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




        Creating a New Ventures Organization
                         Implementing Innovation
                         Discussion Draft




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

                                                        © Insightory Consulting
                                                                                                                                1
3 Related Concepts: Strategy, Business Development
and New Ventures
Each has a different primary focus; though most organizations
have overlaps and hybrid versions.

                                            Business
       Strategy                                                                    New Ventures
                                           Development

• Strategic planning                    • M&A                                  • Launch new
                                                                                 businesses, markets
• Special projects                      • Strategic alliances,                   or products
                                          partnerships & joint
                                          ventures

                                   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.


                                                © Insightory Consulting
                                                                                                                 2
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




                                      © Insightory Consulting
                                                                     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




                                    © Insightory Consulting
                                                                                 4
Candidate Opportunities


Preliminary evaluation of short-listed opportunities

Opportunity   Fit existing   Large         Clear path            Longer         Significant     Include in
              program/       investment    to                    implementat    revenues        NV scope?
              dept?          reqd? (e.g.   revenues?             ion? (e.g. >   (e.g. >$20
                             >$1 MM to                           1 year)        MM/ year
                             break-even)                                        after ~5 yrs)
[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




                                           © Insightory Consulting
                                                                                                             5
Organizing and Resourcing New Ventures –
4 Models of Corporate Entrepreneurship
Dedicated

                                                                                       Producer
                                        Enabler
                                                                               Company establishes &
                               Company provides funding
                                                                             supports a full-service group
                               & sr. executive attention to
                                                                              with mandate for corporate
                                  prospective projects
                                                                                   entrepreneurship                   [] sweet
                                      E.g.: Google
                                                                                     E.g.: Cargill                    spot?
Resource
Authority
                                       Opportunist
                                                                                       Advocate
                                No deliberate approach to
                                                                                Strongly evangelizes for
                               corporate entrepreneurship.
                                                                              corporate entrepreneurship,
                               Internal & external n/w drive
                                                                                but BUs provide primary
                                    concept selection &
                                                                                        funding
                                    resource allocation.
                                                                                     E.g.: DuPont
                                       E.g.: Zimmer
Ad-hoc


                    Diffused                            Organizational                               Focused
                                                         Ownership

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



                                                           © Insightory Consulting
                                                                                                                                   6
Potential Organizational Structures
                                                                                                              In all cases, the SVP - NV would
  Model 1: Straight-line reporting                                                                            report to the COO

                                                          SVP New Ventures



    Dir./ VP                       Dir./ VP                      Dir./ VP                       Dir./ VP
                                                                                                                           . . . Others . . .
 [Opportunity 1]                [Opportunity 2]               [Opportunity 3]                [Opportunity 4]




  Model 2: dotted line – shared reporting with market leaders

 SVP New Ventures                                SVP [1]                     EVP [2]                   SVP [3]                    SVP [3]




                                                Dir./ VP                   Dir./ VP                   Dir./ VP                  Dir./ VP
                                             [Opportunity 1]            [Opportunity 2]            [Opportunity 3]           [Opportunity 4]



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.


                                                                   © Insightory Consulting
                                                                                                                                                         7
Pros and Cons

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

   Pros                                                  Cons
   • Provide sharp focus on new                          • Not easy to find candidate with
     businesses => higher chance of                        breadth of experience in
     success                                               consumer marketing, healthcare,
   • Bring in new entrepreneurial skills                   technology, sales, start-up
     to []                                                 ventures, etc
   • May be able to manage payroll                       • Alters “balance of power” in
     impact by funding through                             existing organization – may lead to
     [Innovation Budget] and/ or self-                     political issues
     funding through incremental                         • Introduces a fault-line – between
     revenues (long-term)                                  those that create a new business
                                                           & those expected to manage it
                                                           long-term




                                         © Insightory Consulting
                                                                                                 8
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


    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.


                                                              © Insightory Consulting
                                                                                                                                          9
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
    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.


                                                              © Insightory Consulting
                                                                                                                                          10
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?




                                         © Insightory Consulting
                                                                                11

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Strategy & new ventures

  • 1. Insightory Consulting Strategy I HR & Organization I Globalization I Non-Profit Creating a New Ventures Organization Implementing Innovation Discussion Draft © Insightory Consulting
  • 2. 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) Other strategies (e.g. “creating a culture of innovation”, hiring new competencies etc) will play out over the long term. © Insightory Consulting 1
  • 3. 3 Related Concepts: Strategy, Business Development and New Ventures Each has a different primary focus; though most organizations have overlaps and hybrid versions. Business Strategy New Ventures Development • Strategic planning • M&A • Launch new businesses, markets • Special projects • Strategic alliances, or products partnerships & joint ventures 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. © Insightory Consulting 2
  • 4. 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 © Insightory Consulting 3
  • 5. 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 © Insightory Consulting 4
  • 6. Candidate Opportunities Preliminary evaluation of short-listed opportunities Opportunity Fit existing Large Clear path Longer Significant Include in program/ investment to implementat revenues NV scope? dept? reqd? (e.g. revenues? ion? (e.g. > (e.g. >$20 >$1 MM to 1 year) MM/ year break-even) after ~5 yrs) [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 © Insightory Consulting 5
  • 7. Organizing and Resourcing New Ventures – 4 Models of Corporate Entrepreneurship Dedicated Producer Enabler Company establishes & Company provides funding supports a full-service group & sr. executive attention to with mandate for corporate prospective projects entrepreneurship [] sweet E.g.: Google E.g.: Cargill spot? Resource Authority Opportunist Advocate No deliberate approach to Strongly evangelizes for corporate entrepreneurship. corporate entrepreneurship, Internal & external n/w drive but BUs provide primary concept selection & funding resource allocation. E.g.: DuPont E.g.: Zimmer Ad-hoc Diffused Organizational Focused Ownership Source: Wolcott & Lippitz. “The Four Models of Corporate Entrepreneurship”. MIT Sloan Management Review Vol. 49 No 1 (Fall 2007) © Insightory Consulting 6
  • 8. Potential Organizational Structures In all cases, the SVP - NV would Model 1: Straight-line reporting report to the COO SVP New Ventures Dir./ VP Dir./ VP Dir./ VP Dir./ VP . . . Others . . . [Opportunity 1] [Opportunity 2] [Opportunity 3] [Opportunity 4] Model 2: dotted line – shared reporting with market leaders SVP New Ventures SVP [1] EVP [2] SVP [3] SVP [3] Dir./ VP Dir./ VP Dir./ VP Dir./ VP [Opportunity 1] [Opportunity 2] [Opportunity 3] [Opportunity 4] 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. © Insightory Consulting 7
  • 9. Pros and Cons These are the pros & cons of hiring a dedicated “New Ventures” leader, regardless of model chosen Pros Cons • Provide sharp focus on new • Not easy to find candidate with businesses => higher chance of breadth of experience in success consumer marketing, healthcare, • Bring in new entrepreneurial skills technology, sales, start-up to [] ventures, etc • May be able to manage payroll • Alters “balance of power” in impact by funding through existing organization – may lead to [Innovation Budget] and/ or self- political issues funding through incremental • Introduces a fault-line – between revenues (long-term) those that create a new business & those expected to manage it long-term © Insightory Consulting 8
  • 10. 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 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. © Insightory Consulting 9
  • 11. 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 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. © Insightory Consulting 10
  • 12. 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? © Insightory Consulting 11