The Idea in Brief
Most companies’ new business initiatives have sorry track records. The number of actual ventures launched is tiny, and their costs far exceed original estimates.
Why these disappointments? Companies move projects forward only when they achieve preset goals. Yet critical elements—such as who the intended users might be—can change along the way. When a project doesn’t meet predefined goals, it’s killed. The company cuts its losses and doesn’t learn from the experience.
There are other alternatives besides launching or killing, say McGrath and Keil. For example, recycle by aiming a venture at a new target market. Spin the project off to other owners. Spin it in to an established business unit that can use it. Or salvage valuable pieces such as technologies, capabilities, and patents.
Squeeze every bit of possible value from your ventures, and you beef up overall return on those investments—making innovation a true engine of renewal in your company.
The Idea in Practice
How to extract more value from your ventures? McGrath and Keil offer these suggestions:
Expand Your Choices
Consider these alternatives to launching or killing a project:
- Recycling. You’ve discovered that a venture’s original concept is flawed. Before abandoning it, explore any new opportunities it may have unearthed—such as a different target market that may value the benefits the project offers.
- Spinning off or licensing. Your venture’s business model just doesn’t fit comfortably with your company’s. The project might still have a bright future outside your firm. Venture capitalists might want to back it as an independent entity. Someone might want to license its intellectual property.
- Spinning in. Your project’s target market isn’t novel or big enough to justify creating a separate business. Identify where else in your organization the idea might have merit, and move it there.
- Salvaging. Your venture hasn’t created a viable product or service. But it contains assets of some value internally. Break up the project. Then harvest its constituent elements—patents, brands, specialized equipment, specific expertise—for use elsewhere in your company.
Treat Venturing as a Discovery Process
To generate returns from all forms of value in your ventures, treat each project as a discovery process, not a go/no-go proposition. Manage each step in the process differently:
- Reviews. Include people from units throughout your company that may have future interest in a venture. They can help you determine whether the whole project or some of its elements would best be folded into established businesses.
- Launches. Recognize that talents and resources required to test and flesh out a concept may differ enormously from those needed to launch the idea as a business. If they do, assign different people and organizational structures to the launch.
- Progress metrics. Make learning the central goal of each venture plan. Validate your assumptions as quickly and cheaply as possible, then revise the plan at key milestones if reality proves different from your expectations.
- Funding. Fund only to the next milestone in your venture plan, and position inexpensive milestones early in the process.
- Staffing. Include some strong players possessing experience with the unpredictability of new business launches. And methodically transfer people with venture experience to the mainstream organization.
Executives chronically complain about their companies’ sorry track records in creating new businesses, for seemingly good reasons. The proportion of ventures that are actually launched is low, and the costs of not just the failures but also the successes all too often dwarf original estimates. Indeed, some studies have found that a firm typically has to come up with thousands of ideas before achieving even one commercial success.
