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Managing internal corporate venturing cycles - Coggle Diagram
Managing internal corporate venturing cycles
Why internal corporate venturing cycles persist?
(Uncommitted resources, prospects of mainstream businesses)
Situation 2: "All-out ICV Drive"
insufficient prospects of mainstream business to meet corporate objectives for profitable growth (motivation for active support)
available uncommitted resources
new venture division or new business group
implementation tool for ambitious top-driven ICV program
home for all existing ICV orphans
Situation 3: "ICV Irrelevance"
unavailable uncommited resources
sufficient prospects of mainstream business
attention focused on exploiting core businesses opportunities
Situation 1: "ICV Orphans"
available uncommitted resources (can afford to support)
sufficient prospects of mainstream business (little motivation to support actively, likely lip service)
drift along, no active management
Situation 4: "Desperately Seeking ICV"
unavailable uncommitted resources
insufficient prospects of mainstream business
top managers latch on desperately to first reasonable-looking ICV projects
high failure likelihood
limited ICV projects choice
Substantial uncertainty
Factors determining length of the ICV cycle
economy business cycle
cash availability (new investments, termination)
Strategic, administrative actors (greater bearing on venturing cycle length)
Three-year rolling budgets
Annual budgeting
1 - 3 years to meet top management expectations else deemed ineffective
pressure to "grow big fast'
potential dysfunctional managerial behavior eg. neglect organisational infrastructure for continued, timely new product development
Average time for new ventures ROI = mature businesses
(10 -12 years)
much longer than average time fast-track executives expected to stay in same job for most large companies
some executives will stay in position too long or disruptive management changes
Frequent executive sponsor changes detrimental to disruptive innovation commercial success
unless HR has clear executive career paths requiring venture positions experience, ensured capable managers available to take over from people due to rotate out
Rational but narrowly opportunistic behavior (short-term results at expense of infrastructure for long-term venture development)
unless process in place to measure managerial performance in clearly established milestones
normal executive rotation to different positions = someone else in charge by innovation can be fully charged
Stay that long = career risks if venture is unsuccessful eventually
Forces driving the end of an ICV cycle
Performance - Failure to deliver
Non-performance - Typically closed before chance to prove self
executive, top management failure to appreciate ICV role in corporate strategy
Xerox - XTV too much success which might have made internal units look bad
fear of success at the expense of Xerox shareholders (startups funded may compete for business)
AT&T corp Opportunity Discovery Department to revitalise Bell Labs research, links to corporate strategy but ended (standard performance metric not met - did not produce enough patents, taking credit for strategy making (top management responsibility, privilege)
perceived as a threat
innovative approach added to discomfort
Administrative factors (changing environmental demands or keep things fluid)
ICV's interference to new organisation structure
newly appointed executive may not be committed to course of action by prior manager, may want to leave mark by making changes
Weakness of will
general lack of understanding of ICV's role in long-term corporate development strategy
inability to sustain commitment
Innovation - long term commitment, difficult trade-offs with short-term pressures
uncertain innovator benefits, certain costs to people affectd by changes
higher resistance to innovation than support
Implications for strategic management of ICV
View ICV as source of insights that can inform strategic direction
where employees think future opportunities lie
self-organizing, emergent ICV as important source of strategic foresight
ICV evaluated first as information generated rather than revenue dollars
ideas, related autonomous strategic initiatives working on in their spare time
innovations might also be pursued by competitors, startups
capitalize on grassroots innovations eg. Whirlpool corp pipeline of product innovations - single person househild dishwashers, ovens that freeze, heat, garage appliances for men
"all-out ICV drive" biases the process, often engenders costly mistakes
top-driven
ICV perceived as most attractive simply due to management's forcefully expressed interests
risk of losing top talent to frustration, resentment of people still generating profits
big loses - premature significant investments to fully exploit, accelerate new growth opportunities
There is always ICV, so manage it
new-business opportunities outside of corporate strategy scope at origination even without dedicated internal-venturing company unit
hard to stamp out completely
autonomous, employee-driven ICV usually cease
(Orphan ICVs, irrelevant ICVs)
frustration by lack of traction
leave company to pursue startup opportunity
without management encouragement
process for entrepreneurial employees to be comfortable coming forward with ideas, m
mobilize senior management to begin determining new opportunities' strategic context
process to evaluate innovations, champion promising ones to embrace, fully support
superimpose strategic discussions on top of financial analyses to better ascertain potential impact on company's future eg. NPV calculations
hazard of evaluating innovations with strictly financial measures eg. electric fuel injection
Undermanaged link between disruptive technology, ICV (source) undermanaged eg. Eastman Kodak Co.
migrate from film to digital photography
If ICV is desperately needed, it may be too late
dire prospect of decaying core business potentially from the failure to capitalize on disruptive technologies earlier on or give up
active, continuous involvement in corporate ICV strategy even when mainstream business is prospering
extent of corporate venture downsizing can eliminate future growth options
ICV cyclicality primarily result of executives failing to master forces causing long-term ICV support fluctuations
ICV's importance to long-term success should not be dictated by fluctuating financial fortunes, short term strategic pressures, perverse administrative routines or fickle management fads
ICV as key established companies capability for strategic renewal, avoid stalled growth
Building Leadership Capability to Manage the ICV cycle
ICV as continuous, integrated part of strategy-making process rather than insurance appealing according to mainstream business prospects
discovery process (experimentation, selection)
emerging opportunities
nuanced adjustments to company's strategic direction
new opportunities consistent with company's core strengths
ICV's new leverage point in competition
potentially unmet customer needs, new market segments
blind spots in current competitive strategy relative to potentially disruptive technologies
UPM's example
rationalize resource allocation
Responsibility of all senior executives
Other profitable growth avenues may not be promising
Intel's ICV cyclical nature
Key challenges
develop company strategic value
evaluate between organic growth, acquisition
maintain ICV corporate level interest
2001 tension between core business (PC- profitable, need more investment to be ahead of competition) VS new ventures (wireless and networking communications losing money but promising)
1997 - 1998 PC market languished -> all-out ICV
new business group (NBG) to develop new business
Intel focus on new wireless communication, networking communications market
2002 Perceived ICV relevance decreases
NBG (ICV) merged with Intel Capital (CVC) - both ICV, ECV
NBG renamed to New Business Incubation Group as corporate "greenhouse" to nurture new companies, technologies
1987 -1991 ICV Orphans
PC market segment core microprocessor investment
Revenue growth ($3b in 1988 to $27b in 1997)