The Problem with Business Development in Tech Startups

My wife runs a company that manufactures "stuff" for a range of Fortune 500 clients. Her presence in the U.S. is primarily sales and marketing, but in Taipei and Hong Kong she has sourcing and design facilities, and finally, in mainland China she has a collection of factories that do all the manufacturing. Starting out with Disney years ago (those collectable pins with Nemo and Snow White, she makes them among a range of other Disney branded products) to Nike (promotional items) and last year she got into disposable scientific supplies (beakers, pipettes, etc.). Her company also has experience with high tech products and packaging, which is the connection to what I'm writing about today.

A couple of weeks ago she asked me about a well known VoIP company that approached her about manufacturing and packaging some of their consumer hardware. The company met with her and poposed a follow up meeting to continue the discussion.

The meeting was monday night at the W Hotel, but the group she was meeting with showed up late and wanted to go to a well known restaurant that was a pretty good distance away. Lisa wasn't entirely happy about this because after all, she hadn't eaten and was hungry and she doesn't like going out in the evening for business anyways. She wanted to have the meeting, talk turkey and come out with some go forward plan. The business development folks, as they introduced themselves to be, wanted to go to dinner (and have someone else pay for it) and talk powerpoint speak while not agreeing to do or not do anything. This is the problem with the vast majority of business development groups in our business, it's like having a sales organization without a quota.

Lisa is very knowledgable about how to manufacture products in China, how to handle the logistics and U.S. Customs, and finally how to package retail products for the U.S. market. These are all skills that the company in question lacked, but the real problem they had was that they didn't know what they didn't know, and because they came into this meeting not intending on accomplishing anything concrete they missed the opportunity to avoid a problem later. Lisa's comment to me upon returning was simply that it was a waste of time but in a couple of months they'll figure out how hard it is to do this stuff and they will be back.

All too often startups use business development as a catch all group for smart people who may not fit elseware. For that reason the function of business development has been greatly diminished in many companies. The effective structure of a business development organization is one that aligns it with the P&L objectives of the larger organization with regard to vertical markets or specific technology/product areas. Finally, business development shouldn't be the place you the fresh MBAs, this function should be the home for seasoned executives who understand how markets work and have the contacts throughout the ecosystem to make things happen.

Comments

[Steve Shu]

"All too often startups use business development as a catch all group for smart people who may not fit elseware."

As someone who sidewinded from operations into business development because I created some key early adopter sales for my last company, I think part of the problem is not setting goals properly. But the shortcoming of business development doesn't just apply to startups (I don't think). I have questioned some of the business development practices of larger software firms for example. We always used to make fun of the Barney relationships - I love you, you love me [but no deal flow].

[Randy Charles Morin]

I've worked a lot of startups these last 10 years. The problem, as I see it, is that these MBA bizdev guys jump from company to company before they attain success. They love to talk and go to lunch, but they don't seem to understand the importance of getting real shit done. They just want to talk about it. Eventually, they take a job w/ another company and you scratch your head wondering what the guy did for the last 6 months.

The root problem lay in their bosses who don't seem to hold them accountable to getting anything real done.

[Randy Charles Morin]

Steve is, of course, right on target. They need objectives (goals).

[Steve Shu]

Why are you two bashing on the MBA guys again? There is so much MBA bashing its riduculous (OK - I am overstating a bit). I don't bash on CPAs for all of the Sarbanes-Oxley stuff (I hope I don't). I think the problem lies in that goal management is harder to do for the business development role in general. Companies have to line up the things Jeff has talked about above. But the trick is that it takes more energy to line up those goals properly. Methinks the problem has to do more with management complacency in lining up those goals and managing to them as opposed to what an MBA can or cannot do.

:)

[Steve Shu]

OK - I cross-posted with you Randy. I'm cool on this. I know what you guys are talking about. There's also probably a different mix of people I've run into in the Valley and on Route 128. Most of the bus dev guys I ran into did not have MBAs - even when chinning up in the org.

:)

[jeff]

Steve, I agree with you that this is a structure and goal setting issue. The goals of course come from having the P&L alignment, which acting as a quota tends to clarify and focus any organization.

[Jim Logan]

Not wanting to be redundant...I've seen business development fail in two start-ups because they had no integration with the rest of the company. They were in their own little world, outside of the revenue plan. Whatever they accomplished made no significant difference in our success. They both pretty much got in the way of Marketing and Sales.

To me, if business development is not part of the company's objectives and supporting the advancement of a strategic plan - remove the organization. It's a waste of time and money.

Your closing comment on the need for expereinced people in business development positions is right on. It's not a place for inexperience.

[Ivan Chong]

The last sentence really sums it up well. Prior operational experience in Product Development or Sales is a *must* in order to do the job properly.

[Nick Gray]

Lisa sounds really, really cool.

[terry bell]

I found the postings interesting. We are a business development firm, in Pittsburgh. We've found our approach, having companies outsource their business development task to SteelCity Partners works. Takes all the turf wars and emotion out of the equation.
We've found that new tech firms, particularly the biotech firms here in Pittsburgh, focus on trying to find that PhD who is completely knowledable about a slice of their technology patch and is simultaneously an expert in business development.These people exist but are extremely expensive. What new venture need to spend that kind of cash on a single resource?Business development is a process that can be applied to just about any market segment. There are plenty of outside resources available that can help to quickly take a concept to revenue.
I sympathize with Lisa's plight but don't blame the MBA's or corporate sterotypes. Corporations just are not motivated to take risks and business development is just that. By definition, not all attempts can be neatly quantified nor will they succeed. That's why the business development discipline is not embraced in large companies.
Sorry to ramble but this is an area where I do have a bit of passion

Terry