TBM 219: Follow the Money (People, Products, or Projects)

Without thinking too hard, does your company fund people, products, or projects? Or some combination?

Now on to the post…

When investing in a startup, what do you look for? Typically it is 1) A skilled and motivated team and 2) a promising product or service. We expect the founding team to stick with it through thick and thin, including pivoting if things aren't working as expected. We invest our capital in the people and the product.

Now imagine a small but mighty product team in a large company that keeps knocking it out of the park. Their product is a source of sustainable and differentiated growth.

The team focuses on actionable inputs tied to long-term success. Over the quarters and years, they have amassed an incredible amount of valuable knowledge about their customers. Competitors constantly try to recruit the team, but people stick around—it's one "those" team. When they add people, it isn't to Build X or Build Y (or to optimize for resumes claiming big teams); rather, it is to round out the team further and generate more outcomes.

In many ways, funding this team is similar to funding a startup. We are investing in the people and the product.

Next imagine a large enterprise that funds projects instead of people and products. Why?

Financial controls and budgeting! 

We must keep strict control over the budgets and estimate project costs and returns.

Accountability!

Every project has a designated team, budget, and timelines! We want to hold teams responsible for delivering what they said they would!

Connecting spending to objectives!

We have strategic goals at the top level and want to allocate money based on specific projects that support those goals.

We can't tie this to one team!

There are a bunch of teams and functions working on this. There are lots of dependencies, and it is easier to consider this as a project.

The enterprise may talk about investing in "our people," and they may claim to embrace the idea of product thinking, but the primary "unit of funding" is the project.

Note the difference. 

The startup and the small but mighty team are inherently long-term bets. In the startup's case, it could be years/decades before our investment bears fruit. In the case of small-but-might-team (SBMT), we're nurturing a stream of revenue and innovation. SBMT may embark on new bets, but these aren’t projects in any sort of traditional sense. The success of a startup or a small team depends on its team members' skills, motivation, and dedication. With any fluidly operating and collaborating team, allocating effort to single projects is difficult anyway.

Meanwhile, the large project-funding enterprise takes the short-term yet "controlled" view.

It goes deeper.

Imagine the small-but-might-team (SBMT) experiences lots of headwinds. Maybe some key members leave for the startup you invested in (lol). New hires start hiring old coworkers, and team size grows. Yes, their product is still doing well, but we all know the team put today's product success in motion years ago. They aren't shipping anything, and customers are getting antsy and impatient.

An executive walks into a meeting and says:

So, WHAT are we getting for our investment in SBMT? Where's the commitment and accountability?

Seems like a reasonable human response.

There's a lot of scrambling. Before you know it, BBNSMT (big but not so mighty team) is putting together a detailed 2024 roadmap with specific milestones and deliverables. The need for governance and controls notches up. The game has changed. The "projects" become more defined, and there's less focus on moving the key levers for growth. 

They've turned into a project-funded team. Once confidence drops, they resort to funding deliverables like the large enterprise. It is a rational response, especially when the team lacks conviction around what is possible by growing and supporting teams.

The lesson? This isn't about accounting. And not even (really) about projects. With some creativity, you can package outcome-oriented bets as "investments." Many companies align with GaaP and prioritize innovation, team growth, employee retention, and a long-term view. 

Ultimately it is about a belief in the power of people and products that sets apart the companies that "get it" and don't. And the progress and outcomes to show for it (which require the leap of faith belief in the first place).

How would you answer?