Strategy & new ventures

© Insightory Consulting

Creating a New Ventures Organization

Implementing Innovation

Discussion Draft

Insightory Consulting Strategy I HR & Organization I Globalization I Non-Profit


Background

Several solid business opportunities identified in [early planning

stages]

While project teams are still refining business models, the

leadership team needs to start shifting focus . . . from: “what new

businesses should we be in?” . . . to: “how can we implement these

new businesses?”

Not enough entrepreneurial leaders among current staff

Limited financial motivation for current staff to take new businesses

forward

Need to work on 3 inter-connected strategies

Create financial incentives for existing staff

Re-align current organization structures/ roles

Consider creating a “New Ventures” role (focus of this document)

1

Other strategies (e.g. “creating a culture of innovation”, hiring new competencies etc) will play out over the long term.


3 Related Concepts: Strategy, Business Development

and New Ventures

2

Strategy Business

Development New Ventures

• Strategic planning

• Special projects

• M&A

• Strategic alliances,

partnerships & joint

ventures

• Launch new

businesses, markets

or products

Each has a different primary focus; though most organizations

have overlaps and hybrid versions.

Given [client] requirements (i.e. to launch several new businesses rapidly)

and the gap in internal resources, this seems to be the appropriate

construct.

A related concept – Chief Innovation Officer – is also becoming popular in some companies (e.g. GE, Citibank,

J&J). This role/ dept is more often focused on innovation processes rather than creating new businesses.


Sample Deliverables from New Ventures

Launch x new businesses

Incubate new businesses till key milestones are reached e.g. :

$X revenues

$X pipeline

X customers/ users

X employees and/ or business leader is hired

Define suitable growth options, including:

Transfer to existing BU/ department

Spin off as a separate NFP or for-profit entity

Transfer or license IP to 3rd parties

Aggressively terminate businesses that don’t reach milestones

3


Sample Criteria for Including a Project in Scope for

New Ventures

Does not fit within scope of existing BUs

Requires build-out of new products, business models, delivery channels

etc

Investment required is more than individual BUs can provide

Has a clear path to self-sustaining revenues (i.e. no “research

projects”)

Time frame is beyond a few months (i.e. not a quick win)

Expected revenues are significant at a corporate level

4


Candidate Opportunities

5

Opportunity Fit existing

program/

dept?

Large

investment

reqd? (e.g.

>$1 MM to

break-even)

Clear path

to

revenues?

Longer

implementat

ion? (e.g. >

1 year)

Significant

revenues

(e.g. >$20

MM/ year

after ~5 yrs)

Include in

NV scope?

[1] Yes [] Yes No Yes No No

[2] Partial [] No Yes No Yes No*

[3] Yes [] Yes Yes Yes Yes Partial/

shared

[4] No Yes Yes Yes Yes Yes

[5] Partial [] ? ? ? ? No

Preliminary evaluation of short-listed opportunities


Organizing and Resourcing New Ventures –

4 Models of Corporate Entrepreneurship

6

Enabler

Company provides funding

& sr. executive attention to

prospective projects

E.g.: Google

Producer

Company establishes &

supports a full-service group

with mandate for corporate

entrepreneurship

E.g.: Cargill

Opportunist

No deliberate approach to

corporate entrepreneurship.

Internal & external n/w drive

concept selection &

resource allocation.

E.g.: Zimmer

Advocate

Strongly evangelizes for

corporate entrepreneurship,

but BUs provide primary

funding

E.g.: DuPont

Resource

Authority

Dedicated

Ad-hoc

Diffused Focused Organizational

Ownership

Source: Wolcott & Lippitz. “The Four Models of Corporate Entrepreneurship”. MIT Sloan Management Review Vol. 49 No 1 (Fall 2007)

[] sweet

spot?


Potential Organizational Structures

7

Model 1: Straight-line reporting

SVP New Ventures

Dir./ VP

[Opportunity 1]

Dir./ VP

[Opportunity 2]

Dir./ VP

[Opportunity 3]

Dir./ VP

[Opportunity 4] . . . Others . . .

Model 2: dotted line – shared reporting with market leaders

SVP New Ventures

Dir./ VP

[Opportunity 1]

Dir./ VP

[Opportunity 2]

Dir./ VP

[Opportunity 3]

Dir./ VP

[Opportunity 4]

SVP [1] EVP [2] SVP [3] SVP [3]

In all cases, the SVP - NV would

report to the COO

Model 1 is more suited for a “Producer” type of environment. Model 2 is more suited for an “Advocate” type of environment. “Enabler” and

“Opportunist” don’t fit with a specific organization structure. By definition, they don’t have a dedicated organization, so corporate entrepreneurship

is handled by existing BUs. In the “Enabler” model, there may be a “Council” that funds and approves specific projects.


Pros and Cons

8

These are the pros & cons of hiring a dedicated “New Ventures” leader,

regardless of model chosen

Pros

• Provide sharp focus on new

businesses => higher chance of

success

• Bring in new entrepreneurial skills

to []

• May be able to manage payroll

impact by funding through

[Innovation Budget] and/ or self-

funding through incremental

revenues (long-term)

Cons

• Not easy to find candidate with

breadth of experience in

consumer marketing, healthcare,

technology, sales, start-up

ventures, etc

• Alters “balance of power” in

existing organization – may lead to

political issues

• Introduces a fault-line – between

those that create a new business

& those expected to manage it

long-term


Learnings from Other Organizations

Use New Ventures (NV) only for opportunities that don’t fit into

existing businesses; not to support BUs in their existing plans

NV as a “corporate capability” takes years to develop

Top leaders need to be patient for returns – new ventures may take >5-6

years to be successful and the model needs to be tweaked several times

Will not succeed without explicit and continuous (multi-year)

support from top leadership

Need to be clear about the goals/ objectives

Select the appropriate model of entrepreneurship – full-blown NV

department (“Producer Model”) doesn’t work for all

Start with tightly focused objectives/ goals and then grow

Don’t try to do too much, too soon

9

Source: Secondary research on “Corporate Innovation/ Entrepreneurship” and interviews with senior executives from 6 F-500 companies

and 2 mid-sized ($1 – 2 Bn revenue) companies.


Learnings from Other Organizations

Ideas are a commodity; prioritizing them through a systematic

process makes them valuable; but the real value-add is

implementation and/ or finding a “home” for the idea

Never use the NV organization to change corporate culture and/ or

create a culture of innovation

They can be the catalysts/ exemplars, but not the drivers

Use a “portfolio approach” rather than trying to predict the success

of a single initiative

Larger organizations need to churn through a large number (dozens

– even hundreds) of ideas to find a few good ones to pursue

In certain industries M&A is a more powerful tool for innovation than a

“new ventures” organization

Very few large corporations can get to beta faster/ cheaper than an

entrepreneur

10

Source: Secondary research on “Corporate Innovation/ Entrepreneurship” and interviews with senior executives from 6 F-500 companies

and 2 mid-sized ($1 – 2 Bn revenue) companies.


Discussion Items

Do we need a more in-depth study, esp. for “business development”

organizations?

What are the early thoughts on:

Who could lead this group?

How will we fund it initially?

What is the appropriate transition point from consulting to permanent

resources?

Who will resist this idea? How do we mitigate this resistance?

11