New Corporate Ventures: Six Success Factors

To thrive, businesses need continuity. What’s a business leader to do in an environment where the only constant is change that only seems to want to accelerate?

The answer is to build an organization able to manage its core business and search for new opportunities at the same time. Given how mature businesses are organized, this is not an easy task, but necessary nonetheless for the long term sustainability of the business.

Mature organizations, that have found a product or service that customers are willing to pay for, can begin to optimize the business. They exploit the business they have established by improving efficiency, achieving economies of scale, and introducing incremental improvements into the product. Enabled by the assets and brand equity they have accumulated, established firms tend to focus and excel at this.

But before they can start exploiting, organizations are in exploration mode. In exploration, the goal is not yet to achieve operational efficiency, but to experiment, by iterating quickly and using the data generated to pivot to new or refined opportunities until the business is ready for exploitation.

The difference between successful exploitation and exploration is what enables organizations to run the core business versus building a new one. But when dealing with innovation and starting new ventures it is necessary to do both of these at the same time, or at least to keep exploiting but letting a small division or initiative stay in exploration.

This is not an easy thing to do. There is a huge risk that the new venture will be smothered by the legacy, processes and metrics imposed by the mature organization.

In our experience there are six factors that are key to setting up a new corporate venture in a way that enables them to explore, but at the same time take advantage of having a corporate parent:

1. Selecting the right venture model for you: Business Unit, skunkworks, or corporate startup.
2. Tapping the power of the startups: Entrepreneurial skills, mindset, and methods.
3. Protecting the new venture’s independence: So that you can actually benefit from #2.
4. Using corporate assets for acceleration: De-risking, access to capital, and expertise.
5. Leveraging brand trust to create partnerships: Rome wasn’t built in a day, and nor is brand equity.
6. Designing the right KPI framework: You can’t manage what you don’t measure.

Get the full report