In my last article I began a series on the product planning process. I wanted to start by emphasizing that the most critical aspect to product planning is to have an effective mechanism for separating the good ideas from the bad (see The Seven Deadly Sins of Product Planning).

In this article, I wanted to talk about what I would consider the next most important technique for helping a company make the difficult choices about where to invest for the future.

The Board of Advisors may sound similar to the Board of Directors, but the group has a very different responsibility and very different dynamics.

The purpose of a Board of Advisors is to complement your company’s senior management team with industry experts that care about the future of your company, yet are probably either too expensive or otherwise unavailable for you to hire.

The composition of an advisory board varies depending on the needs of each company, but it’s pretty common to have someone with a very deep and relevant product background, someone with deep marketing experience, a very strong technologist, and often someone with deep domain experience (i.e. if it’s a medical software company you may have a well-respected surgeon).

The key is to complement your senior management team. If, for example, you don’t have an experienced CFO type on your executive team, it’s a good idea to add this dimension to your advisory board too.

One reason advisory boards work so well is that your executives get access to experienced and proven leaders, but in a non-threatening way, there is no worry that these people are out for their job, or to make some quick cash. The motivation of the advisor is to make the team and the company successful.

Sometimes the board of directors tries to play a similar role, but honestly it’s difficult. For one thing, most board of director members are primarily investors, and their primary responsibility is to represent the shareholders. Moreover, the board of directors is responsible for hiring and firing the CEO, which is critically important but it creates a very
different dynamic when working with the management team and actually anyone in the company.

This is why so many board of directors meetings are essentially dog and pony shows. It¹s where the CEO does his best to convince the board of directors that he’s got everything under control, and all is going according to plan. On the other hand, an advisory board meeting is where you tackle openly the hardest problems with the purpose of leveraging the different experiences and insights from around the room (so that when you do go in front of the board of directors you really do feel confident of your plans and progress).

It’s the difference between going to dinner with your boss, and going to dinner with your friends. With your advisors there’s no implicit threat. You can discuss and argue about anything. You can be frank, and tackle the hardest issues openly. Your advisors really do become your friends.

The advisors know that they’re at the table to provide their honest opinions and help however they can, but they¹re not responsible for running the company.

As such, the CEO is usually comfortable with the advisors coaching or working directly with any member of the company.

As to the logistics, advisory boards typically meet quarterly for about a day. Again, their purpose is not to try to run the company. That’s what the management team does every day. But taking a fresh look every few months at how the market is changing, how the technology is developing, what the company’s biggest strategic and operational challenges are, and discussing the product, technology and marketing plans can be absolutely invaluable to the company.

Further, and this is a bit hard to describe if you haven’t experienced it yourself, but there is a certain energy and synergy that results when you get together a group of very smart people representing several different disciplines in a room with your senior management team.

Between quarterly advisory meetings, the individual advisors are usually in touch fairly frequently with their counterparts in the company, coaching, answering questions, reviewing progress, making introductions, interviewing job candidates, whatever they can help with.

Advisors typically are compensated with equity because you want them to care about the long-term success of the company. But they’re also typically given a fraction of what a board of directors member is given because they’re only contributing a bit of their time and not their money.

I find these advisory boards to be extremely effective tools for everything from the smallest startup to very large public companies. For the typical startup that hasn’t even built out its management team, the advisory board represents a very easy way to effectively grow the virtual capabilities of the team (not to mention the appeal to potential investors of having industry recognized people associated with your company).

For the large company, the independent outside advisors help combat the natural tendencies of large companies to protect what they have, look inward rather than outward, and be defensive rather than offensive.

I hope this article doesn’t sound self-serving, as I am on several advisory boards myself, but honestly it¹s my favorite way to work with a company. I get to know the company and the team well, and I get to help them improve and grow. In any case, I wouldn¹t be the right product advisor for many companies ­ you want to get someone with deep and relevant experience with your particular type of business.

So if you don’t already have a board of advisors, you may want to consider trying the idea out. Invite some friends you respect from different disciplines to your office for a day, and tell them you¹d like to get their opinions and suggestions on your strategy and your plans. Don’t treat it like a presentation. Tell them the big issues you¹re grappling with, and see what you think of the dynamic and the results.

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