All Posts By

Menno van Dijk

How to take an impact business to scale?

Large social challenges = large entrepreneurial challenges

My own daughter – a young gifted modern classic music composer – once shared with me: “Dad, you think like someone from the last century when you say: first learn, then earn and finally return. Millennials want to learn, earn and return all at the same time.” I came to understand that this means launching innovative businesses (learn) with products and services that make the world a better place (return), and also turn a good profit (earn). So, in essence: large social challenges are also large entrepreneurial challenges.  

We have now worked with about a hundred young innovative companies that act on this vision. Think about Ampyx Power, Senfal and Exasun providing alternative energy; iLost and Fairphone, LGSonic, BioDetection Systems, and Voltea replacing existing products or services with more social and responsible choices; Black Bear Carbon, Ecochain and Peel Pioneers reducing waste and making products organic; LandLife working on nature restoration; Social Medwork, Micreos, Quantib, Nemo Healthcare, OneFit, Siilo, and Sensara providing increasing access to education and healthy living; Dopay and Impact Terra reaching the poorest socioeconomic groups; or Codaisseur and Mantelaar creating employment for people normally excluded from the labor market.

All of these innovative businesses create new products and services that aim to make the world a better place and do so with an attractive business model.

Let’s not call these businesses “social enterprise” because this includes also incomparable endeavors, such as initiatives that focus on awareness building to change the public opinion, or that lobby for changes in regulation, or stimulate community participation and new forms of cooperation. These approaches have success factors very different from those impact-oriented businesses.

Let’s not call them “social enterprise” for another reason: “social enterprise” often seems to imply that the enterprise is not seeking financial gains for its shareholders. We believe this to be counter-productive given the entrepreneurial nature of scaling. Risk taking, performance, and value creation should be rewarded. For-purpose can also be for-profit. We believe in the power of private initiative with attention given to the longer-term interests of all stakeholders: customers, society and employees, but also entrepreneurs and shareholders.

We need to improve the odds of scaling

If your customers crave the product and if the product has direct social impact, you have achieved “lockstep”, i.e., the more you sell the more impact you achieve. Successful impact scale-ups have pure alignment on this.

Only what scales moves the needle in terms of impact. Scale-ups contribute vastly more to economic growth, job creation, taxes, wealth, and impact than start-ups or small businesses that do not reach scale. For an entrepreneur with an innovative solution, the holy grail is scaling it—that is, taking it to a level where the new approach operates efficiently and effectively and reaches so many customers as to truly contribute to resolving a social problem.

Many initiatives exist. Corporates are looking beyond social responsibility. NGOs are introducing entrepreneurship into their organizations. Everywhere companies are being set up by individuals who believe in the potential of ‘doing good’ in an entrepreneurial, business-oriented way.

However, the odds of scaling are very low. We found that only 0.4% of start-ups are able to scale above $ 10 million revenues within 5 years. We also found that the odds of scaling an enterprise focused on social impact are even lower.

Fortunately, in our portfolio the growth rates are promising. About half of the impact-oriented ventures in our Runway are able to grow more than 50% per year.

From our work with impact scale-ups and our research on scale-up success factors, we found some clues on the opportunities that social-impact oriented scale-ups can leverage and some of the pitfalls to avoid.

No simple formula for scaling

There is an understandable wish for clarity regarding what to do. Witness the attractiveness of Blitzscaling or Rockefeller Habits or Lean Start-up methodology or, in case of social enterprise, the SCALERS concept or the Zebra framework.

However, a straightforward formula does not exist. Scale-ups operate in a volatile, uncertain, complex, ambiguous world – so a lot is outside of their control. Scale-up entrepreneurship is about risk taking and therefore scaling depends on good fortune. Scale-up success is path dependent. Each scale-up success story is a unique adventure dependent on the background and strengths of its founders: it does not repeat itself. And scaling is organic, interconnected, and symbiotic.

The art of scaling

We have come to realize that scaling is an art. And although every artist produces something unique, some common characteristics and practices can still be distilled.  These are typically practices that are deceptively simple to grasp and incredibly difficult to master. It is the opposite of a formula, like painting by the numbers.

It all starts with having scaling potential: otherwise scaling is just not possible. Scaling potential results from delighting customers, having a competitive edge, creating a scalable business model and experiencing favorable market conditions. Favorable market conditions means first of all that the market is ready, i.e. receptive to the innovative product. And that the industry is growing, with limited competition and positive industry margin.

As the enterprise scales it needs to build its sales capability and focus it sales efforts. It also needs to build an efficient and reliable delivery engine – without this scaling is premature. And while building this delivery engine, it needs to keep experimenting and learning. A scale-up needs to act strategically when going international, keep launching innovative products and act swiftly when favorable opportunities suddenly pop up. The organization needs to rapidly onboard new recruits, install processes, a performance ethic and consolidate best practices.  All in all, a tall order best taken on by teams of seasoned entrepreneurs with high ambition, resilience and competitive drive.

Impact scale-ups operate in similar high risk, competitive markets with similar underlying business economics so would be naïve in assuming that the rules to flourish in the jungle do not apply to them.

However, impact-oriented scale-ups have something extra that makes them truly special: they also create social impact, and this can be much larger than the value they monetize through their sales income. The key question is how to leverage this potential and what special powers are needed for this.

The archer fish (photo on front) is a fish able to survive and thrive in its ecosystem because it is equipped with a special power: it preys on land-based insects and other small animals by shooting them down with water droplets from its specialized mouth.

Let’s leverage the social impact

There are at least three major ways to leverage potential for social impact: (1) building coalitions of supporters, (2) leveraging premium resources, and (3) generating indirect income and attracting low-cost financing.

  1. Building coalitions of partners. To create traction, you need to educate the market, break through initial resistance and increase trust in the new solution. In case of impact-oriented scale-ups, the opportunity for this is much enhanced because the world has a lot to gain from your product or service. So, you would have more potential in rallying stakeholders around your cause and get them to support you. Think about brand endorsement, privileged customer access, support in lobbying. To leverage this opportunity your special power needs to be: social impact story-telling, so persuasive, inclusive communication to bring stakeholders to the level of committed partners.
  2. Having access to lower cost resources.Having social impact invokes contribution from suppliers, partners, employees and customers beyond what is a purely market-based transaction. For instance, you might be able to engage your customers in advocacy and co-creation. Suppliers might be willing to support you at reduced fees or even for free. Your special power is to leverage this opportunity, and reduce your cost base and burn rate while maintaining a performance orientation and a strong business beat. After all, you want to achieve the social mission while at the same time build a profitable business.
  3. Generating indirect income and attracting low cost capital. In many cases, the social impact scale-ups create is recognized by the public and social sector. You need to get them to put their money where their mouth is, i.e., not just support your cause but also remunerate you for the social impact achieved and to invest in you at “blended” returns (combining social impact with reduced financial return requirements) with patient capital. Your special power is to attract these sources of income and funding without becoming a victim to the resulting administration and bureaucracy.

Let’s avoid the pitfalls

At the same time, a situation where the social value is much more significant than the commercial revenues puts additional pressure on the art of scaling. Specifically:

Delight customers, even when they do not have to pay. Scaling requires delivering a product or service that is significantly better than the alternatives. This starts with a customer centric mentality and serious customer sensing – understanding their behavior, needs, wishes, pain points, value in use. And the capability to create a product that is truly essential, surprising and beautiful, also when the beneficiary does not have to pay.

Commit to operational efficiency even if you funded handsomely. Some impact scale-ups appear legitimized by doing the right thing, just adding staff when they grow, and not necessarily by being efficient and using resources productively. Scaling requires to be very disciplined in improving efficiency and scalability, and to be motivated to build efficient organizations that deliver reliable products and services.

Keep focus on learning through failure while having sponsors. Your learning is reduced if sponsors force you to report good progress through standardized impact metrics. This will make it difficult to establish a critical, evidence-based perspective on your own performance and to treat funding as learning experiments that benefit from early failure.

Bring in seasoned entrepreneurs while being on a mission. Many impact scale-ups have been founded to resolve a social challenge – not per se to capture an entrepreneurial opportunity. As a result, the leadership (CEO, MT, Board) often lack the entrepreneurial experience, mindset and capabilities for the business to thrive.

Impact scale-ups make the world a better place, but it takes two to tango. Their potential for social impact should trigger strong support – financial and in-kind – from funders, service providers, and talent. It is our mission to contribute to this – through our research activities, practice support, and by providing access to growth funding.

Image from: https://blog.nationalgeographic.org/2014/09/04/mystery-solved-how-archerfish-shoot-water-at-prey-with-stunning-precision/

Corporate & Venture Collaboration Principals

By Menno van Dijk and Sander van der Blonk

Cooperation between large corporates and young innovative ventures can have many flavors. These range from R&D collaboration, to opportunities for leveraging the corporate’s brand and customer base to find initial users. It can also be about strategic investments. The one thing in common is that cooperation between large/institutional and small/opportunistic invariably difficult and often frustrating. Focusing on making the collaboration work before jumping right into the product might feel like slowing things down, but in the long-run makes the entire collaboration more likely to succeed.

For a cooperation to work between a large corporate and a small scaling venture requires a lot, including shared purpose, people/principles fit, and a trust-building process.

Shared Purpose

When two parties collaborate without a shared purpose, a divorce looms ahead. In the case of a VCs exiting their ownership in a venture and a corporate entering – where does the management’s interest lie? Are they waiting until the end of their lock-up, or do they face a future as employees within a larger entity? When a start-up and a corporate collaborate on R&D, is the goal to quickly reap benefits and then act independently, or is it to build a long-term partnership? When a scale-up develops a corporate as a launch customer, will they give exclusivity or will the corporate’s competitors also be served? The first thing to establish a common purpose in terms of intent, targets, and time horizon. This requires scale-ups to think much more strategically.

People/principles fit

Collaboration is between people, not companies, who genuinely enjoy working with each other. This is often based on shared principles, common culture and having the same style and background. In practice, the management of a young, innovative enterprise is often younger, opportunistic, and independent; it is also less formal, less reliable, and less experienced. It requires careful casting from the side of the corporate to create a good match. It also requires the large corporate to understand that a start-up can often not navigate the complex organization to get all the buy-in that is generally required to make an initiative work – they often do not have the resources to do so. The corporate needs to have an internal champion to do this for the scale-up. They also need to understand that timelines matter more to a scale-up – a nine-month delay can be nothing for a corporate, but can bankrupt a younger, smaller venture.

Trust building process

Trust comes by foot and leaves on horseback. This quote about trust is attributed to Johan Thorbecke, the Dutch politician who was responsible for the first constitution in the Netherlands in 1848. Trust does not happen over one dinner: it solidifies over a series of interactions of working together, making promises and delivering on these.  This is the trust building process. In this respect, the “fake it until you make it” mentality of some young ventures is counterproductive. The “let’s straightjacket them” approach of some corporates is equally ineffective.

* * *

So, where does this leave us? As usual, the soft stuff is the hard stuff. This should raise the awareness of the start-up/scale-up to think before acting. Collaborate only with corporates you admire. On the other end, corporates, with their deeper and more sophisticated competency in collaboration processes, they can take the lead to ensure it works. If the mountain does not come to Mohammed, Mohammed must go to the mountain. And in this case, the mountain, surprisingly is the start-up/scale-up, and Mohammed the corporate.

ScaleUpNation, Rockstart, and Scoutely will be hosting an event to explore these insights with corporates and start-ups/scale-ups. Interested in an invitation? Please learn more here.

 

 

Are you an Effective Scale-up Board Member?

By Menno van Dijk, Laurie Kemp, Hayat Chedid, Noëlle Haitsma, and Floris Kroon

Governance can make or break a scale-up. We all have our own war stories and examples of founders/CEO’s being kicked out of their company, board meetings going sour, and politics steering us away from what should be our focus: realizing our joint vision.

Because having a value-adding board is far from obvious, we prototyped a Board Masterclass Program for Scale-up Board Members with two groups of 70 experienced board members, business coaches and VC investors during the first half of 2018.

Over the course of 5 days, we explored the various elements of scale-up board membership, shared best practices between participants, invited experts and learned from cases and real life situations. Here, we share some of our key findings.

  1. A scale-up is not a start-up

The common assumption that after achieving product-market fit the rest is history is nonsense. As ventures scale, the challenges and many demands (both external and internal) a CEO/MT encounters only increase in size and complexity. As board member you need to support the founders in their transition to become executives, and the team in their transition to a full organization with well-oiled business functions (sales, service, production, development), processes and culture.

  1. Coaching seems easy, but proves difficult in practice

Many board members have a tendency to offer direction and advice. Even with the best intentions, this undermines the responsibility, confidence and leadership effectiveness of the founder and his/her leading team. Coaching – i.e., asking the type of questions that help the leadership team gather their own thoughts and make their decisions is far more effective, but difficult to master for the typical board member. As common management wisdom has it: tell someone what to do once, and s/he might do it. Try it twice, and you will kill any future creativity and independence of thought.

  1. It’s a balancing act

As our participating board members became more proficient in coaching, they also realized the multitudes of roles board membership requires, and the difficulty in balancing the roles of coach (at the one extreme) and investor (at the other extreme). In practice, everyone involved in a scale-up wears multiple hats, and there is no clear division of roles.

  1. Withhold judgment and trust the process

Board members of scale-ups are often (former) entrepreneurs who tend to be quick on their feet and react immediately and intuitively. Avoiding this instinct, reflecting and following a more thoughtful and disciplined discovery and decision-making process invariably leads to better solutions and gives the MT much needed structure and control. So try to avoid giving into your primary reactions and adhere to process instead.

  1. Keep your eyes on the prize

Scale-ups need to keep innovating, to stay ahead of competition which is quick to copy their initial lead. As a board member, you build the confidence and conviction in the MT to not only focus on sales and production targets for your first-generation product (even if the VC’s put a lot of emphasis on this) but to also keep developing new products and business opportunities, to rapidly expand internationally and to be opportunistic. It can be great fun to explore these opportunities together with the MT as long as you avoid imposing your vision on them. No entrepreneur pursues someone else’s dream.

  1. Excellence is about creating leverage

Scale-up CEOs try to solve every issue at hand themselves. They might drag you into this, e.g. by asking you to sell to a big account, help de-bottleneck production or resolve an organizational issue. A good board member helps the CEO lead instead of firefight, so to articulate the bar for operational excellence, to hire top talent with the right mindset and values, and install continuous improvement processes, instead of helping out on execution (even more firefighting).

  1. Let go of your own biases and frames of mind

Your success is based on your specific situation and does not automatically translate into the situation your scale-up is now facing. History does not repeat itself, especially not when scaling an innovative scale-up. You can only avoid your biases through continuous probing and open-minded listening. Once you start to better understand the personalities of the MT, the dynamics of the industry, the business model, the qualities and vulnerabilities in the organization, your biases start to disappear. And chances are that even when you think you are listening without judgment, you probably aren’t.

  1. You ARE the mirror

Interviewing customers as well as employees is your obligation. While this may not be welcomed by to the CEO and s/he will want to control the process and outcome, doing employee and customer discovery your own is critically important. It is the only way to provide candid feedback and a mirror on how the CEO/MT influence and impact others.

  1. Maintaining constructive board dynamics is your fiduciary responsibility

Having discord between board members is the last thing a scale-up MT needs. Boards should build a strong foundation of trust among themselves, a strong sense of togetherness in supporting the scale-up and clear alignment on mission and vision of the business and qualities of the MT. So, actively build trust instead of assuming it is there already.

  1. And finally: It is not about you.

Yes, you are an accomplished professional with many years of executive, investment or entrepreneurial experience. That is what got you a seat at the table. But now that you are there – it is not about you, and it never will be. Scale-up board membership is about supporting your CEO and his/her MT on their journey. One Board Masterclass participant shared that his biggest learning was that he is not yet ready to be a board member, because his self-orientation was still too strong. He realized that, at this point in his life and career, he preferred to still be in the driving seat. He has since taken an executive position at a fast-growing Dutch company.

Scale-up board membership is exhilarating but also much more difficult than you might think. It requires deep self-reflection and ongoing self-development to be able to help others. Mastery requires a learning mindset, humility, and a good sense of humor.

Are you an effective board member? Do you want to develop yourself as a board member, with a highly curated group of fellow board-members? We are launching two new Board Masterclasses on September 26th and October 18th and have limited spots left for both groups. Please reach out to jacqueline@scaleupnation.com if you want to learn more, or click to apply here.

The Transition from Founder to CEO

Successful CEO-cum-founders are a very rare breed. Most founders surrendered management control long before their companies went public. (Based on the research in the US) by the time the ventures were three years old, 50% of founders were no longer the CEO. In year four only 40% were still in the corner office and fewer than 25% led their companies’ initial public offerings.

Based on 2008 HBR Article from Noam Wasserman “The Founder’s Dilemma”, summarized and adapted Menno van Dijk of ScaleUpNation.

Four out of five entrepreneurs are forced to step down from the CEO’s post. Most are shocked when investors insist that they relinquish control, and they’re pushed out of office in ways they don’t like and well before they want to abdicate. The change in leadership can be particularly damaging when employees loyal to the founder oppose it. In fact, the manner in which founders tackle their leadership transition often makes or breaks young enterprises.

Start-up phase: Founder’s vision and drive

At the start, the enterprise is only an idea in the mind of its founder, who possesses all the insights about the opportunity; about the innovative product, service, or business model that will capitalize on that opportunity; and about who the potential customers are. The founder hires people to build the business according to that vision and develops close relationships with those first employees. The founder creates the organizational culture, which is an extension of his or her style, personality, and preferences. From the get-go, employees, customers, and business partners identify start-ups with their founders, who take great pride in their founder-cum-CEO status. New ventures are usually labors of love for entrepreneurs, and they become emotionally attached to them, referring to the business as “my baby” and using similar parenting language without even noticing. Their attachment is evident in the relatively low salaries they pay themselves.

Scaling coincides with sharing control

Founders realize that their own financial resources aren’t enough to enable their ventures to capitalize fully on the opportunities before them. They convince others to invest in their company. Outside directors will join the company’s board.

As they raise resources in order to capitalize on the opportunities before them, their company might become much more valuable, and the value of their share would soar. But as a consequence, they will have to give up equity, so share control over major decisions.

Even if the company can be fully bootstrapped sharing control can make sense.  The reason is that scaling is a team effort.   A team of three or more co-founders all sharing in the control of the enterprise significantly increases the chance of scale-up success. Successful scale-ups allow employees to share in the equity and adhere to inclusive decision making.  Having a Board does help a company to scale.

Scale-up phase: Growing Pains

The first major task in any new venture is the development of its product or service. But when the founders celebrate the shipping of the first products, they’re marking the end of an era. At this point, leaders face a different set of business challenges:

  • Strategic Leaps: The founder needs to make smart bets in terms of new product introduction, additional market expansion and internationalization.
  •  Operational Flywheel: The founder has to build a company capable of producing, marketing and selling large volumes of the product and of providing customers with after-sales service.
  • Organizational Flow State: The organization has to become more structured, and the CEO has to create formal processes, develop specialized roles, and, yes, institute a managerial hierarchy. The venture’s finances become more complex, and the CEO needs to depend on finance executives and accountants.

The dramatic broadening of the skills that the CEO needs at this stage stretches most founders’ abilities beyond their limits. Some venture capitalists invest in a startup only when they’re confident the founder has the skills to lead it during the scale-up phase.

Pass on the baton or up your game

In the scale-up phase, the board demands a CEO capable at managing the other executives, who has deep knowledge of the functions the venture has to create and has experience in instituting the new processes to knit together the company’s activities. The board’s task is straight-forward if the founder underperforms as CEO.

Some scale-ups have founders that are already experienced, credible scale-up CEOs. In other cases founders who want to be CEO for a longer time need to quickly learn new skills. Boards can coach their CEOs to develop and apply these new skills while the company is scaling. If they do, founders can become accomplished enough to maintain control.

Even if the need for change is clear to the board, it isn’t clear to the founder, because the founder’s emotional strengths become liabilities at this stage. Used to being the heart and soul of their ventures, founders find it hard to accept lesser roles, and their resistance triggers traumatic leadership transitions within young companies.

Keeping Founders on Board

Ideally, a board should keep the founder involved after he is no longer the CEO.

After all, you can replace an executive, but you can’t replace a founder. And the unique skills demonstrated to envision the opportunity and achieve product/market fit during the startup phase, are still highly relevant during the scale-up phase.

Many times, keeping the founder on board is easier said than done. Founders can act, sometimes unconsciously, as negative forces. They can resist the changes suggested by new CEOs. But also, those (co-founders, employees, investors, board members) who have now gained control can misuse this for selfish objectives or have misplaced confidence in own capabilities and judgment. The founder can leave deeply disappointed feeling his legacy being squandered. Sharing and relinquishing control is a courageous act. The responsibility is also on the receiving end to recognize this and maintain appropriate balance and restraint.

In US studies of technology start-ups and high growth firms, about a third of founder-CEOs leave their companies when a professional CEO comes in, while about half move to the board of directors (often as chairman) and the remainder take a position below the CEO.

Boards can sometimes help founders find new roles. When a founder has an affinity for a particular functional area, such as engineering, the board can offer him or her the opportunity of focusing on that area and letting the new CEO “take on all the things you don’t like to do.”  The more concrete value the new CEO adds, the easier it will be for the founder to accept the transition.

Entrepreneurs need to come to grips with what success means to them. Founders who understand that their goal is to achieve something larger than themselves in terms of impact, value creation and organizational size will not view themselves as failures when they step down from the top job, as long as these goals are being achieved.  Founders must, as the old Chinese proverb says, “decide on three things at the start: the rules of the game, the stakes, and the quitting time.”

Interested in joining a scale-up entrepreneur or board member program?  Please check out our program page.

For further research on The Founder’s Dilemma, we recommend Noam Wasserman’s book.

Board Members that Propel, Not Protect

Supervisory board members of scale-ups focus on value creation rather than value protection, this article describes what it takes.

By Menno van Dijk, founder of ScaleUpNation. With input from Rodria Laline, Valeria Mecozzi, Noëlle Haitsma, Bouke Marsman, Grant Davidson, Wal van Lierop, Frank Landsberger, Jaap Maljers, Floris Croon, and Jan Paul Grollé.

My daughter was a competition skier. Her coach/trainer had many successes on her name. She would have deep insights in what it takes to win. She would not only train my daughter on technique but also coach her on commitment, courage and focus. She would provide coaching on request and also freedom when needed. She would try to propel my daughter towards success, not protect her from failure. It is the kind of relationship scale-up CEOs would look for in their board members.

In my work with scale-ups, the topic of creating a board often comes up. As scale-ups are in a transition from first product to growing sales and services to a broader, international market, they need to build the strategy, organization and network to support this exponential growth. And with increased exposure they need risk management and control, solid financial reporting and compliance with legislation and regulation. And for this they need a board. In fact, our research among Dutch scale-ups finds that scale-ups are almost 50% more likely to have a supervisory board than those young innovative companies that stall.

An Effective Board

Scale-ups do not just need a supervisory board, they need an effective one. And we have found that being an effective board member of a scale-up requires quite a different skillset and mindset than that of a board member in a large, mature enterprise. There are two main factors that drive this difference:

  1. In a good scale-up, the CEO already has a close relationship with all stakeholders and an insight in their needs and expectations. The founder/CEO is a major shareholder. The inspirational role model that has attracted and engaged the employees. The number one sales person, in constant contact with customers. The one that manages relations with suppliers, the public and an early investor community. So, in essence, the CEO already embodies multi-stakeholder management. Little you need to do in this respect.
  2. Your focus in the scale-up phase is on value growth more than value protection. Check and balances, fiduciary duties and mitigating risks and liabilities – these constitute the core of the work for a supervisory board in a large, mature company. But a scale-up still has little to lose. Instead, most of its value consists of future potential and this needs to first be realized before there is anything to protect. Your role is not to help protect the company, but to help propel it.

As a result, as a scale-up board member you are an actively involved inspiration more than the non-executive supervisor at a distance.

It starts with setting direction and expectations.

Your role is to coach the CEO in leading innovation and formulating great expectations. The CEO’s big dream (a “hockey stick” in revenues and value) should be worth making a risky investment in. This hockey stick is an investment graph, and as the scale-up progresses and more investments are coming in, you slide into larger and larger commitments, engagement and risk taking.

You deep dive into the opportunity.

You need to truly understand the market opportunity and competitive dynamics as well as the company’s capabilities and edge. A scale-up pursues a high risk innovative strategy, so a superficial understanding disqualifies you from being of help. So, you spend time diagnosing issues and blind spots. You will do a lot of ‘sensing’ for weak signals through informal conversations with key people in the company. You can listen well and master the art of asking insightful questions – questions that not only further your understanding but more importantly trigger the CEO to realize for him or herself the most appropriate action.

You earn your trust as a coach.

Your founder/CEO is a bit of a stereotype: adventurous, creative, eager to learn, impatient and comfortable to take risk. Open to people, quite informal and preferring respect over power. Very focused on action, execution and speed and very demanding of the team. In the scale-up phase, the distance to the organization increases after the founder has rounded out the management team. To bridge this distance, the founder must become a CEO, shifting from push to pull and from tell to listen mode. Become a better listener, become more patient and more emphatic. It is your role to coach the founder/CEO in this transition and in the new leadership and management roles.

In the journey, you help combine execution and innovation.

To scale the organization needs to be ambidextrous, combining results in operating excellence with results in ongoing innovation and experiment. You need to be comfortable with that as well. On the one hand, you help to instill accountability, install relevant performance indicators and exploit management processes – all to keep the enterprise on track. On the other hand, you help explore entrepreneurial potential. You challenge assumed risks and limitations and help reframe these into breakthrough opportunity. You support a constant quest for innovation – a divine discontent with the current quality of the product. It is not your role to be the head of innovation, but you certainly are its biggest supporter. Whether you are involved in operating excellence or ongoing innovation, you provide access and legitimacy. You lend your name and Rolodex to open doors to new customers, potential partners, investors and knowledge institutions. And in those cases that make all the difference, you are on the road together with your CEO, because in the action you are at your most effective.

You manage the VC relationship.

As the scale-up is getting traction and more people start coming in, everyone wants control and a piece of the cake. For instance, VCs come on board and they require a board seat. It is your role to demand that the VC brings in a person with whom the CEO can build a strong, successful relationship. You need to be demanding, do your due diligence, and ensure the person is committed to go the extra mile in case of trouble, and not simply disengage and step out. Also you need to have a thorough understanding on how financing sources influence business models, how to best raise the valuation in financing and which clauses to avoid.

You work well together with the other board members.

Good dynamics between the board members are crucial. As the scale-up continues to progress, the stakes become higher. You need to manage the resulting power discussions and politics (which most entrepreneurs detest and try to avoid) and keep all goals and interests aligned. Each board meeting requires your answer to questions such as: What is the customer need we are targeting and what is our proposed solution? Who are our competitors and how do we win against them? What do we need to do to make our strategy profitable? What is the game plan for sustaining our competitive advantage or for strategic renewal?” As a result, within the board the following discussion topics come back again and again:

  • What drives all of us? It has to be serving the scale-up’s customers, and serving them extremely well.
  • How do we do that? We want to make sure the reality of execution can keep up with all the new ideas.
  • Who will do it? We help bring in the team builders, the process managers, the operational experts.
  • Why we do it? The overall purpose and holding on to that purpose, is so important.

You educate the CEO on upward management.

Lack of information or information asymmetry is one of the biggest causes for ruptures within boards as it severely undermines trust. Here you need to educate your CEO. Your CEO needs to over-communicate effectively: the more you know the better you can anticipate and the more you can help. THE CEO should want to seek your input and feedback and assign you specific tasks. And provide quantified goals and progress metrics to ensure quantifiable and objective discussions at board meetings.

Do you have what it takes?

In summary, do you have what it takes? Do you have real experience as a scale-up entrepreneur? Do you have the insights in the industry? Do you understand how to combine results in operations with results in innovation? Do you understand the ins and outs of Venture Capital? Do you And most importantly, do you know how to coach effectively? In delivering support programs for scale-ups we have come to realize that the current board training programs available are not sufficiently tailored to this specific role. So, we have developed a program “Board Masterclass” that fills this void. The format is strictly peer based, focused on coaching rather than controlling. It also focuses on value creation rather than value protection, and experiential and explorative rather than classical lecture-based.