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Critical Success Factors for Corporate Ventures

This week, I’m directing the Columbia Business School Executive Education course Leading Strategic Growth and Change.  The course is designed to help companies learn to better manage opportunities for growth through innovation, new product development and venturing.  This weeks’ course has been fantastic so far, with a veritable United Nations of participants.  In fact, we have folks here from every continent (except Antarctica!). 

Today’s presenter is Ron Pierantozzi, who was at one point the director of New Business Development for Air Products and Chemicals, Inc.,  During the period from 2002 to now, Air Products’ stock has gone from around $29/share to over $100/share, its P/E ratio has soared, and the company has grown 18% a year.  Not at all bad for an industrial company in markets that face grinding margin pressure in many commodity businesses.  He’s just talking about the disciplines he’s learned are necessary for growth.  One of the more interesting discussions we’ve had today has to do with the critical success factors necessary for managing corporate ventures.  He lists six that he’s found to be valuable and important:

Role Clarity – are people being managed with appropriate metrics?  Who is coordinating the innovation efforts, and what roles do they play? 

Senior Governance – The venture leaders should have direct reporting relationships to senior corporate executives so that decisions don’t get held up and resources winnowed away.  The leadership team for ventures should be functionally diverse.

Comprehensive idea capture and triage – You ideally want a clear process for developing new ideas, and clear screening criteria that would help people understand what kinds of ventures are OK, and which are not.

Venture Capital style financing – adopt staged funding, based on pre-determined venture objectives.  We’d also add the ability to stop investing is key.

Independent ventures – ideally, not beholden to the core business, but independently managed by a venture board.  You also need processes to facilitate the transition of a venture from one place to another in the corporation.  See also our ideas on capturing value from failed ventures.

Entrepreneurial Talent – you need to set up a system so that there isa pool of potential managers for ventures, who cycle in and out of the venturing process.

So check out your venturing system – anything missing?

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