I Have an Idea…So Now What?

One could argue that every physician is an entrepreneur at heart. They’re not afraid of risk, and they’re well aware of the potential rewards. It’s no surprise then to see so many physicians making the transition into the role of startup CEO. But the path to a successful company is not without its share of challenges. All too often, this leads to a physician saying “I have an idea…so now what?”

While every company’s journey is going to be different, there are some constants between them. We will cover these commonalities and discuss how to overcome those challenges. Along the way, Dr. Rajesh Dash will talk about his journey with HealthPals. HealthPals is a company that Dr. Dash founded in 2015. After shifting its market focus, HealthPals found success as a data and business partner with the American College of Cardiology.

Examine the Market

The first step in any successful company is to build something that somebody wants. While this definitely sounds simple, and even trite, it’s a challenge that often leads to failure. In the world of healthcare, the best advice is often to focus on innovating within your present field. You already know the challenges that you face, and the problems that you wish someone would solve. Staying inside of your own field gives you a competitive advantage over working elsewhere.

Dr. Dash had been working as a preventive cardiologist. He was on the staff at Stanford University, focusing on predictive imaging. The genesis of HealthPals came from a clinic that he started to identify and treat risk factors in young South Asians. His own work had showed him that many patients were not undertreated for their own risk factors, and he believed that a digital service could help give them more effective treatment.

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Once you know the problem that you want to solve, you need to determine the potential market size for your product. Is your solution’s target so precise that it ignores a larger potential? What competitive advantages can you bring that over the status quo or your competitors? What price is someone willing to pay for what you’re offering? Until you have a good idea about the answers to these questions, it’s not worth moving forward to the next step. So do your research, and tap into your personal network to help clear away confusion.

HealthPals found that there was a broader need for their idea than what a single clinic could provide. As Dr. Dash and the team continued their research, they found that many patients met all the clinical criteria for medications, but few had started them.

Further, the team found a gap in the use of evidence-based guidelines versus the current treatment plans. This gap showed the need for a solution that could reach a wider audience than what the team had been focusing on before.

Write the Plan

Now armed with the information from your market research, your next step is to put it into a business plan. Your plan should make it clear what your business does, how you intend to attract customers, and how you will structure the company.

In the startup world it’s also important to distil this business plan into a slide deck that you can use to tell your story. Investors, early employees, and even advisors will want to have this explanation available to them.

Build the MVP

The MVP, or minimum viable product, is the first iteration that shows what a company is able to do. For many entrepreneurs, the MVP or prototype becomes a stumbling block. Showing this incomplete work to anyone is embarrassing. But as LinkedIn co-founder Reid Hoffman says, “if you’re not embarrassed by the first version of your product, you’ve launched too late.”

Though the focus of the article is on technology, Free Code Camp has a great explanation of an MVP process:

1 – Start with a single, simple product solving a tiny subset of a Grand Problem

2 – Keep iterating, while constantly solving bigger, related problems en route to solving the Grand Problem

3 – Constantly communicate the vision of the Grand Problem that you are solving.

Sometimes the MVP isn’t designed as an MVP at all. In Dr. Dash’s case, the clinic was the MVP when it was first built as the end goal. It wasn’t until he started working in the clinic, focusing on one population group, that the grand problem came into the picture. By looking at the data that the clinic was using, Dr. Dash was able to see that there was a broader problem that he wanted to address.

Cardiologist Dr. Billy Cohn has developed numerous prototypes over the years, and now holds over 90 patents either granted or pending. In Dr. Cohn’s case, he built many of his prototypes from scrap materials, pieces that he acquired from home improvement stores, or even parts from a dollar store. His work is a perfect example of not overthinking an MVP. They only need enough function and refinement to get the job done. There is plenty of time to come back later and improve on the original idea.

Let the Data Decide

One of the toughest challenges that any entrepreneur can face is finding out that their original idea needs to change. Sometimes it’s a lack of customers, other times it’s a matter of finding new information once the MVP is out in the world. Regardless of the reasoning, it’s important to keep an open mind and not get overly-attached to the first idea.

HealthPals Screenshot

Dr. Dash’s experiences with data caused him to make a significant pivot. “We set out to build something quite different than what we are now,” he said. “The first iteration was a point-of-care solution. We showed automated, personalized, evidence-based lists of guideline-driven treatments. Physicians really liked the idea, but nobody was willing to pay for it.”

The concept of product-market fit is an area that often trips up entrepreneurs. The pitfall to avoid is that of being so in love with your original idea that you’re prevented from seeing a broader need or a bigger picture. For HealthPals, the shift was to move toward health systems rather than solo or other small practices.

Never Stop Exploring

We spoke earlier about looking for ways to innovate within your current field. The next step after finding the right idea is to explore ways that it can serve more people. Dr. Dash started by focusing on a specific problem that was part of a larger issue. His work took him from a single clinic, to a point-of-care startup, and eventually to health systems. As it stands today, HealthPals has developed a clinical intelligence system (CLINT, for short) that allows patient data to be mapped to the evidence-based criteria of the customer’s choosing.

CLINT has opened the door for HealthPals to become a data and business partner with the American College of Cardiology. Now, instead of a single clinic or a handful of offices, HealthPals can run virtual clinical trials against 200 million patient life-years of de-identified data. These trials can test whether recommended treatment actually works, or if it’s an ineffective status quo. Beyond these tests, HealthPals can now provide analytics back to the various health systems and companies that work with them. As Dr. Dash tells us, “the ACC is a tremendous channel partner, and working with them has been a huge turn of events for us.”

Read, Research, Repeat

No one article can ever encompass every step required to go from an idea to a successful product or company. So let this serve as a primer for you. As you’re dealing with the frustrations in your daily work, and thinking of ways that you could solve them, you now have a starting point for making a difference.

Along the way you might need technical help, investment dollars, or other assistance. While the grand problem may seem daunting, remember the MVP method of finding a solution. Start by fixing a small problem, look at the market to see if there are bigger opportunities, and don’t hesitate to find a partner to help you grow. You’re already an entrepreneur at heart; put that drive to use and change the future of healthcare.

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The New Rules of Healthcare Innovation

I started this week at home in Nashville, attending the Health:Further conference. This year, it seemed to me, that there was an overarching theme that I will call “the rules of healthcare innovation.” AngelMD President Dan Parsley and SVP Mark Mescher were both speaking, so it gave me a good opportunity to attend some talks, panels, and one-on-one meetings. These are the topics that I heard, time and time again.

Innovate Where You Are

While talking to investors, one thing almost all of them said was that they wanted to see innovation led by founders within their own areas of expertise. It’s a sentiment that was echoed by AngelMD Lead Investor Dr. Suzanne Manzi in her interview last month.

“I’ve seen promising companies, but sometimes they’re run by people who don’t have experience in the market that they’re trying to enter. They can have a great product, but the odds are stacked against them if they lack the background.”

It’s easy to look around and see frustrations within the healthcare world. For the entrepreneur, these frustrations look like targets for innovation. But the sad fact is that, often times, the innovation target is far removed from the entrepreneur’s area of expertise. This leads to inexperienced, poor decisions, and oftentimes to unnecessary failure.

The Wisdom of the Crowd

With the first point in mind, clinician-entrepreneurs must also be careful to not be overly sure of their own expertise. There will be times when something bothers you personally, and you think that there’s a better way of doing things. But that doesn’t mean that anyone else is having the same problem.

The quick way around this pitfall is to survey the wisdom of the crowd. Talk to other providers in your specialty. See if they’re having the same frustrations that you are. Ask them what they’ve tried in order to get around those frustrations.

At AngelMD, part of our secret is in the power of the network. We make it easy to connect to other healthcare providers in your field, so take advantage of that opportunity. This is especially important for those who work in smaller geographic areas, or less-populated specialties. Use your AngelMD profile to connect to others, ask them for their feedback, and put the crowd to work for you.

Organizational Opportunities

I shouldn’t have been surprised to hear Marcus Osborne from Walmart talking about wellness innovation, but I was. My jaw shouldn’t have dropped when I heard HCA’s stats surrounding innovation, but it did. Over and over again, I heard stories about large organizations placing bets on innovation. Companies are putting big money into innovation — especially the kind that solves their own problems.

We often hear stories about the person who slogs through their 9 to 5 job, then heads home to pursue a passion. These days, those stories are changing. Companies that you might not expect (look back at the first paragraph, and notice that I said Walmart) are tapping current employees and hiring new ones, in order to drive innovative solutions within healthcare.

This shift in culture is opening new doors. In some cases, it’s placing doors where they never existed before. Instead of looking to outside vendors, many companies are willing to put down table stakes in order to be a player. So before you go looking around, or spending late nights on your own, investigate the opportunities that already exist inside your organization.

There Are No Rules

It might seem strange to end a post about rules by saying that there are no rules, but hear me out for a final point. The fact of the matter is that the world of healthcare has changed. Innovation is coming from every direction, and the only thing set in stone are the regulations that govern all of us.

Innovators have spent years being constrained by what others have told them they can’t (or shouldn’t) do. But today’s landscape is much different. Age matters less than it ever has, experience is less difficult to gather than ever before, and the connected world that we live in means that global collaboration is a simple reality.

If Health:Further taught me any one thing, it’s that there is not only a need, but also the means, to bring about the future of health. So stop waiting for someone to give you permission. Build something, advise someone who is, or invest in those who have. The world of innovation is ours.

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The Business-Building Power of Focus

Sharon Dye uses her nearly three decades of consulting experience to help Insperity’s clients determine the steps to ensure business success. During her talk at AngelMD’s Alpha Conference 2018, Sharon explained the power of focus when it comes to building a business.

Based upon four quadrants of success, Sharon urges companies to appreciate the impact that their culture can have. This understanding changes every step of the business, from the interview process to the exit.

Good Morning. I was not going to use the word culture, but I don’t know where our last speaker went to sit down, but he opened the door, so I’m going to go right on through it, and through this talk, use that word, and I’ll define it in just a second.

But mostly what I want to talk to you about today, I’ve got about 15 minutes, and I want to talk to you about the power of focus and what happens when focus doesn’t exist.

One of the major things that I, 30 years now, have seen be impactful and help organizations, entrepreneurs, and businesses actually accomplish what they want to accomplish is when they give focus the full weight that it deserves.

But, we should start off with a story that will describe everything I’m going to try to describe better than I’ll be able to describe it.

A dear friend of mine was vacationing with her husband in the Midwest, a small little town, and every morning, she … That is not her, by the way. I wouldn’t betray her by using her actual photo, which you’ll understand that a little more as the story goes on. She would wake up every morning and go jogging, and it would always end in this coffee shop/ice cream shop/store because she was going to get an ice cream cone as the reward for jogging in the morning.

So, she gets to the store every morning, and she says hello to the guy that works there, and over the several days, they developed a nice little friendship. She gets her ice cream cone, and she slowly walks home, enjoying her ice cream cone. Great morning. She goes to the ice cream shop one morning, and she walks in, and there’s one customer inside, sitting off the left, and it’s Paul Newman, and everything solid in her goes to liquid. She is … There he is, and she’s trying really hard not to faint dead away, and she’s swooning and doing all of that, and she decides, “I’m going to be a mature adult woman that is not going to bother this man and let him know that I’m swooning. I’m going to pretend that he doesn’t even exist and carry on and get my ice cream cone.”
Sharon Dye: She goes up. She orders her ice cream cone, pays for it. Puts the change in her purse, and goes to walk out to the car, and is very proud of herself that she maintained decorum, and did not bother Paul Newman.
Sharon Dye: She gets to the car. Goes to get in, and she doesn’t have her ice cream cone. So, she decides, “Fine. I’m going to face the music and go back and get my ice cream cone.” She walks back inside and looks at the counter where the holder is, where you’d put the ice cream cone, and it’s not there.
Sharon Dye: She goes up to the counter. The kid that works there has gone to the back. She’s looking all around. Doesn’t know what to do and decides, “I walk of shame back out to the car. I don’t know what happened.” And as she turns, and she’s going to walk out, of course, she catches his eye, and he smiles and says, “You put it in your purse.” There it was. Upside down, in the purse. That’s the great power of focus when it meets distraction, and Paul Newman being pretty distracting.
Sharon Dye: So, power of focus. Let’s talk a little more about that. It’s a little word that has a massive impact on return on investment, a massive impact. I’ll let you read that for yourself. The point to this slide, the point to all of it is, if you own a business, if you’re thinking of investing in a business and you want to say, “What’s the one thing I should pay attention to everyday, all day, what is it I should use to vet for? Do I invest in this business or this business?” I would proffer to you that you should vet for, and if you’re running a business, you should pay attention to, are we actively, constantly paying attention to what it is we’re focused on doing. Is it the ice cream cone, or have we gotten distracted by Paul Newman? It will make all the difference in the world of how long it takes you to get to your success marker, if you hit your success marker, and what’s kept you from hitting it.
Sharon Dye: All right. So, if I were you, I would be asking the question, “Well, if I’m going to pay attention to focus, what do we focus on?” And I’m going to take 30 seconds and describe you a model that we developed by a gentleman named Dr. William Schneider. Bill lives in Denver. He’s been doing research around the impact of culture to business success. He’s been doing his research for the better part of 40 years now. I won’t go into all the research that’s he’s come up with behind it. I’ll just ask you, just believe that it’s important, and we’ll go on from there.
Sharon Dye: What he developed was a four-quadrant perspective of what to focus on. So we’re going to fill in the four quadrants and go from there.
Sharon Dye: This axis is measuring and is intended to describe what is the organization, what is the enterprise relationship to time? If it’s an actuality relationship, it means that you are doing something that’s more present-oriented. So think months/year. It’s a pretty quick, I’m doing what I’m doing. I’m making a product, or I’m delivering a service, but what we’re doing is more about the present than it is long distant future. Long distance future is if you have a possibility orientation to time.
Sharon Dye: So, we’re doing what we’re doing as a company for the long term future. This is the decades/generations. Is the distinction clear? Good enough? Okay.
Sharon Dye: Now we’re going to add a horizontal axis, and we’re going to talk about what is the organization? What are the enterprises? Where does it go for information? What kind of information does it trust when it wants to make a decision? Does it trust personal information? That would be on Yelp, all of the reviews. Personal. It doesn’t fit on a spreadsheet. It’s anecdotal personal information. Or, does it trust impersonal information? So, that would be the stars on Yelp. 4.5 out of 5. Two very important kinds of information, but distinct from one another. Clear enough? Okay.
Sharon Dye: Okay, so now we have obviously two axes that have created four quadrants, and I want to … The last thing I want to point out here is that the lines are dashed. They’re not solid. This is intended to say, one of these quadrants for your enterprise is where you start your focus, and the other three is going to support that. But make sure that you’re always paying attention to the quadrant where you would start for our enterprise, and let the other three be supportive. The minute you tilt off that, now you’ve diffused focus. Now you’ve introduced Paul Newman into the situation. Okay.
Sharon Dye: All right. So, Bill plotted around those four quadrant’s descriptions of what an enterprise would focus on if we took an actuality time orientation. That’s more present focused, and we said, “You’re probably going to rely personal information to make your decisions.” He described that as an organization that has a focus of what Bill called cenergy.
Sharon Dye: So, you interact with your consumer, your customer, your client. You interact in a way in which you co-create what it is, the solution you need to create. Think about a real estate person. We want to buy this building, and we sit down with a real estate agent, and we’re going to co-come up with, what do we offer for the building. I, as the purchaser, am going to bring my budget. I’m going to bring why I want the building, what I’m going to do with it, all of my own information. Real estate agent is going to bring the comps for neighboring buildings, etc, etc, and together, we’re going to walk through and escrow process and co-create, a long the way, all the solutions and answers that we need to. And that’s what Bill describes as a cenergy focus.
Sharon Dye: If we stay on the top, and we move to the right, Bill called that a certainty focus, and that is saying we’re still in a present orientation of time, but we’re going to rely on impersonal information.
Sharon Dye: So, if we go up to that red quadrant there, we could easily plot in that kind of box Walmart, very commodity-like businesses. We would put military, law enforcement. They’re going to rely on information that sits in a spreadsheet as their first place to go when making a decision, and again, very commodity-like, it’s a present orientation. Not looking to change the world decades from now. We’re just going to keep doing what we do in a present orientation.
Sharon Dye: All right, now let’s go down to the bottom. We’ll stay on the impersonal side, and we’ll go to the blue, and this is an enterprise and organization that has as its focus what Bill called superiority, and that says we do what we do for the longterm future. We could take 10 or 15 years to develop the tool, the model, the service, the whatever we’re doing. We could take 10 or 15 years to do it, but when we get it to the market place, we will reset the standard. Tesla. We’re going to reset what it means to drive a car. That’s what this organization is doing, and again, it could take 10 to 15 years to get it done. That’s fine. They don’t need to be first, but when their product, their service hits the marketplace, it resets the standard, resets the bar. Obviously Apple, etc. would fit there.
Sharon Dye: All right, now let’s go to the last one, and that’s the enrichment focus, and that is an organization and enterprise that says our focus is we are here to change the world. We want to elevate the human spirit. We’re in this for the long haul. We want to make sure that there are no people in the world … There are no children without shoes. Tom’s shoes, for example. Non profits could certainly fit there, but not exclusively, and we exist, our focus, and if you want to join us as an enterprise, our focus is that we’re doing something, whatever our cause is, so that we ultimately eradicate that problem. Mother’s Against Drunk Drivers. On and on. You can plot several of them there.
Sharon Dye: So those were the four that Bill came up with through his research that were four core focuses, and again, going back to what I said at the beginning, the point here is, that you start with one. You have one that is at the very, very center for you, and what is it at the core of your enterprise that you are saying, “If you come do business with us, consumer, this is what we’re promising you.” And the other three become in support of that, of delivering that.
Sharon Dye: Now I’m going to introduce the culture word. Bill defines culture as the way you do everything. Please take the word everything literally, and what we’re describing here is what you’re promising your customer, which is outward focusing, and then inward focus is culture, and once you determine what you’re promising your customer, it tells you how you need to organize yourself internally to make sure that you deliver on that customer promise better than your competition.
Sharon Dye: And one of the things you have to answer is, who is our customer? It’s astonishing to sit in board rooms and executive tables and say, “Who’s your customer?” And I get a list of six people. And it isn’t the six people. You have a customer, and everyone rallies with focus around doing what we need to do to make sure we deliver to that customer what it is we’re promising we’re going to deliver.
Sharon Dye: I had a client who was a retired five-star general in the Marine Corp, so a rather intense fellow, and he had come from the world that was in the upper quadrant, I’m sure you can imagine, and he understood life that way. And he retired, and he decided to take some of his money, and he wanted to own some franchises, and for lots of reasons, he decided to buy, franchise Kinder Care, the preschool chain. So, he bought a few Kinder Care. Natural, natural fit. No problems there whatsoever. None.
Sharon Dye: So it was before I met him, and he decided to buy Kinder Care, and when I met him, it was basically anarchy was going on amongst those that were running the Kinder Cares and him. It was pretty ugly, and really nice preschool women were using language that they never, ever, every thought they would use. No Sunday School teachers were allowed to be present at several of the meetings.
Sharon Dye: So, he came in, and as you can imagine, one of the first things he did, having the focus that he had, which was putting himself as the customer. How does this serve and make sure it does what I want it to do.
Sharon Dye: So, walked in the door, looking at Paul Newman, and not the ice cream. So he walked in to find out where they can be operationally efficient. Of course he would. Right? Yeah. So he finds out what they’re spending on milk and crayons, and he decides that Johnny gets a glass of milk, and if he wants more, that they pour the milk, and then they put water in it so it dilutes. “We don’t buy new boxes of crayons here. You just keep using the broken ones and the nubs.” And then, this is true, then he decided that discipline can’t start too early. So, he decided what would be great is after nap time, if they learned how to fold their blanket and put it neatly in the cubby, and they had drills about how to do that.
Sharon Dye: So it didn’t take too long ’til Mom’s picking up Mary and Johnny, and “How did it go today?” And Johnny’s crying and saying, “Miss Mary is going to leave, and I love Miss Mary, and she’s not going to be here, and I didn’t fold my blanket right today.” So Mom hears this for a couple of days, and she’s thinking, “What’s going on here?” And so she comes back in and stops and sits down and has a little talk with those that are running it, and they start telling her, “So we’ve instilled this program that we do every day after nap time and fold the blanket, etc, etc.” So, Mom has a very easy solution to this problem. She sends Johnny here to be hugged and nurtured and told that he can do and be supported and have an ugly finger painted thing that’s just put up on the wall and framed. That’s why she sent him there. So, it’s a simple solution. They’ve lost focused. She hasn’t. She just goes down the road to the place that has focus. And out go Johnny and Mary and Sally and Suzy. And he can’t figure out why people aren’t going here.
Sharon Dye: So, we had a conversation. He wanted me to fix the people. Fix Miss Mary. I said, “You don’t have a people problem. You have a focus problem. You have a focus problem. You lost sight of what you’re here for. Your reason for existing is all about that lower left. That’s why you’re here. You want to enrich Johnny and Mary and Sally and Suzy. You have a focus problem. If you fix the focus problem, the people problem is done.”
Sharon Dye: And he needed to make sure that costs were contained. Of course he did. But that wasn’t the focus.
Sharon Dye: I loved in JJ’s presentation yesterday, he put up the letter from Stanford, and I quickly read ahead in the first paragraph, and my soul cringed. He has a focus problem that’s about to create a really big people problem, but it won’t happen overnight. It always happens gradually, and all of a sudden, the people he wants to work there won’t work there anymore, and he’ll be left with those that are mediocre and those that are down at the bottom, and that’s who he’ll get, and he’ll say he has a people problem, and he doesn’t have a people problem. He has a focus problem.
Sharon Dye: My friend who went to get an ice cream cone, her problem wasn’t her problem. She had a focus problem. Who wouldn’t? Sorry gentlemen. I don’t … Insert what woman here. It’s Paul Newman for us, but she had a focus problem.
Sharon Dye: So, I started with saying that in all of the research that Bill did, and we’re not doing it justice, I admit right up front, 40 years in 15 minutes isn’t quite doing it justice, but having said that, it really can be boiled down to if you want to know how to organize things internally, [inaudible 00:18:04], first answer what is it at the core your entity is promising your customer. Take as long as you need to figure out who your customer is. You get one. It’s not six people. It’s not the investors. It’s not this. It’s not that. It’s one. Stay focused there, and everything will get organized around that, and you have a decision-making tree you now have organically created because of focus. You know how to interview people. You tell them what you’re focused on, and you watch their body language and their face, and you ask them, “How would you help us deliver this?” Does their last six matters really matter? Not as much as we think.
Sharon Dye: What matters is, here’s what we’re doing. How could you help us do this? What would you bring to the table, and you have an entirely different interview process, and then you stay out of the people problem business ’cause you have a focus-success business, and you have a ecosystem that operates together, singularly-focused on getting the ice cream cone.
Sharon Dye: I have one minute left, and I want to know if there are any questions or thoughts or comments. Yes, please.
Speaker 2: I always thought that in healthcare, we have three customers. We have the patients who is the beneficiary which [inaudible 00:19:23], but we need to have the buy-in of the healthcare professionals, and we need to have the buy-in of the insurance companies. Would you agree that in healthcare we have three customers, not one?
Sharon Dye: No. I think you have one customer, and you have people that you need to be in that ecosystem, helping ensure that the customer you have gets what they need because everybody else upstream and downstream will get what they need as well.
Speaker 2: So you think the patient is the customer?
Sharon Dye: Yes. I do.
Sharon Dye: Anything else? Thank you all very much. Thank you.

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On Call Ep 10 – A Seat at the Table: Boards & Startups

Boards are an important part of any company, but can be especially critical of a startup’s success. In this episode, we go over some pitfalls in board organization and leaderships with the help of Ana Dutra, CEO of Executives’ Club Chicago.

The full transcript can be found below.

Susana: Hello hello and welcome to episode 10 of On Call with AngelMD, the podcast at the intersection of healthcare, technology, and finance. I know I say it every episode, but I’m going to say it again: please rate and review us on iTunes or if you’re listening from soundcloud give us a like and a follow or a comment. Thank you in advance for your wonderful feedback. Now let’s hop into the episode.

[Clip from HBO’s Silicon Valley]

That was a clip from HBO’s Silicon Valley in which Richard, CEO of the fictional Pied Piper is basically fired from the company he founded. Much of the Season 2 and 3 storylines revolve around the board dynamics and show just how critical a board is to the future of a company, though obviously with a lot more drama.

In this episode, we’re going to explore board dynamics: why boards are important, the impact they have, and what to avoid when assembling your board.

Putting it extremely simply, a board is made up of important people and exists to guide and advise the company through important decision-making. And having a solid board with developed leadership skills is critical. This is something Ana Dutra, CEO of the Executives Club Chicago, has learned in her 28-years of experience consulting C-level business execs.

Ana: The one thing that I can tell you, for those of you who are investors or founders or inventors, is that I have seen great products and great companies failing or not having sustainable success because of poor governance and because of poor leadership. In fact, it is the highest factor for failure of companies no matter what size and what stage they are. You can have the best product, you’re going to be successful for a few years, but if you don’t put the right people in the right places at the right time, that is just not sustainable.

Susana: Organizing a board is an important step in any startup’s journey and it’s one of those tasks that’s never really done. Maybe somewhere along the line you’ll want to add a board director, maybe as your company grows you’ll need more or less input from your board, etc., etc.

In terms of who should be on a board, it varies. You will definitely want to make sure they have a good understanding of the industry you’re operating in. Some board members will join the company through an allocated seat after the close of a funding round. According to a TechCrunch article, it’s common to add a board seat for the lead investor of each funding round.

It’s a good practice (and Ana will talk about this later) to have an “independent” seat who is not an investor and not an employee. Though they should still be well-versed in the company and industry, this allows for somewhat of an outside perspective. Here’s Ana speaking about that and best practice for the size of a board.

Ana: Board Size. For startups, you have investor, you have the operators so the executive directors or the executive advisors. As I said, as least one or two independent directors should be in place. Think about who you serve. Think about the people who are validating your science or the data behind the company. Think about diversity and the … I was just having a conversation right before we started and just look around this room. I cannot believe that the markets that you’re serving are not low diversity as we see in here. So think about adding, not only people who can add value from a content perspective, but who can also represent known diverse segments in your company. They will help you to get more business. They will help you to see things from different perspectives. They will help you to attract capital from other sources as well.

So many times having one, and just one for startups, independent director on the board can make a huge difference. The other question is around who that the independent director is going to be. In the health care space, for those of you who followed what happened with Theranos or Outcome Health, just to site two very recent examples. Theranos did not have one scientist on their board. Didn’t have anybody who was there just to ask the right questions. It’s not to probe. It’s not to confront. It’s not to run the company. It’s just to ask the right questions. Outcome Health, I don’t believe that there was any poor-ill intention, in terms of the data, the big data, that they were analyzing and disseminating. But you know what? It was not right. When investors discovered that, they felt they were being deceived. So that’s why having an organization like AngelMD who is bringing all of you together to actually talk about those issues. Thinking about governance and organizational models in your startups and in the companies that you’re thinking to invest in and what are the right questions to ask, can be incredibly helpful.

Susana: So building a board takes a lot of work, and it’s an ongoing process so let’s talk a little bit about possible pitfalls in that process.

Ana: Let’s talk a little bit about the most common causes of disruptions in boards. The first one is misalignment around the mission of the board and the strategy of the company. That misalignment, of course usually in two ways. It’s either amongst board members, as I said if you have investors, those of who are in the room, the founders, the operators and they’re all looking at the business in the long term from a different perspective. We have a problem, Houston, right? The other one is between the board of advisors and the CEO and the person who’s running the company. Again, I couldn’t be more clear, boards are not meant to run companies. They are meant to ask the right questions. They are meant to advise, but if you have an adversary relationship or if you don’t establish roles clearly enough with the CEO operating the day to day business, we will have problems. This should be a partnership relationship not an adversary relationship.
The other type of misalignment that I’ve seen very commonly is around the future of the company. Are we growing to sell? Are we growing to acquire? Are we growing to IPO? What the heck are we doing here? Until you have that type of alignment, you will have serious discussions in the room that are not necessarily going to touch on alignment, but that are caused by the lack of. So we see very clearly when companies are talking about succession. So who is going to succeed the founder or the CEO? You start to see different board members coming up with different competences or profile requirements for the next leader. When you see people in radically different camps in terms of who they think should be leading that company, I can assure you that the misalignment is not around the individual of the role, it is around the strategy of the company. That’s the difficult conversation you need to have – unprepared directors.

Which takes us to the third point. Which is misalignment around expectations for directors. The first thing I always ask when I’m being asked to sit on a board is, what do you expect from me? Why are you asking me to be a candidate for this board? Is it because of my experience, technical competence, or is it because I can make connections for you or I can help you to raise money or is it because, in the case of some advisory boards, you expect me to be a little bit more hands on? So, for both sides, investors and board candidates as well as operators in the room, founders in the room, that needs to be abundantly clear.

Susana: These misalignments Ana’s talking about? They can pretty much all be explained as a breakdown of communication. She points out three misalignments: those around the mission of the board and the strategy of the company, those around the future of the company, and those around the expectations of the board member.

Those three aspects: mission, future, and expectations basically boil down to culture. So no matter what side of the table you are on, you need to ensure there’s a culture fit.

A board member position is essentially a part-time job. Would you accept a job where don’t think you fit it? Would you hire an employee who doesn’t seem to get along with the existing team? No! Of course not! And the same applies here.

A board should not be a source of conflict, but rather a resource. That’s why boards have evolved over the years and regulatory standards have been set, I’ll let Ana elaborate on that.

Ana: So, boards started very simply because people were investing money in companies and they wanted to know how they were run so there were no legislators, there were we no organisms regulating how boards should work. As I mentioned over the course of the last few years, not only because of the world financial crisis, or Sarnes Banes Oxley or you take World Comm and other big scandals and the scrutiny increase quite a bit. Investors also became savvier, so stock holders are saying hey, we want to have a say on pay of CEO, we want to understand how much equity is being given to employees at the top. Now you have the ISS with institutional investors saying if we are institutional investors, here are some guidelines that we want to impose on you.
So now there’s so much more responsibility over directors, which changes the role of directors as well, as well as investors. What we even think about in the span of investors? Because so many times the interest of the founder, the inventor, the interest of the current operator and the investors might be at odds, so although, at the end the ultimate goal is to increase value of the company. Whether you’re going to sell it or you’re going to continue to grow it, but you have investors and I work a lot with private equity groups, and when you have many private equity partners on the board, that creates already a tension point. With the CEO who is hired sometimes to replace the founder to take the company to the next level but one wants to accelerate to sell fast, the other one is thinking long term growth and sustainability.

Susana: No matter what side of the boardroom table you’re sitting on, the experience can be incredibly rewarding. As a board member, you get the opportunity to guide and enthusiastic individual as they pursue the unknown. And as a startup exec, you get a wealth of information and experience to take advantage of, so take advantage of it!

There’s countless stereotypes around board meetings and how they are a waste of time, but you’re only going to get out what you put in. To start getting the most out of your board, try drafting one big question for them per quarter. Not only does it show you value their input, but it’s also a great way to get feedback on “big picture” topics.

Do you have tips and tricks for how to best utilize a board? Have advice for future board members? Join the conversation on Twitter with the #AngelMDOnCall.

Thank you for listening to on call with AngelMD. Visit us at angelmd.co for more information. You can follow us on twitter @angelmd_inc, we’re on facebook at /angelmdinc and you can find us on LinkedIn as well. I’m also on twitter @smacha1995. As we’re a new podcast, we’d love to hear from you. Tweet us with the hashtag #AngelMDOnCall and let us know what you thought of the episode. Thanks again for listening, we hope you join us again.

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Ana Dutra – Avoiding the Pitfalls of Startup Leadership

When you’re starting a company, the advice you’ll usually hear is all surrounding the idea and the execution. There are very few words paid toward the leadership, governance, and continued growth of the startup into its eventual goal. As the CEO of The Executives Club, and Director of The CME Group, Ana Dutra has over 30 years of experience in helping companies identify and execute growth strategies. During her talk at AngelMD’s Alpha Conference, she gave some sound advice that is equally as applicable to startups as it is to investors and advisors.

Ana’s direction focused on developing the best potential board of directors for a young company. She walks through tough questions, and points out the challenges that many companies face. As she points out, even the best products can be ruined by having a company whose leadership is unable to predict the traps that will cause them to fail.

First of all, it is an honor to be here. I am extremely humbled because even though I do come from a family of physicians, so I hope that that helps, sisters, brother-in-law, husband, two daughters now in medical school, I come to talk about a different science. Which is a science of governance and leadership. I was lucky enough throughout my career to be able to experience good and bad and different and horrible governance and leadership from a number of different angles, not only by consulting to companies and see them acquiring businesses and divesting them, but also sitting in boards, startups, global public companies, private companies, then also being a CEO myself, and then doing my time as CEO of Korn/Ferry Consulting doing board assessment throughout the world.The one thing that I can tell you, for those of you who are investors or founders or inventors, is that I have seen great products and great companies failing or not having sustainable success because of poor governance and because of poor leadership. In fact, it is the highest factor for failure of companies no matter what size and what stage they are. You can have the best product, you’re going to be successful for a few years, but if you don’t put the right people in the right places at the right time, that is just not sustainable.

The good news is that, in the past and if you think about governance model theories and boards and advisors evolved, that is kind of a hobby, right? Then the regulators started to come in. For example, in 2002 Nasdaq actually said that no company must have dependent directors or executive directors in the nominating committee if they wanted to be listed with Nasdaq so that it’s to institute some independence. Then in 2009, the FCC said well every public company must have a CEO succession plan in a succession for the successors of the CEO to be listed in the public Nasdaq or New York Stock Exchange. Now, you have ISS talking on [inaudible 00:02:38] so there’s more scrutiny around governance around public companies. Then we have the big issues and the big scandals we have for Bane Oxley and then we have all the big scandals that increases scrutiny.

But when it comes down to startups or to private organizations, there’s very little regulation out there. I have to say that it warms my heart that over the last three months, I’ve been asked to speak in VC conferences and startup conferences and incubators three times just in the last couple of months. Which means to me, that eyes are being opened to the fact that if you don’t put in place great governance and great operating structure and great leadership from the beginning, you are dramatically reducing the odds of success for your company.

I have to tell you a story. About 15 years ago, I was asked to speak to a group of physicians and I told my husband I was so excited about it because it was the first time that I was going to talk to a group of physicians and he said, “oh man, nobody is going to pay attention to you.” And I said, “oh why is that?” He said, “I’ll tell you why. Because one is going to be thinking about the next procedure they have to do, they other one is going to be saying this is not real science, what am I doing here and the third one’s going to be thinking, I’m only sitting in this room cause my boss told me so, how long is this going to last?

What I see now is quite the opposite. What I’d like to do in next 15 minutes is to talk about three things. First of all, we start to talk about evolution and maturity of governance model and boards. Then let’s talk a little bit about size, composition – I know there’s many investors in the room and one thing that I’ll tell you you should be looking at is how is this company organized, how is it governed, who is in the advisory committee, board or student committee or whatever you call? And the last thing, let’s talk a little bit about challenges, traps and how to overcome or at least predict and anticipate them. Is that fair game? And then we’ll have some time for questions.

So, boards started very simply because people were investing money in companies and they wanted to know how they were run so there were no legislators, there were we no organisms regulating how boards should work. As I mentioned over the course of the last few years, not only because of the world financial crisis, or Sarnes Banes Oxley or you take World Comm and other big scandals and the scrutiny increase quite a bit. Investors also became savvier, so stock holders are saying hey, we want to have a say on pay of CEO, we want to understand how much equity is being given to employees at the top. Now you have the ISS with institutional investors saying if we are institutional investors, here are some guidelines that we want to impose on you.

So now there’s so much more responsibility over directors, which changes the role of directors as well, as well as investors. What we even think about in the span of investors? Because so many times the interest of the founder, the inventor, the interest of the current operator and the investors might be at odds, so although, at the end the ultimate goal is to increase value of the company. Whether you’re going to sell it or you’re going to continue to grow it, but you have investors and I work a lot with private equity groups, and when you have many private equity partners on the board, that creates already a tension point. With the CEO who is hired sometimes to replace the founder to take the company to the next level but one wants to accelerate to sell fast, the other one is thinking long term growth and sustainability.

So many times having one, and just one for startups, independent director on the board can make a huge difference. The other question is around who that the independent director is going to be. In the health care space, for those of you who followed what happened with Theranos or Outcome Health, just to site two very recent examples. Theranos did not have one scientist on their board. Didn’t have anybody who was there just to ask the right questions. It’s not to probe. It’s not to confront. It’s not to run the company. It’s just to ask the right questions. Outcome Health, I don’t believe that there was any poor-ill intention, in terms of the data, the big data, that they were analyzing and disseminating. But you know what? It was not right. When investors discovered that, they felt they were being deceived. So that’s why having an organization like NGOMD who is bringing all of you together to actually talk about those issues. Thinking about governance and organizational models in your startups and in the companies that you’re thinking to invest in and what are the right questions to ask, can be incredibly helpful.

Let’s talk a little bit about size, composition and agenda. That’s different for startups, for companies who are at the more mature stage, private companies, public companies, family owned companies, founder led companies. I have to tell you the whole issue of having founder and inventor led companies that grow with a block buster product to a certain size and then is not successful, it’s what enabled people like me throughout my career to then spot those companies and buy them, sometimes, pull the person out and then start to grow the company through digitization or through doing things that the founder, who was great inventor, could not see from a business perspective and understanding when is the time to make that shift and having a board of directors around in place to say, this is the right time, there’s nothing wrong with the person, there’s nothing wrong with the idea to that point, but it’s the time to then think about the next step, is extremely important as well.

As I said, public companies, which is not the focus of our conversation, are going to have that mechanism embedded in the way that boards have to do business. You have to have an executive committee, you have to have an audit committee, you have to have a nom and gov committee. Having said that, why should startups be any different? An audit committee, or a compliance committee, at least should be a part of any foundational board of directors or board of advisors. Which is what’s going to prevent many companies from doing things that they don’t even know are non-compliant from a business perspective or from a tax or from a legislation perspective. They’re just doing it because the mindset of the inventor and of the founder is not necessarily focused on those other issues. So think about that as well.

Board Size. For startups, you have investor, you have the operators so the executive directors or the executive advisors. As I said, as least one or two independent directors should be in place. Think about who you serve. Think about the people who are validating your science or the data behind the company. Think about diversity and the … I was just having a conversation right before we started and just look around this room. I cannot believe that the markets that you’re serving are not low diversity as we see in here. So think about adding, not only people who can add value from a content perspective, but who can also represent known diverse segments in your company. They will help you to get more business. They will help you to see things from different perspectives. They will help you to attract capital from other sources as well.

Let’s talk a little bit about the most common causes of disruptions in boards. The first one is misalignment around the mission of the board and the strategy of the company. That misalignment, of course usually in two ways. It’s either amongst board members, as I said if you have investors, those of who are in the room, the founders, the operators and they’re all looking at the business in the long term from a different perspective. We have a problem, Houston, right? The other one is between the board of advisors and the CEO and the person who’s running the company. Again, I couldn’t be more clear, boards are not meant to run companies. They are meant to ask the right questions. They are meant to advise, but if you have an adversary relationship or if you don’t establish roles clearly enough with the CEO operating the day to day business, we will have problems. This should be a partnership relationship not an adversary relationship.

The other type of misalignment that I’ve seen very commonly is around the future of the company. Are we growing to sell? Are we growing to acquire? Are we growing to IPO? What the heck are we doing here? Until you have that type of alignment, you will have serious discussions in the room that are not necessarily going to touch on alignment, but that are caused by the lack of. So we see very clearly when companies are talking about succession. So who is going to succeed the founder or the CEO? You start to see different board members coming up with different competences or profile requirements for the next leader. When you see people in radically different camps in terms of who they think should be leading that company, I can assure you that the misalignment is not around the individual of the role, it is around the strategy of the company. That’s the difficult conversation you need to have – unprepared directors.

One of the reasons why Nasdaq does not allow non-independent directors on the nominating committees, because we don’t want to have family and friends in the board. That’s what people will do. If they don’t do that deliberately, they will tend to recruit to their board people who, one, either think or act like them, have the same style, they feel comfortable with, or people who they trust and they believe are going to be loyal to them. So, I know this person is not going to cause me trouble, cause you know what, we’ve been friends for several years, we know each other and I can justify him being on the board, but that’s not necessarily the best solution. My recommendation is very early in the process, I don’t care if you’ve been a company for 20 years or just for 20 months, start to think about your skills matrix. What kinds of companies, experiences, skills you need in your advisory board, you need in your board room.

And for you in the room who are investors, demand it. Demand to see if we’re going to form an advisory board, what types of skills do we want to have? Do we need people with technology skills? Do we need people who are scientists or who understand big data or do we need people who are going to help us to raise money for the company?

Which takes us to the third point. Which is misalignment around expectations for directors. The first thing I always ask when I’m being asked to sit on a board is, what do you expect from me? Why are you asking me to be a candidate for this board? Is it because of my experience, technical competence, or is it because I can make connections for you or I can help you to raise money or is it because, in the case of some advisory boards, you expect me to be a little bit more hands on? So, for both sides, investors and board candidates as well as operators in the room, founders in the room, that needs to be abundantly clear.

Dysfunctional dynamics. When I left Korn/Ferry, I was asked to write a book. The publisher’s who came to me said, “would you write a book about leadership? You do all those workshops and all that.” And I said, “nay, I don’t think so.” Just type ‘leadership’ on Amazon. You’re going to find more than 10,000 titles just on that subject matter. So, we read about all those great leaders, these phenomenal biographies, best in class, world class leaders and then I said people get to the market place and I’ve seen this day in and day out and all they find is leader-shit. It is, right? People ask me … I was seen Billy talking about simplicity and he goes, “did you just come up with that?” I said no, I always thought about that maybe it’s because I’m not born and raised in the US and you think about words in a different way. I thought, my goodness, I am here talking to people, coaching about leadership and all I see is leader-shit.

Guess what? So I wrote the book. It’s actually Lessons in Leadershit and it’s based on research about all the toxic behaviors you find in companies in the workplace and how to address them if they are your peers, your boss, your direct report. Guess what? It doesn’t stop in boards. You have the tyrant and bully in boards, you have the unaccountable, you have the lend grabber, you have the manipulator, you have the political animal in the board room. However, for a company to function you need to get that out of the way. And so understanding how your people are going to operate in the board room and how do you make decisions in particular for startups where much, much higher percentage of decisions are actually made in the board room, is extremely important. So that you don’t have either one person dominating the conversation or you don’t have, for those who are familiar with the Syndrome Abilene Paradox, where an entire family ends up driving three hours to have an ice cream, when at the end of the day nobody wanted to but I went because I thought that my brother really wanted to so I’m going with them. And somebody else’s two kids wanting to go … not that you could be their father, but I’m just pointing to people around … and say well maybe we should go and then they get to the ice cream place and they say nobody really wanted to be in the car for two hours to get this ice cream.

Guess what? That happens in boards more than you would imagine. That’s how sometimes acquisitions are pursued, diversity are pursued. Hives of key people are pursued because nobody actually speaks up or because only one person speaks up. How do you solve for that? Most important, and I have one minute to give the solutions on that.

First of all, let’s be abundantly clear, on advisors and board members and any players, expectations, time commitments, what do you want from them, what they can expect from you. There’s a big agent turn limit debate which is less relevant to you in this room, but instead of saying that somebody has to step out of the board when he or she reaches a certain age, do board assessments. Even if you ask an external consultant or the HR person to do an assessment. Then you will understand who is actually contributing value to the board or to the business in a meaningful way and who is not.

Minimize the opportunities for conflicts of interest. I always tell this story and by the way, you probably have some of that in the health care industry, when a friend of mine who has run a company very successfully, an HR company said to me, you know I think it’s time now for me to get on a couple of corporate boards, can you help me? And I said, sure Kevin, what kinds of boards do you think you would qualify for? And he said, “well I have done most of my company work with pharmaceutical companies so I think I should qualify for boards of pharmaceutical companies.” I said, “OK, let’s think about it. So are you going to close your business?” He said, “no, no, no, no, no absolutely not.” So let me tell you what. If you get one of those boards of a pharma company, first thing is you cannot do business with them. Second thing is, you cannot do business with any of their current competitors or anybody who could become a competitor. And he looks at me and says, “I don’t think that’s a good idea, then.”

So, help people to think about potential conflicts of interest, right? If they are going to do fundraisers, can they actually be on the board without compromising themselves. Think about diversity inclusion in boards. That’s for me has been a life passion, a career passion is to put more women, people of color, people with global experience in boards that can only enhance perspective.

And finally, and that the most trivial one, is meeting agenda cleanliness and effectiveness. I am sick and tired of going to board meetings where people are discussing irrelevant things when the company is actually on the board of sinking. When there are new trends and technologists coming into the market place that may break their business, but we’re just not talking about that. We’re talking about dress code. Seriously? So, think about what really matters. What should and what should not be in the agenda? What is operator’s role versus board role? I can assure you that you’re companies are going to be successful and last longer and longer. So I’m happy to take questions. I know I’ve past my time a little bit, but it’s been an honor to be here.

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