A Paradigm Shift—Third-Party Immersive Execution

After a bizarre 2020, companies are finding themselves back in more familiar territory: thriving, getting by, or struggling to stay afloat. For those not thriving, this is a time for introspection and an honest assessment of your product portfolio, commercial efforts, and leadership team.

Can you, with complete objectivity, analyze whether your products are meeting actual market needs? Are your commercial efforts utilizing tools for the changing world? Is your leadership team adjusting to the new reality? The good news is all these things are fixable. Products can be refined, commercial efforts maximized, and leadership teams improved with mentoring and training. The best way to improve in these areas is through a third-party perspective by engaging an independent firm with experience across a wide variety of disciplines.

Find a trustworthy firm that has a deep bench with expertise in the field in which you are working. A reputable firm will provide a thorough and unbiased review of all portions of your business and supply fractional leadership where you may have gaps. Sound too expensive? What is the cost of continuing down your current path?

One of the exercises these types of firms use takes clients through a structured immersive process that quantitatively and qualitatively provides actionable insights that can have immediate financial impact. For example, upon immersion with a client, Factor 7 will compile current financials into the FACTOR 1% worksheet and we can show them how a mere plus or minus 1 percent change to their business model—including pricing, payable and receivable terms, COGS, etc.—can immediately impact their business.

Seeing the impact in the numbers, however, is not enough. Following that quantitative exercise is the qualitative process. A consulting firm should then create an actionable strategy and execution plan to achieve the objectives necessary to increase profitable revenue, and more importantly, cash growth. Aligning insight with strategy and execution is how a third-party organization can help maximize your human and financial capital for optimized sustainable growth.

Many startups and early-stage companies rarely have a comprehensive strategic commercial plan. If they do have a plan but revenue is falling short, they are not sure what levers to pull to rapidly achieve increased sales. Or, they may have a strong commercial strategy but need operational support to meet growing demand while managing procurement costs. Managing cash and making the correct decisions to improve financial conditions is critical. What mechanisms are in place to analyze the decision-making process?

Rarely do startups, early-stage, and growth-stage ventures have all functional areas covered with the right experience, so staff find themselves working in areas where they may have little or no experience. That is the nature of the beast in “managing cash” as ventures work toward sustainable cash flow, but wearing too many hats can cause stress, fatigue, poor decisions, and costly poor execution. Furthermore, the cost of hiring the wrong person can be devastating to a company. Previous success or experience does not guarantee future results. It takes great self-awareness and willingness to ask for help and obtain support from an independent third-party firm. With all of the shifting and changing of careers caused by COVID-19, there is no shortage of qualified third-party support in the marketplace.

Case in Point
Recently, Factor 7 Medical was engaged by a client to assess their operational, financial, and commercial performance. They were experts in the tactical execution of their services, but were lacking broader experience and expertise to manage their drastic increase in revenue and the increased need of cash to fund their growth (noting that accounts receivable and payable were also growing).

In the early immersion interviews with the co-founder and CEO, the CEO said, “Our problem is me; we need a new CEO.” She explained, “I’m working 70-plus hours a week and we are over our heads.” That is not a typical answer you’d expect, but this CEO was mindful of her limitations and was more concerned about the sustainability and health of her business than her own needs.

Upon engagement, the FACTOR 1% process enabled a deep-dive discovery with employees and financial analysis, which ultimately determined what the client truly needed. It wasn’t a new CEO; it was a strategic execution plan, existing core leadership team alignment, plus an additional operational and financial leader. The FACTOR 1% “Start_Stop_Keep” discovery process with employees facilitated and enabled change through time-tested servant leadership values and principals. Instead of the CEO shouldering all the load, the load needed to be redistributed.

The leadership team was willing and able to help with the load, but they needed confirmation, training, and affirmation. This CEO had the drive, the vision, and market experience to lead the “top line” growth, but was burdened by the operational execution/human relations details and the financial management details. This CEO thought the company needed a new leader, but in actuality, that is not what was needed. The organization needed improved processes, accountability, and execution from their leadership team and better financial analysis/reporting. The FACTOR 1% process helped the CEO understand what was causing her stress and unhealthy work hours, and actively helped implement the corrective measures the team envisioned.

At the end of the six-week FACTOR 1% process, the client fully understood the value of immersive execution and the fractional leadership model we presented. Ultimately, going into week seven, this client hired a Factor 7 Medical partner to become their chief operations and financial officer, contributing 10 to 20 hours per week. Additionally, this client engaged three additional Factor 7 Medical resources that are actively supporting customer projects as account executives, contributing significantly to top-line revenue growth.

Because of their willingness to look for and accept assistance from a third-party consultant, they have enjoyed improved cash flow, operational efficiencies, and increased profit from refining sales execution processes. They have been able to focus their efforts on commercial excellence, deliver valuable services to their clients, and continue their double-digit growth trajectory.

Fractional Leadership
Fractional leadership is gaining in popularity. The basic concept is a company recognizes where it needs help and a third party “joins” their team on a temporary, part-time basis without the associated incremental costs of a full-time employee. Most people, until recently, had not considered executive level “temps” to fill their CEO, CFO, CCO, and CTO roles. Cost would be prohibitive to filling all these positions in an early-stage company. Conservative estimates would place the cost of a complete executive level team at more than $1 million annually with the potential for a dilution of equity.

Alternative strategies are to find board members, board advisors, or subject matter experts (SMEs), but that approach typically is encumbered. Board members are seeking financial results, not typically participating in achieving the results. Board advisors and SMEs are mostly figure heads and help with credibility and networking, but more times than not, they are not rolling up their sleeves and actively participating in achieving those results. This approach is not immersive and does not provide actionable help where and when you need it as fractional leadership does.

The paradigm shift is fractional leadership provides an exceptional level of experience and expertise at the highest levels and mid-levels of the organization for a fraction of the cost to build a complete team. Fractional leadership solves the non-participation problem where boards and SMEs fall short. Fractional leadership is effective for startups, early- stage, and growth-stage ventures that have an exceptional product but not a full team with the depth and breadth of experience to execute effectively.

When considering the fractional leadership approach, it is important to remember several critical elements in finding a suitable third-party partner:

• Deep experience in the market you are attacking
• A broad and deep “bench” across all functional areas (e.g., executive experience, product development, operations, commercial excellence, leadership development, quality and regulatory pathways, manufacturing excellence)
• Willingness to roll up their sleeves and become “player/coaches”
• Alignment with your core beliefs, values, and objectives
• Connections within the industry to help accelerate potential partnerships and revenue
• Experience in both product and company lifecycle management

Once you have determined the areas in which you need help, you simply have to engage a team that checks all the aforementioned boxes. The fractional leadership model is an excellent way to achieve important goals in a short time period at a fraction of the cost of adding team members. 

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Kevin Haines is a 25+ years veteran of the medical device market. He is a commercial executive with sales and marketing leadership experience with a wide range of companies, including startups, Fortune 100 companies, and everything in between.