Red Sycamore: Structuring for Focus

There is a certain philosophy behind how we structure companies, and why we silo different projects and operations.  There are times when the same company can be the vehicle for a series of products and services, but more often than not, it is better to start another. 

A company is a vehicle for an idea, nothing more.  It works best when the resources, the team, and the focus, is on one idea.  There are times, where it may be a second idea, which is closely related to the first one.  Beyond this, it becomes impossible to achieve market leadership because there are too many distracting ideas and directions.  As more ideas are added to the company, not only are efforts split among the different teams working on these ideas, but they start to actively impede each other as they have different priorities, directions, and needs.  They compete for resources, and time is one of those resources. 

We have to consider that at the earliest stage, the company needs to seize market share and maintain market leadership.  Resources are tight, especially for startups.  As such, having more than one idea or project is a dilution of scarce resources, and that increases risk.  The problem with risk is that the exposure curve is not linear but quadratic.  Risk multiplies.  As such, it is  better for a company to be focused on one idea, one market niche, at a time. 

At Red Sycamore, the entity is solely meant to be a holding company.  It raises funds for the project, it manages the overall strategic direction for the verticals, and it negotiates directly with major equity partners.  But there are individual verticals for each major project, eleven in all, and each with its own management team.  This ensures that each vertical is its own profit centre, siloing risk, and ensuring that there is focus.  These verticals are not meant to compete with each other because they have different products.  Rather, they complement each other.  Each vertical has its own team purpose built for it.  The concept of parachute management is not efficient.