Once again, pretend you’re the CEO of an established company. You want to launch a high-risk, high-reward business. Maybe it’s based on a new product. Or entry into a new country or region. Whatever it is, how should you set it up?

Here’s my simplified “six easy pieces” (the title is an homage to Richard Feynman):

1. Pick “founder(s)”
2. Give them autonomy, not dependency
   
3. Let them handpick a couple of your people
4. Tell your existing teams to have an open door, but they don’t call the shots
5. Kick the new venture team physically out the door
6. Establish some rules for governance

Let me explain each of these in a bit more detail.

1. Pick founder(s)

Of course, you need founder(s) who will have the right mix of vision, specialist skills and general management talent to push it forward. But in a new ventures context, it’s important to have founder(s) who will identify with the venture, and not feel like they are still just employees of your company (the “mothership”). They should feel like the venture is their baby and be irrationally passionate about it.

2. Give them autonomy, not dependency

It’s common for the mothership to make promises to the new venture. “We’ll do your product, your operations, your X, your Y, etc. You don’t need much cash. We’re being really efficient!”

This is a recipe for slow death – or in the best case scenario, a huge amount of middle management discussions. “Efficiency” often ends up meaning shared resource pools in which the new venture has to compete against mothership teams. It will lose. Losing means bottlenecks and loss of agility. And loss of agility for a new venture is death.

At one venture I worked on, environments were controlled by a shared infrastructure team. Our releases would sit on the shelf for weeks, because mothership business units always ended up taking priority for release slots. We were about as agile as a block of wood.

For any critical aspect of its business, the new venture team must be free of dependency on the mothership. So rather than giving them shared resources, give them:

1. Cash! Enough budget to be a standalone entity. If it makes sense to get something from a mothership team, then it can use the cash to buy that in.
2. The autonomy to solve their needs in whatever way they see fit. If the mothership team doesn’t deliver what’s needed, the new venture team needs to be free to solve it another way: hire its own team, find an external partner or supplier, etc.

3. Let them handpick a couple of your people

The new venture should have a couple of your best people because a) existing expertise is how your new venture can beat others and b) the new venture needs strong informal relationships into the mothership organisation at multiple levels. Let the new venture handpick at least a junior level superstar with a couple years in the mothership.

A high-performing graduate once joined my new venture team, after he had about a year of experience. Not only was he an excellent marketer, he knew every back door for getting something done with different teams in the mothership, because he knew the other graduates in the company. And for him, it was a great development opportunity to dive into the deep-end.

The team that loses the superstar will probably protest. They will feel pain. But for them it’s not a matter of life-or-death. And let’s face it: high-performers need new challenges to stay.

4. Tell your existing teams to have an open door, but they don’t call the shots

You want your new venture to be able to use the mothership as a competitive advantage. But you don’t want to kill its agility.

You achieve this balance by establishing some clear ground rules for the new venture and mothership teams.

1. The mothership teams should have an open door for advice. Good advice is easy to give and immensely valuable to receive. If the new venture wants a few hours or even a day, give it to them.
2. The mothership teams should be open to selling services into the new venture. If the new venture needs something from a mothership team, they should negotiate a commercial agreement. An explicit agreement sets expectations and allocate resources to fulfill those expectations. Just as importantly, it takes relatively little management time. The alternative is constant lobbying, which easily turns into a full time job for managers.
3. The mothership teams don’t call the shots. The head of marketing does not get to determine the marketing plan for the new venture. The UX specialist does not get to sign off on the design of the next feature. This kind of “control creep” means the new venture becomes as agile as a block of wood.

5. Kick the new venture team physically out the door

Out-of-sight is out-of-mind. And this can be a good thing. By their very nature, new ventures are doing something different. And these differences will easily trigger seemingly minor, but very disruptive questions and comments from mothership people. “Why this brand positioning… This feature seems strange… My son thinks we should do XYZ differently…”

The new venture team knows the importance of keeping people onside, so it will stop and reply. And stop to take meetings to explain. And after a while, the hours turn into real management overhead and a subtle pressure to avoid doing things too differently.

The ideal solution is to get an office down the road. Close enough for new ventures and mothership people to meet for a coffee when needed. But far enough that the new venture isn’t disrupted by “parachute management”. It also fosters the tight-knit bonds and culture needed to become a high-performing team.

6. Establish some rules for governance

The mothership needs to maintain some form of oversight of the new venture and its management team. The trick is doing it without imposing unnecessary overhead.

In one example, the new venture has a board made up of senior level execs and its clear what kind of decisions need to be taken at the board level. This is clean and straightforward as a form of governance.

In another example, the new venture is effectively subject to the control of different teams and managers: finance, audit, HR, security, etc. Often these managers are aiming to minimize downside risk, rather than capture upside. This type of control makes sense for an established company like the mothership. But for a new venture, it just reduces agility.

Conclusion: set up the new venture to maximize agility

If you’ve read this far, you can probably tell that I’m a big believer in agility. For a high-risk, high-reward business like a new venture, rapidly experimenting and responding to new insights and events is the lifeblood of finding success. And large organizations tend to be terrible at agility. So as the CEO of the mothership, when setting up a new venture, think about how to keep the management overhead down and the talent up. In other words, maximize agility.