Project Management Institute

A Leg Up

Resource-Strapped Startups Lack Project Management Chops, So Business Incubators Are Lending A Hand

David Taylor, Virgin StartUp, London, England

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BY SARAH FISTER GALE

PORTRAITS BY JON ENOCH

Startup success stories are legendary.

Visions of Amazon founder Jeff Bezos selling books out of his garage, or Jack Ma scraping together money to launch Alibaba, inspire budding entrepreneurs around the world. They also attract venture capitalists (VCs): In 2017, funding to VC-backed companies grew 50 percent over 2016, reaching US$164.4 billion.

But despite all the fabled success stories and seed money, startups are a risky bet. More than 50 percent of all U.S. startups fail within five years, according to 2017 data from Statistic Brain Research Institute. The high rate of failure, even among companies with strong backing by savvy investors who vetted the idea and team, suggests some entrepreneurs are missing vital tools to help them transition from big idea to thriving business.

No tool is more important than project management, says David Taylor, a mentor at the business incubator Virgin StartUp, London, England. He's also chief grower at Grow in London, a marketing business incubator. “Unequivocally, startups need project management skills to get off the ground,” he says. Entrepreneurs are often running at breakneck speed trying to do everything at once. “They need someone to help understand how and why they need to create plans and set milestones.”

Boye Ademola, a Lagos, Nigeria-based partner and lead for digital transformation at KPMG who mentors startups, agrees. “Without project management fundamentals, the chance of delivering tangible results is slim.”

Yet aspiring business leaders often have no idea why project management is important or how to integrate it. That's where startup incubator organizations with staff skilled in project management can help. While they provide strategic advice and networking and mentorship opportunities, many business incubators and accelerators also integrate project management training and guidance.

“Unequivocally, startups need project management skills to get off the ground.”

—David Taylor

At Boston Children's Hospital's in-house incubator in Boston, Massachusetts, USA, project managers are part of customized teams the organization convenes to develop clinicians’ innovative ideas into viable products and services. For example, to support delivery of a software project to improve emergency room (ER) triage processes, the hospital paired ER staff with software developers, a visual designer, a business analyst and a project manager. Even the Creative Artists Agency (CAA)—which helps entertainers and athletes manage their careers—is building an incubator with project management skills in mind. In October, CAA announced it would launch a “startup studio” named Creative Labs in Vancouver, British Columbia, Canada. A key reason for choosing Vancouver? The city's wealth of project management talent, said the new lab's co-founder.

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“Startups never have enough resources to hire their own project management experts, so they need training on how to do it themselves.”

—Brad Burke, Networked Insights, Chicago, Illinois, USA

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“Startups never have enough resources to hire their own project management experts, so founders typically need training on how to do it themselves,” says Brad Burke, CTO of the marketing agency Networked Insights and former mentor at digital startup incubator 1871, Chicago, Illinois, USA.

At 1871, Mr. Burke spent two years working with entrepreneurs who had secured angel funding for their startups. He noticed that many organizations worked like well-oiled machines when co-founders were working on a single project. But if things got even a little complex, they lost control. “Once you have multiple teams with interdependencies, you need at least basic project management skills to survive,” he says.

In the startup world, a big part of survival hinges on maintaining investor interest. Investors want to see results, and project management helps deliver them. “Providing startups with project management guidance creates a level of accountability and makes it easier for them to demonstrate their ROI,” Mr. Taylor says.

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Offices of digital startup incubator 1871, Chicago, Illinois, USA

THE VIEW FROM OUTSIDE

Many startup mentors agree that project management is vital to getting companies up and running. But that doesn't mean they all have the same approach to imparting project management knowledge and skills.

Mr. Ademola focuses on helping startup owners look beyond the product to the business community.

“They usually have little business experience or understanding of the resources they will need to get to market,” he says. He helps them build a roadmap and define the people and capital they will need to complete that journey. He also encourages them to connect with customers and other stakeholders to get feedback on their product. “Once they are empowered with this knowledge, they are able to make better decisions,” he says.

For Mr. Burke, it's all about showing rather than telling. He finds that entrepreneurs are so focused on getting the next thing done they often have little patience to discuss process. So he eases them into it. “I don't say, ‘You need project management.’ I ask them, ‘Who is managing the project?’” he says.

He aims to help startup mentees think about where risks might arise within their strategy. Especially if they realize that no one is a clear owner of critical tasks, they'll recognize the need for project management practices such as establishing milestones for project teams and key performance indicators (KPIs).

Mr. Burke has seen a common pitfall that creates an opportunity to show the power of project management: when startups hire overseas development teams to complete a project on the company's critical path to generating revenue or getting a product to market.

“They see this solution as throwing money at a problem to make it go away,” Mr. Burke says. But when they let the vendor define the deadline and also set parameters for reporting progress and determining whether goals are met, things quickly go off the rails. “You can't let the person you are paying tell you when the project is done,” he says.

Once they recognize the problem with this model, he introduces them to basic project management practices, like setting up a ticket system for the development team so they know which tasks to prioritize and establishing daily meetings that include overseas teams to track progress. “Eventually they see how these extra steps free them to focus on other things,” Mr. Burke says.

Mr. Taylor takes a similar approach at Grow in London. He finds that most entrepreneurs hate corporate jargon, so he uses colloquial terms to discuss project management practices that focus on the specific needs of the company and where a plan might have gaps. For example, he recently mentored a fintech startup that had spent months building a prototype without getting customer feedback. Mr. Taylor helped the founders see how feedback on the prototype would help them hone the product before they went to market. He then helped them build a plan to talk to 100 potential customers.

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“A project management approach allows [startups] to capture, quantify and prioritize the project tasks.”

—Joe Maruschak, RAIN Eugene, Eugene, Oregon, USA

The feedback helped them tweak the technology and expand their network of potential buyers. They've since made feedback loops part of their project management process, he says. “Most startups learn more from doing than reading.”

TRACK EVERYTHING

Other business incubators treat project management techniques and strategies as a formal part of training programs. The Regional Accelerator & Innovation Network (RAIN) is a government-backed initiative to grow tech startups across the U.S. state of Oregon. Its affiliated accelerator in the city of Eugene offers immersive training and mentoring programs to early-growth-stage companies. “Project management comes in through all of it,” says Joe Maruschak, chief startup officer and executive director, RAIN Eugene, Eugene.

He believes three big problems most startups face are failure to organize, quantify and prioritize. “A project management approach allows them to capture, quantify and prioritize the project tasks,” Mr. Maruschak says.

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“Providing startups with project management guidance creates a level of accountability and makes it easier for them to demonstrate their ROI.”

—David Taylor

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“In the past I just chalked it up to a different way of doing things. But after going through the accelerator, I realized we needed a better system.”

—Brett Bernstein, Gatsby, Los Angeles, California, USA

RAIN Eugene's program is built around these goals. On day one, participants are expected to submit an executive summary describing what their business idea is, why it's needed, how they will build the idea into a scalable business and why they are the people to do it. “It is basically a project charter,” he says.

The process forces startup leaders to think in detail about how they will build their business and identify gaps in their plan. From there, RAIN instructors require each participant to track everything they do—for example, time spent in meetings, client calls, product development or sales. Then they link each task to business value generation.

That's when the “aha moments” happen, he says. Whether it's seeing how much time they spent in meetings or the way they prioritized sales calls, they start to see that not all activities deliver the same value. “They need to learn that time is the only resource they will always have, and they can't waste it,” Mr. Maruschak says.

The next step for RAIN program participants is to put tasks in buckets based on expected outcomes, prioritize the ones that generate value and start to create plans for reaching strategic goals.

“It's about breaking down the big picture into small pieces and then getting it done,” he says. “That is the discipline of project management.”

DATA-DRIVEN ACCOUNTABILITY

Derek Schloss has seen his company benefit from task tracking and prioritization. The co-founder and CEO of Cowbucker, which manufactures and sells hats, Mr. Schloss went through RAIN's 16-week program last year. The “track everything” mantra was drilled into his head, and it's changed the way he runs his company, he says. “The KPIs help us make better decisions and stay on track to achieve our goals.”

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Since completing the RAIN program, Mr. Schloss has set up daily standup meetings for his entire team and built a dashboard to track activities and their expected outcomes. “There are 100 little projects we need to keep track of,” he says. By monitoring metrics tracked by the dashboard, he's able to accurately gauge the value of time spent on different activities rather than just going on instinct.

Demonstrating strong project management discipline also can impress stakeholders and investors who want proof that a company is delivering on its promises, says Brett Bernstein, founder and CEO of Gatsby, Los Angeles, California, USA. The marketing platform identifies and introduces companies to their most influential customers based on customers’ online behavior. Last July, Mr. Bernstein was accepted into Acceleprise, an accelerator in San Francisco, California that focuses on software-as-a-service and business-to-business tech startups.

From day one, Mr. Bernstein's mentors required him to adhere to basic project management practices. These included setting weekly goals, prioritizing tasks and identifying risks. “Being held accountable forced me to do things I might not have made time for before,” he says.

These practices led him to make a tough staffing decision early on. After Mr. Bernstein realized one of his key development team members wasn't communicating or holding his own team members accountable, he made the decision to fire the employee. “In the past I just chalked it up to a different way of doing things,” Mr. Bernstein says. “But after going through the accelerator, I realized we needed a better system.”

Since completing the program in September, Mr. Bernstein tracks a list of KPIs, which he uses to set weekly goals and report progress. “It has become part of the Gatsby culture,” he says. Each week the team meets to discuss progress, look at outcomes and set new goals. Aside from keeping everyone focused and productive, it has helped his team pivot Gatsby's business strategy in response to new data, Mr. Bernstein says.

He makes a point of communicating goals and strategy shifts with his investors following weekly team meetings. “It's a way to engage with them and remind them why they backed us,” he says. “Putting our goals and deliverables out there makes us accountable.”

“It's about breaking down the big picture into small pieces and then getting it done. That is the discipline of project management.”

—Joe Maruschak

For Mr. Maruschak, project management chops often make the crucial difference to a startup's chances of sustaining success. RAIN Eugene works specifically with startups that have a big potential for high growth. Once these firms take off, it can be too late to start thinking about how to incorporate project management, he says. “All fast-growing companies need project management from the beginning,” he says. It ensures that every new hire is indoctrinated with project management discipline from day one—which helps the organization make better decisions and strategically prioritize work.

“Once you get people to think in chunks, they get more realistic about what's possible and how to get things done.” PM

Foundation First

The goal for mentors at tech accelerators: Make sure startups embrace the value of basic project management discipline.

Joe Maruschak's biggest pet peeve as a startup mentor is “tool pushing”—when people confuse project management with software tools. They view project management as a software-driven task and manage by the tool rather than by the desired business outcome. But to Mr. Maruschak, chief startup officer and executive director at Regional Accelerator & Innovation Network (RAIN) Eugene in Eugene, Oregon, USA, project management is really about discipline.

“If you can't prioritize tasks, cool networkable tools won't add value.”

He feels strongly that every startup that comes through RAIN should be trained in the art of tracking key performance indicators, keeping the stakeholders abreast of progress and making good decisions. What technology an organization ultimately uses is far less important than these skills.

The same goes for specific agile techniques such as scrum or daily standups, says Brad Burke, a former mentor at the digital startup incubator 1871, Chicago, Illinois, USA. “If your activities aren't integrated into the broader business goals, even agile falls over.”

Instead, most mentors at startup incubators and accelerators focus on the basics: why project management adds value and how to integrate it into the business process. Then they let companies choose the method or tool that works best for them.

“The neat thing is that project management is scalable,” Mr. Maruschak says. In the beginning it can be as simple as prioritizing tasks and breaking down big goals into achievable chunks. As the business grows, project management practices can become more sophisticated.

What matters most is discipline. If a fledgling organization has that, it will tend to choose project management approaches and tools that best meet its needs, whether agile, predictive (waterfall) or hybrid, Mr. Maruschak says. “Once you manage a few projects as a team, you'll figure out what works.”

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“If your activities aren't integrated into the broader business goals, even agile falls over.”

—Brad Burke

Cash Required

Before startups can get major projects off the ground, they need an infusion of venture capital (VC).

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Source: MoneyTree Report Q4 2017, CB Insights and PwC, 2017

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

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