Building Breakthrough Businesses Within Established Organizations

• Emphasis must shift: From ideas to execution and from leadership excellence to organizational excellence.

• A new business with high growth potential (NewCo) rarely coexists gracefully with the most closely related established business unit within the company (CoreCo).

• In the new business example, the best practices were examined for managing strategic experiments.

• According to the HBS, trends have now changed. Business growth must take a new directions in terms of models and procedures used.

Building Breakthrough Businesses Within Established Organizations

•Review•Reinvigorate•Refresh•Refocus

Review

Reinvigorate

Refresh

Refocus Customer Needs

STRATEGIC ISSUES

To stay ahead of your competitors you need to:

Innovation

New ProductsNew Service Customer Needs

Servicing Customer needs requires innovation – you can achieve this by:• Adding a new service• Adding a new product• Modifying existing services / products

Modify Existing Services / Products

STRATEGIC ISSUES

When planning growth from within organizations will face 3 challenges:

3 ) Learning: The faster the new venture learns from critical unknowns the better.

2) Borrowing: The new venture cannot ignore the resources in use so the correct things must be borrowed.

Building Breakthrough Businesses Within Established Organizations:

3 Challenges

1) Forgetting: The new venture must forget the business model in use.

Three challenges: forgetting, borrowing and learning.

• In building NewCo, the CEO must be willing to challenge status quo on a range of issues including shared values and budgeting.

• Many firms make the mistake of duplicating organizational designs.

Warning signs that forgetting will be an uphill battle:

• The company has only one business model.

• All business units within the company are at similar points in their business life.

Borrowing:

• Warning signs that borrowing will be an uphill battle:

• CoreCo perceives that NewCo will cannibalize their revenues.

• CoreCo perceives that NewCo could render their competence obsolete.

• CoreCo perceives that NewCo might damage their assets.

Borrowing example:

The New York Times digital version on the internet came into problems with the paper format The Times.

The Times accused digital version of stealing subscriptions along with other accusations.

These problems were tackled effectively due to cooperation between senior management acknowledging and proactively managing tensions.

• Reliable forecasts are best indicators that a business is learning.

Wild Guesses

Informed Estimates

Reliable Forecasts

Time

Pre

dict

ion

Is NewCo Learning?

Learning:

• Warning signs that learning will be an uphill battle:

• NewCo’s leader perceives that they are in a rush to get to market first.

• The company has a tradition of detailed planning.

• The company has a history of common planning approaches on every business unit.

Learning example:

The learning challenge is most difficult of the three.

Hasbro’s traditional games Scrabble and Monopoly were under threat by the Hasbro interactive version.

Hasbro Interactive eventually collapsed as it did not engage in the learning process effectively. They did not establish if they had there capabilities before proceeding.

Hasbro did not set any predictions; too rigid. Hasbro’s planning cycle yearly; should have beenquarterly. Too aggressive.

The Key Learnings:The Key Learnings:

• For effective growth; planning is a fundamental requirement.

• Senior Management have to play a crucial role in managing tensions.

• The 3 challenging stages have to well managed.