Good, solid, diverse Teams execute. Imperfect ones fail. Teams must consist of critical members who can lead in execution – from marketing to engineering. Again, as an earlier blog described, the consistency of a team is similar to a football team where every player, however specialized, has an important role to the execution. A few days ago, a colleague referred me a Texan company that has developed a software for hospital networks. The software is an integrated digital entertainment network which can insert advertising. The founder claims that 2 hospital networks had shown interest — although verbal. Looking at the spreadsheet and the management team, I was not confident that this company could execute the product sales. It missed a critical member: an experienced sales/marketing person who has had direct sales experience in this area. And the financial spreadsheet demonstrated that whoever put this thing together had little experience in sales projections. Why was the marketing component important in this market sector?
Investors know that the quality and experience of the Team makes for a successful company. Let’s look at experience. During a pitch, I witnessed a presentation where the senior managers wanted to funding to support the installation of remote WiFI networks in Canadian rural areas. Those senior managers and founders came from the grocery business. Telecom industry is sui generis and specialized. One has to have some in depth understanding of telecommunications engineering in order to put together such a network. I doubted that this Canadian group experienced in a successful grocery business could ever design and install such a network. I wondered how would such experience can be transferred to telecommunications. My personal experience in the telecommunications industry inferred that they would fail.
In some industries, experience might not matter although I am challenged to know which ones. But in the case of hospital marketing, previous experience is paramount. One has to understand the supplier networks for hospitals, and be fluent in medical technologies. Hospitals are integrating to improve their margins, in order to reduce their costs from suppliers by using economy of scale.
In addition, one must know that hospital networks cannot install any software. They already have a standard platform, Epic, which they will not be replacing. Any other software must be compatible to Epic, to be integrated in the hospital networks. University and major hospitals are reluctant to change this software platform, and, unless you know that market, any attempt to dislodge it would be a waste of time. You can develop software that can interface it however. And, without understanding the trends in that industry, it would be difficult to approach that specific software market. Hospital consolidations have precipitated that major purchases from technology to bed frames be directed to a single point of contact, who makes the final strategic choices in incorporating new technologies within the hospital network.
Besides medical and telecommunications industries, I am sure that there are other markets where previous experience is critical in knowing the sales supply chains. But in the case of this Texan company, I knew that the “verbal” sales commitments could not be real in the context of the hospital industry. Head administrators for hospitals generally make a commitment in writing. And the Texan company’s team leaned on engineering and nothing on the marketing side. Hospital networks make firm decisions as to their needs, not verbal ones. It is not easy having appointments since every medical device manufacturer, other medical suppliers, and pharmaceuticals all take a bit of their time.
Now, let’s look at the other four Ts – Traction, Terms, Technology, and 10X. I doubt that the Traction existed, since there were no solid sales. The software “T”echnology was there, but I had no additional information about IP protection. And, although the company was seeking investments, I saw no “T”erms. In other words, the probability of success for this Texan company seems to be closer to 5% or even less. Not enough to attract investors. Whereas adding the right ingredients would push the likelihood of raising the capital. A good marketing guy can push this probability to over 50%, and fixing the other “T”s would push that percentage to over 75%. Of course, that would represent for the founder some additional costs in terms of capital and resources. But the weakest point for this company was its Team, which impliedly stated that they would fail to execute.