Thursday, June 13, 2013

Deciding on an Organizational Structure for a New Business

One of my earlier blog posts discussed the steps in setting up a new business. The first step was to identify the job to be done for the customer. The steps following were very straightforward and methodical. You can read this post at

I have recently been involved in two start-ups that may prove as useful examples for a less structured, more evolutionary approach.

The first is a collaboration between Rice University, MD Anderson Cancer Center and the National Space Biomedical Research Institute. The job to be done is to create and commercialize devices for delivery of health care at a distance. The focus is on cancer prevention and care. The organization is known as the eHealth Research Institute.

As it turns out, the steps following the identification of the job to be done and the development of a vision statement may be more evolutionary than taking clearly identified methodical steps.  For example, in a recent planning session, we were considering the various organizational structures that might be adopted. The best structure would be one that allowed continued support from the founding institutions while allowing the ability to attract public and private funding for the new organization.

While the approach follows my recommended approach it differs in the ability to easily identify a clear strategic plan. The reason is the potential for environmental change. The potential for change in funding from the current public and private sources has to be considered as well as the potential for change in focus for the founding institutions.

We believe the new devices that will be created for commercialization by the eHealth Research Institute have the ability to change health care delivery worldwide. To be successful, we will have to have a means of attracting the best projects into the institute that can be moved to the prototype stage then we will have to find funding to support research while the projects are being moved to the final stages of development. We will have to rely on grants and philanthropic funding for the initial stages of the projects then we will have to create partnerships with venture capitalists, private investors and corporations to move the devices from prototype stages to commercialization.

This organizational process will have to be evolutionary in nature. There are examples we can draw upon for guidance but this organization will be different enough from others that it will require innovation and the ability to adapt to a changing environment.  A list of activities to be accomplished will be necessary to develop the organization but rather than each step leading to a clearly definable next step, it will likely lead to a series of options that will require some research before making a choice. It may be that the organization will be different than that which we envision today.

Another example is a consulting venture that I am participating in. In this case, it is pretty clear that our firm will be consulting on infrastructure development in a Central American country. This will be the first such project for our consulting firm and will be the foundation for similar projects in other countries. We believe we are the preferred vendor because our expertise in this area is second to none.

The challenge here is developing an organization that that can grow very rapidly and maintain the quality of service. The good news is that we have access to a large pool of qualified experts ad we are very good at identifying what must be done to successfully complete each project.

In this case we initially proposed on working on one project but we have been asked to provide guidance on all similar type projects. This was a growth in the potential size of the project and it comes at a time when another country is considering our services for a similar type of engagement.

Here the potential organizational solutions will not be easily identifiable but will rather look like a decision tree, each branch offering a different probability of success or outcome.

In both examples the development of the organization is evolutionary in nature and the outcomes cannot be easily predicted. This makes planning, financial and otherwise, more difficult.

To remove some of the ambiguity it is best not to engage in long term planning. It is probably better to identify the next decision point and plan to successfully operate through that decision.

For example, with the eHealth Research Institute if we can identify a means of raising enough financial support to move us forward on identifying and attracting 4 to 5 projects for development without finalizing the ultimate organizational structure then we have a short term win and the ability to better study the next organizational decision. We have identified one research organization that has been successful that took six years before reaching its current organization structure.

For the consulting firm, the organizational structure will develop based on the types of demands placed on the organization. Strategic alliances may be critical for success in the short run then economics or other criteria may require developing a larger internal staff.

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