Set up the start-up company

Final Project

A project on how to set up the start-up company successfully, while ensuring that the executive team and the supplier teams remain motivated.

The purpose of the Project is to apply the concepts and techniques of the module to the development of:

· An organizational design plan

· An interface diagram showing different stakeholders and their interaction

· A plan to resolve potential conflict within the executive team

· A list of cross-cultural behavioural issues and solutions if off-shore contracting company is engaged

· A plan to manage leadership and team member stress

· A code of ethics

Each of these will form a separate section of the Final Project.

The case study on which the project is based is as follows:


Project Background
Assume that you are a project manager who has delivered a number of projects exceeding customer expectations within schedule and budget in high-technology sectors including aerospace and robotics. So far in your career, you have been managing projects under different organisational forms including functional, projectized, and matrix structures. You have completed projects to initiate new business units in existing organisations. However, you do not have experience in starting an organisation, in particular an organisation where the time to allow the employees to work collectively as a team is limited.

An entrepreneur, Dr. Ryan O’Neal, and an investor, Jeff Hoffman, approach you with a business idea and a funding of $12 million. Ryan and Jeff would like you to develop an innovative system in warehouse order fulfilment. The system will consist of a group of autonomous mobile vehicles which will move quickly through the warehouse and load and move orders to the fulfilment platform (Guizzo, 2008). Dr. O’Neal is an expert in mobile robotics while Jeff Hoffman is an investor with a strong background in warehouse management, supply chain management and fulfilment technologies. A critical project requirement is to implement the business idea and launch the product within 10 months. Ryan and Jeff are both convinced that if the product is launched in 10 months there will be a set of committed customers in the U.S. to sustain future venture funding. Ryan and Jeff estimated that about 100 professionals will be needed for eight months to undertake the necessary technical and engineering work. This translates to 1,000 staff-months.

The brief project statement that you wrote together with Ryan and Jeff is:

To create the start-up company so that the product (as defined in a charter document) is available for installing at customer sites in 10 months from the start date and a production operation is also in place by that time to develop the vehicles at a rate of 50 units per week and control station at one per week.

The proposed name for the new organisation is Sturata Inc. and it will be setup in Vermont, USA. You will be the Interim COO (Chief Operating Officer) of the company until successful completion of the setup phase. Jeff Hoffman will be the president and CEO (Chief Executive Officer) of the company at least during the setup phase, while Dr. O’Neal will be Vice President, Engineering and the CTO (Chief Technical Officer).

Let us assume that after discussion with your family and friends you decide to become the key player of the executive team together with Jeff Hoffman and Dr. O’Neal. Miss Yamaguchi, a young Japanese-American with a degree from The Robotics Institute at Carnegie Mellon University and an MBA, was hired as VP, Administration. Miss Yamaguchi has earlier experience of setting up two start-ups in cross-cultural configurations. The position of a CFO is still vacant, however.

There are a number of issues involved with this project, including the following:

· The product needs to be extensively tested in a live warehouse environment before it can be rolled out or even before performing test installations on potential customer sites.

· Safety regulations must be met because the mobile vehicles will work in warehouses together with human workers. These safety regulations are different for different states in the U.S.

· The project team needs to be assembled. As the overall project is of significant size and challenging in multiple dimensions, you need to employ staff quickly and the team members you recruit need to start contributing as soon as they are hired. On the other hand, as the project is at the “idea level” at this point in time, it will take some time before work can be assigned. Therefore, employing staff should be done accordingly.

· The project consists of two phases, work on which must continue on an ongoing basis: Phase A) Research, Design and Development and Phase B) Production. Although production will lag during the first phase, the infrastructure needs to be ready before production begins, and therefore, production planning should start very early during the first phase.

· The management of and relationship with the suppliers of components and subsystems needed in developing autonomous mobile vehicles (or robots) and other technical systems is an important aspect of the project. The autonomous mobile vehicles and other technical systems will be designed in-house, but an estimated 100 suppliers will supply necessary components even during the first phase. Moreover, production needs to begin and the supply chain should be in place for production needs by the end of Phase A.

· The project also involves some challenging research work. Dr. O’Neal has a background in research and has contacts in some best schools around the world especially in the Republic of Ireland, Italy, Germany, California, and the UK. However, a liaison function needs to be developed to interface with the academics involved in the project.

· No company has been set up to undertake the project so far. Therefore, all legal and administrative work to form a legal business is also included in the project.


Acquisition Proposal
Jeff Hoffman discovered a small company called Ryoichi in Tokyo, Japan, which undertakes contract work. The company is comprised of 13 closely-knit engineers. Jeff reported that the team at Ryoichi had the skills and expertise that Sturata Inc. needs to design autonomous mobile vehicles. Jeff knows a few people from within Ryoichi. In fact, one of them was his student at a course which he taught at UC Berkeley. Dr. O’Neal was also impressed by the portfolio of contract work that Ryoichi has delivered. He agreed that their skills and expertise correspond to the needs of Sturata Inc. Jeff wants to buy Ryoichi, using a mix of stock options and cash to finance the purchase. Ryan instead wants to use Ryoichi as a contract company because he is concerned about difficulties in communications (only five people from Ryoichi speak fluent English), the entrepreneurial spirit of that team, and the fact that the team members are very tightly knit together.

Assume that after discussions and negotiations mediated by you, Sturata Inc. decided to acquire Ryoichi and use it as a design and development centre. A formal offer is being prepared to acquire Ryoichi for US$1.25 million 30/70 cash/options ratio (ratio of cash to the underwritten value of stock options that a buying company offers to the shareholders of the company being purchased). As a start-up company, Sturata can only offer stock options and not marketable securities with cash or other tangible assets. It was also agreed that the team will look into the possibility of opening up a production centre in China. This has further complicated the overall project.


Recent Developments
Each member of the executive team spent 60 hours during the first week just to develop a hiring plan and to engage recruiters. During the second week of operations, a series of unfortunate events occurred. Ryoichi requested a revision in the buyout offer to a 50/50 cash/options ratio. Jeff Hoffman suffered a mild heart-attack and is currently hospitalised. Dr. O’Neal had to take a leave of five days to travel to Ireland for the funeral of his grandmother. These events have almost destroyed the original start-up project plan that you had designed. Things were changing too fast and you found yourself under immense pressure to keep the project on schedule. More than half of your project contingency buffer has already been absorbed in a matter of just one week. There is no more room for error, and obviously, you are under immense pressure.

In a conference call, the executive team emphasised that start-ups are high-stress and high-stake undertakings and thought that there should be a way to control leadership stress.


Final Project Requirements

Your project deliverables will include:

1. An organisational design plan for the start-up showing its evolution over 10 months. Include the following in this plan:

· Your decision for the initial organisational form. What should the organisational form look like as the project progresses towards completion? Provide explanations to support your answer.

2. An interface diagram to show interfaces between various teams and units within the organisation and their interfaces with external organisations and regulatory bodies. For each internal and external interface, identify stakeholders. Describe what form of leadership skills will be needed for interaction at these interfaces.

3. Concrete activities and a plan to resolve the potential conflict between Jeff Hoffman and Dr. O’Neal about Ryoichi.

4. Assessment of any behavioural issues with regard to Sturata Inc. buying Ryoichi and whether you should put a structure in place so that Ryoichi employees are assimilated cohesively within the new organisation. Explain your answer.

5. A plan to manage leadership and team member stress individually and collectively. You need to research to find and the best ways to control leadership stress. Your description for these should not exceed two paragraphs. Your research should not be limited to the recommended text. Explain how leaders can reduce stress for team members.

6. A Code of Ethics for Sturata Inc. highlighting the value system the organisation should embrace keeping in view its multi-cultural and cross-functional nature. The code should include one short paragraph to explain each of the following:

· General employee conduct in a multicultural environment

· Conflict of interest and post-work activities

· Recording organizational communications

· Relationship with suppliers

· Relationship with customers and partners

· Gifts, favours, and commissions

· Responsibility to society and environment


Glindinning, M. (2009) ‘Kiva robots save Zappos shoe leather’, Material Handling Wholesaler [Online]. Available from: (Accessed: 22 February 2009).


Please make sure that you cite and reference all your outside sources properly, as per the Harvard Referencing System.

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