Corporate Venturing - Stop being so fickle!

Enthusiasm for corporate venturing (efforts by firms to create new businesses from within) come and go over time.  Firms set up venture groups, get disillusioned with them, fold them back into the core business only to discover a few years later that they need some place for new ideas and the people who have them to go, and the whole cycle starts up again.  A key reason companies find organic growth so difficult to achieve is this on-again, off again, haphazard way of managing it.  Perhaps this is why my colleague Julian Birkinshaw some years ago noted that:  “less than 5 percent of corporate venturing units created new businesses that were taken up by the parent company.”  (source:  Birkinshaw, J., A. Campbell. 2004. Know the limits of corporate venturing:  Almost all units set up to create new opportunities for a company fail to develop any significant new businesses, but that isn ot to say that the techniques are useless - they can be harnessed for other purposes Financial Times, London (UK), 11). 

But it doesn’t have to be that way.  My colleague Thomas Keil and I have just finished a research project that finds that corporate venturing can play a huge role in business development for firms, but here is the rub:  For the most part, ventures are not going to be the home for the commercial use of the innovations they generate.  These, instead, come when innovations in terms of technologies, capabilities and so forth move to either a strategic new business thrust (such as Nokia’s move into multi-media) or to another venture which has the potential to gain critical mass.  Our insistence that ventures stand alone is an outdated idea.  Once we accept that new ventures are incubators of sorts and perhaps that their main role is as temporary capsules for new capabilities, we would manage them far more adroitly than we do.

For more on this idea, see also Bob Burgelman’s excellent article:  Burgelman, R., L. Valikangas. 2005. Managing internal corporate venturing cycles. Sloan Management Rev. 46(4) 26-34.

Share this article:      

• Posted Rita McGrath on October 13, 2007

Creating a more innovative culture

I was recently asked how one creates a more innovative culture within a company, with specific reference to Kodak.

The difficulty is that as companies become successful, their performance increases to the extent that they stamp out those people, practices and methodologies that don’t fit the success model. In a word – they get very fixed and rigid on perceived right way to do things, which makes it extremely difficult to embrace change when it happens. In Kodak’s case, this was coupled with an entitlement culture which meant that people never thought there was any risk of things going wrong in the core business.

How to spread a new culture throughout the company? Well (perhaps unfortunately) a near-death experience has a way of focusing the mind and overcoming resistance to change. So you need to create or capitalize on a compelling case for making the change.

Share this article:      

• Posted Admin on February 22, 2007

Failing to invest in innovation when times are good

Yet another great company (in this case, Dell) has fallen victim to a failure to engage in business model innovation when times are good. We see this all the time - hugely successful corporations get so wrapped up in exploiting their own business models that they fail to invest in the innovations that will help create their future success. Then, when things start to go wrong, they go on an all-out quest to find new sources of growth FAST, condemning their growth leaders to rushed, desperate and usually failed innovation efforts.

About three years ago, I was having a conversation with two CEO's of major computer manufacturers who observed that Dell's strategy was simply piggybacking off their R&D and other investments in innovation in the computer industry. They feared then that Dell would stunt the growth of the entire PC category be rendering innovation un-economic. Looks as though the model has actually come back to hurt Dell - its competitors have innovated not only in their products but in their production prowess. Moreover, turns out that many customers actually like to interact with a real salesperson when purchasing complex or new equipment. So advantage to HP, Best Buy, and other retails, disadvantage to folks like Dell.

Share this article:      

• Posted Admin on February 10, 2007

Organizing Innovation Projects

A perennial question that comes up with respect to organizing innovation is whether ventures should be set up far apart from core business or within it? Unfortunately, both approaches to organization are problematic. While so-called skunkworks and separate structures have been popular as a way of helping those working on innovation projects to avoid being smothered by the rules, politics and processes of the more established lines of business, their track record is spotty. Among the downsides are that essential connections are missing that would permit the venture to be re-integrated with the rest of the corporation if it is successful. At the same time, the struggles venture teams experience when within a larger entity that doesn�t understand them are terribly real.

Share this article:      

• Posted Admin on January 30, 2007

Ten “worst practices” for gaining benefits from Innovation

Watch-out for these tell-tale signs of an innovation process that may be headed for big trouble

1. The plan for an innovation is all-or-nothing and looks only at the project as originally conceived; not at the underlying capabilities built up in it
2. There is no explicit plan to articulate and test assumptions and update the project plan subject to what is being learned
3. The innovation is fully funded through to market introduction at the point of initial project approval (without a requirement to demonstrate accomplishment of interim milestones).
4. The project is evaluated on a calendar schedule basis, not on the basis of milestones accomplished
5. Project team members are rewarded only for market introduction; and suffer negative consequences if their projects are stopped
6. The project is under pressure from senior executives achieve large revenues or market share quickly
7. The project is being managed in isolation from other activities in the business
8. The team members of the project have little experience with uncertain or ambiguous situations, even if they have a great track record in the core business
9. The CEO and senior team publicly argue that the project will make up for performance shortfalls in the core business in the near term
10. You have no way of measuring project benefits other than progress on plan

Share this article:      

• Posted Admin on January 22, 2007

Search: