The Client Challenge: How to Spin off a Startup with Many Stakeholders and a Weak Organization

Two California foundations, the California Healthcare Foundation and the California Foundation, support initiatives that expand access to healthcare for underserved Californians. Among their goals are eliminating obstacles to care that are created by separate, manual application procedures for government health and social programs, obstacles that leave many eligible families without coverage. Each of the dozens of federal, state and county programs to reach low income households typically requires a separate application process submitted to a separate office. These manual approval processes lead to backlogs in many counties, as well as burdensome and confusing requirements for applicants.

The California Healthcare Foundation and the California Foundation have invested in an Internet alternative to separate, paper-based applications, with One e App as the resulting product. One e App provides one simplified, online enrollment form that allows simultaneous consideration for multiple government social and health programs.

The software was created and piloted in three California counties. However, the organization behind One e App lacked the structure and capacity to meet its full statewide mission. Because of the organization’s shortcomings, the two investing foundations’ executives found themselves overly involved in One e App management, a situation that was not sustainable.

IT Optimizers joined an interdisciplinary team that jointly was to propose a governance structure for the next phase of One e App. This team also included lawyers from Davis Wright Tremaine LLP and Tangerine Brigham, a consultant specializing on county health and social programs. IT Optimizers brought to the team senior consultants experienced in information technology startups. One e App faced operational issues similar to those that for-profit technology startups must address, despite its bottom-line objectives focusing primarily social welfare rather than profitability, giving expertise in technology startups particular relevance.

Solution Provided by IT Optimizers: Plan for Business Challenges First, then Organize Accordingly

Rather than solely focusing on defining a governance structure, IT Optimizers chose to first define the strategic business plan for One e App. Its experts emphasized that before an optimal governance form could be selected, required organizational objectives and strategies needed to be defined. To harvest its full potential value, One e App would need systematic development of not just product and computer operations, but also of outreach to customers, customer support, vendor relations and more. Key client segments needed to be identified, along with the value One e App offered them. Viable fee structures would need to be set, reflecting both the value paying clients gained from the product and revenue needs for One e App to gain financial independence. Making good business decisions required gearing the organization and its governance to key challenges faced.

IT Optimizers pared the business planning process down to the essentials for effectively targeting the new organization and its governance. Its experience in formulating strategic business plans for high tech ventures ensured efficiency in generating the appropriate level of plan detail.

IT Optimizers generated creative, viable strategy alternatives. By forcing consideration of differing options, tradeoffs and implications could be dealt with explicitly by the foundations’ executives.

Identifying the kind of decisions the organization and its board needed to handle effectively was key. The business strategies evolved in parallel with looking into legal options, interviewing stakeholders, and in particular with building agreement among the foundations’ officers. In the end, aggressive goals were adopted, with both foundations agreeing that the upfront investment required was well justified by the more rapid growth that could be generated. An organizational and governance structure was set up to match these goals.
 

Benefits: Rapid Agreement on Strategies, Financing, and an Organizational Structure

The integrated, cross-disciplinary process and resulting documentation provided the foundations with:

• Results exceeding the client’s bottom line by providing not just a proposal for a governance structure, but also a business strategy,
• A time and cost efficient business planning process, enabled by IT Optimizers’ Fulcrum methodologies,
• Systematic consideration of creative alternatives,
• Consensus among stakeholders on strategic directions and corresponding organizational structures, and
• Quick and enthusiastic agreement by all owners that the project was promising enough to invest in rapid growth.

Following the project, One e App was transferred to the new free-standing organizational structure, and substantial progress has been made toward achieving the strategic plans of independent, viable business.

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