Peter T’s observation (“The biggest year in venture capital investing since 2001”) that VC funds with specialized sector “practice groups” are outperforming “generalist” funds seems intuitively obvious. When venturing into the blue ocean of a new market opportunity, it is good to have the resources to buy a boat. Even better to have by your side people who can steer or row, as well as recognize impending danger from the subtlest change in weather patterns.
Creating an effective team is an imprecise but crucial success factor for any project. (In the world of venture-backed enterprises, it is probably the defining factor between business concepts that get financed and those that don’t.) This paper, “Exploring Depth Versus Breadth in Knowledge Management Strategies,” attempts to compare the effectiveness of generalist (breadth of knowledge) and specialist (depth of knowledge) in product development teams.
Not surprisingly, the authors find that specialist strategies outperform generalist strategies under conditions of low and high market turbulence. Worst performing? Generalist teams that adopt an average of the beliefs held by fellow team members. However, generalist teams utilizing the “hot hand” decision rule (i.e. the decision-maker learns from the team member whose beliefs have been consistent with market desires most recently) perform significantly better. This simulation-based study points to at least one team selection factor: place a “hot hand” on your product marketing team!
It is established wisdom that a team that has worked in the past tends to perform well in the next venture. Not all communities have the luxury of drawing on an established pool of management and entrepreneurial talent teams. Are there any alternatives to the slow, one-person-at-a-time recruiting?
Tribes are a tried and true form of self-organization for humans. This post, “The Tribe” from infoChachkie, explores a recipe for building a balanced core team by drawing on the tribal organizational structure. “Respect man’s evolution and heed the tribal lessons of old. If you do, you may just end up on top of the food chain in your industry.”
The importance of the team and cultural fabric of an organization was brought home for me in the context of an entirely different industry: BioPharma. During a Windhover Webinar “Overheard at JP Health care Morgan 2008,” Roger Longman discusses how big pharma companies seek to innovate and restructure their businesses to address an impending ~$60B cash flow gap. To illustrate that the industry acknowledges the real problem Roger provided two quotes: