Client Story: Stand Up Company
- Echolocity
- 7 minutes ago
- 5 min read
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Background
A parent company and a product line spin-off business to become an independent, stand-alone company. In 2023 the company was tasked with the launch of a standalone literacy products company. This project included the separation agreement from the parent company & managing to 15 Technical Service Agreements (TSAs).
To be a standalone the new company's tech stack had vendor software evaluation to fit the company needs. Once selected the design, configuration & vendor implementations, build-out and deployment of new ERP, supporting and an e-commerce website in 9 months-timeline.
Separation Roadmap – Walk the Wall
One of the biggest roadblocks to successful separations is executives’ failure to anticipate all the dependencies and interdependencies associated with the new company. A comprehensive “separation road map” can help them address such disentanglement issues. The road map should capture all activities as well as the sequencing of functional and cross-functional work streams associated with the divestiture. It should clearly link the intended goals and milestones for the separation with the related deal process steps.
How we approached creating the roadmap- All new company functional leaders were brought onsite for a “Walk the Wall” planning session exercise. literally covering a wall or two with ceiling-to-floor, Kanban-styled task cards across a timeline-vs. -functional workstream grid – was a highly effective approach to capturing all critical information and engaging key stakeholders throughout project planning and delivery.
A key aspect of this process is separation transparency. What specific roles, activities, assets, contracts, and people should support each business? Transparency provides a baseline. Achieving transparency requires disaggregation. Think of the way, for example, that a mechanic would disassemble a engine to understand what makes it go, or where its inefficiencies may lie. The goal should be clarity on a microlevel, with an eye not just to “what resources is this company using to support its operating model” but also “what resources should it be using given its specific circumstances as a stand-alone business?”
The exercise should begin with outlining the new organizational setup based upon the activities reviewed, the opportunities identified, and the program conceived for IT simplification. A robust road map encompasses all functions, highlights key milestones, and identifies the interdependencies that will be critical to achieve a business-ready new company. It can also define the spans of control, reporting lines, and how different functions should interact with one another. While traditional road maps are useful to see the big picture, for great maps, granularity is once again essential. Any practicable (as opposed to merely aspirational) road map sets forth FTE sizing at the level of an individual employee—or, more precisely, the specific activities and roles that individual employees should undertake.
The detail reaches well beyond senior management.
Better practice, still, is to anticipate what could come next and plan for scenarios under a “next generation” organizational setup. Best practice is to spell out the next-generation arrangement and define changes that are implemented in the premarketing, preclosing, and post-closing phases. This roadmap was then transferred into the Separation Project Management Plan.
Lesson Learned: Use one Project Plan software and one overall plan.
Technology – Technical (Transitional) Service Agreements (TSA)
Rethinking technology is a unique consideration in separations. IT is itself a separate function, and like every function, it should be scrutinized for potential cost savings and efficiency improvements once the business is no longer part of a larger company. At the same time, the use of IT systems, infrastructure, and support is integral to and runs across every part of the new company. Consideration and evaluation of core needs using common applications (such as Microsoft) and off-the-shelf or lightly tailored options can greatly reduce IT expenses without sacrificing functionality of the new company needs.
How we approached IT selection – core function software technology needs were identified. Conducted joint workshops among support function internal teams, vendors and IT to align on business needs going forward and to identify outdated and unused IT systems, which should be eliminated. Vendor evaluations and interviews were conducted with three vendors in each need, narrowed down to software selection. Alignment on a separation approach, transitional service agreements, and appropriate lead times to ensure that essential technology is operationally ready from the moment the businesses are separated.
Lessons Learned: Technology implementation consideration for integrations is essential in selection and implementation cycles. Project managers need to monitor and manage selected vendors’ IT implementations. Challenging assumptions about support structures, identifying potential disruptions, and being very clear in planning (and communication), can create the conditions that drive better business.
Building the Team & Culture
Precisely because the opportunities are so great in separations—when every support cost is on the table and a highly technical, bottom-up analysis is so essential—it’s possible to overlook the personal aspect that can make or break a separation. It’s natural for people to resist change; in the context of separations, trepidation is heightened. While some jobs are added, others are eliminated or transferred; the uncertainty would put anyone on guard. We found the challenge of status quo bias (“this is the way the job has always been done, so this is what we should keep doing”).
There were fifteen team members that transitioned to the new company with vast historical company knowledge, we were also challenged with building the team as we stood up the new company. Flying the plane while building it: the new company had zero process of record in place, developed these as technology was configured and implemented.
In separation company leaders invested significant time crafting their change stories and sharing them with immediate teams and a broader range of employees in small group discussions and in town halls. The excitement was palpable. We’ve also seen the enormous benefits that can come when leaders put words into action and role model change.
Lessons Learned: It’s natural to be skeptical of change—but it should be even more concerning when the default is for more of the same. Separations can unlock tremendous value. The odds for success improve when the separate company adapts a cost structure and culture that befits its specific needs—not those of the original company.
Project Management
Single source project plan covering all functions and technology was a valuable tool toward this projects’ success and timeline. The plan incorporated the ERP & technology implementation teams. A CRAID log was utilized to give transparency, accountability and traceability to project Actions, Risks, Issues, Decisions and Change Requests. Future state needs were recorded for future development. Dashboards at the project, program and portfolio PMO levels gave visibility to project status.
Results
Successful ERP-NetSuite implementation with supporting HR, Accounting, Operations, Customer Service, Sales and E-Commerce tech systems that met TSA timeline.
Team expansion to support business needs.
Successful warehouse move without product shipment delays or backorders.
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