decision Methods
But now, your organization is much larger than it was prior to your value breakthrough. There is no longer just one team — there are many teams. Depending on stage there may be two, three or even more levels between the frontline and the CEO. Now you may have multiple products. Now you may be serving multiple segments, each with a different sales team. It’s important to model these complexities into your spreadsheet architecture. The resulting taxonomy must show how Team claims link to claims in Market, Product and Model — segment by segment, product by product, channel by channel, team by team.
In Phase II complexity rises. Reid Hastings, CEO of Netflix, has said that the only antidote to the rising complexity of scale is to increase the density of what he calls “10Xers” — those rare individuals who can operate in high-variation environments, where truth is opaque and the way forward must be tested, iterated and optimized. 10Xers devise superior hypotheses, test them effectively and iterate efficiently towards truth. A top team stocked with 10Xers ensures the teams below them are stocked with 10Xers.
In this first subdomain, the job is to identify all the competencies you need so as to move from your current company-building stage to the next. In this section of the spreadsheet, it’s useful to first do this independent of role. This frees you from confirmation bias. “Who do we need?” is the first question. “Who do we have?” must be the second question. It’s easier to see the gaps that way.
There are three competency considerations:
- Required competencies of the top team
- Required competencies to increase market / product fit
- Required competencies to increase market / model fit
Collectively, the shared purpose is to drive value creation and build competitive advantage.
As you consider top team competencies, begin by checking for the presence of requisite thinking competencies (design thinking, lean thinking, strategic thinking and systems thinking). In the spreadsheet, you can apply a weighting to these four. What thinking competencies must your top team possess so as best to reach the next value inflection point?
It might look something like this:
The Top Team
As the number of employees engaged in the work of innovation and customer acquisition grows, senior leaders move from doers, to coaches of doers, to coaches of coaches. Leaders on the top team must possess the thinking competencies the current and next stage require — some mix of design thinking, lean thinking, strategic thinking and systems thinking. At each stage of company-building, the ratio shifts. That’s why it’s so important to recalibrate your top team competency requirements at each stage: they evolve.
Challenges rise as you scale. In a big enterprise it’s all too easy for the most mature (and therefore large) business units to dominate the culture. This can make it difficult to custom-fit the optimal “thinking competencies” ratio for every business unit. The systems thinker running a large business unit may not fully appreciate why the emerging business unit is led by design thinkers.
If different business units are at different stages of company-building, then the top team competencies for each must be uniquely determined. Enter these as claims in the spreadsheet, and then make sure to bring them into alignment with their associated claims in the other three domains.
Market / Product Fit
Market / product fit is not binary — it’s a continuum. You’re either moving towards deeper fit or away from it. It takes the right team to accurately assess market movements and determine proper responses. As you list required competencies in the arena of market / product fit, you need to consider outside-in market analysis competencies, the competencies required to explore and build product features, and those required to acquire and retain customers. The ascertaining of market / product fit is high-variation work. You need a high density of 10Xers to achieve and maintain market / product fit.
Product / Model Fit
Your product delivers value. Your business model retains a portion of that value through pricing, reinvests to acquire more customers, and does so in such a way as to build competitive advantage. For this you need an array of competencies. You need competencies in market research and pricing analysis. You need leaders who can build a sound brand identity architecture. You need messaging and message distribution expertise. You need sales, customer success and sales operations competencies. You need strategic thinking competency, so that you can find all possible pathways to sustainable competitive advantage. All of these competencies are necessary to prove product / model fit. Once again, this is high variation work. Only 10Xers may apply.
Roles / Structure / Selection
In this second subdomain, competency requirements are organized into roles. Roles are positioned within and organization structure, and selection choices are made. No need to replicate the entire company organization chart in the spreadsheet — the focus here is only on those roles that impact value creation and competitive advantage. This includes market research, product development, the revenue engine and — importantly — your top team.
It’s best to work from the bottom of the organization up. Start by identifying the frontline teams you need — those that touch innovation. For each team, define the roles and competencies that should exist within it. For each role, enter the selection choice (incumbent, transfer, new hire or opening). The large enterprise may choose to only document selection choices from director level on up. This is fine.
Above the team level, you can then design the minimum leadership superstructure required to achieve effective direction, employee development and cross-team integration. Keep it as light as possible. Most day-to-day business outcomes occur from frontline teams, not the bureaucracy above them. Put your initial design to the test with other executives and your board. Expect to iterate. Once the design is stable you will have clarified roles, reporting relationships, responsibilities and authorities of leaders. These will have become settled assumptions. For each executive, make sure the boundaries of responsibility are rational, reasonable and integrated.
At enterprise scale, it should fall to the systems thinker to design your organization. A systems thinker sees the enterprise as a system, sitting inside an ecosystem, made up of subsystems. Within these subsystems (such as the revenue engine system) are domains (such as top-of-funnel marketing, or sales development). Inside the boundary of each domain resides people, workflows, technology and money flows. When you build your enterprise leveraging domain-driven organization design, you build a modular company — like Legos. You create teams capable of getting things done with fewer external dependencies. You reduce the risk of functional silos. You become more responsive, resilient and agile.
Domain-driven design is different from functional design. All too often, executives think of functional departments as the primary organizing units. But functions exist to serve the systems of a business; it is systems (not functions) that achieve business outcomes. Most systems are cross-functional. For instance, the product management system is cross-functional. A technical domain team might be composed of a product manager, front-end engineers, data engineers, back-end engineers, a UX designer and perhaps a data scientist. Each of these functions might report to a different functional leader, but the people in these functions owe their primary affiliation to the team. It takes all functions to deliver product features that achieve business outcomes.
For more about systems thinking and systems-based organization design, read my book, In The Loop.
In the spreadsheet, the Roles / Structure / Selection subdomain will look something like this:
By seeing your role, structure and selection decisions as testable claims, you are reminded to continuously test, verify, iterate and optimize performance — at the individual, team and company level. You do so via clear performance standards, diverse feedback loops, KPI tracking, coaching, development, and — when necessary — replacement.
Teams / Objectives / Decision Methods
This third subdomain puts the spotlight on team performance and decision making. For each team, what are the business outcome objectives it must achieve? Given these objectives, what decision method must it follow? The architecture of this subdomain might look something like this:
Place the focus on your objectives on outcomes, not outputs. A product team charged with releasing ten new product features per quarter might achieve its output objectives with no impact on business outcomes. That makes no sense. Outcomes move the business forward, not outputs.
Once you are clear on a team’s outcome objectives, you can then identify the decision method most suited to achieving them. For instance, for the technical domain teams engaged in product development, will the functional leaders who manage the people within these teams make all key product prioritization decisions? Or will the team be largely autonomous, self-organized and self-managed? These are important considerations. The most advanced technology companies (such as Google, Netflix, Amazon, Spotify) advocate for autonomous, self-organized technical teams. They believe that if business outcome objectives are clear, teams should be given significant autonomy in how they get there.
In the beginning, the system that is your company is just an embryo. It is simple. Communication occurs across the desk between co-founders. Hierarchy doesn’t matter much. But once you move beyond MVP, that single-cell organism divides, divides and then divides again. Systems diversify and scale. By the time you reach enterprise scale, your company has evolved into a complicated network of socio-technical operating systems, informed by diverse feedback loops.
If it is to function well, the domains within this system called your company — especially those domains that touch the work of innovation — must be populated with 10Xers. These people possess the necessary competencies. They have been placed in proper roles, organized into a rational structure, and sit on teams empowered to accomplish business outcome objectives. To ensure direction, development and alignment, a light superstructure rests above these teams.
At every stage, your goal is to create the lightest possible organization design still capable of advancing the business from its current stage to the next. All things being equal, you want to push decisions as far down as you can — as close as possible to the point of impact. This creates leverage, increases velocity and enhances learning.
Remember, everyone is a walking hypothesis until verified.
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