Academic journal article Research-Technology Management

Corporate Venturing: An Expanded Role for R&D: Developing Growth Strategies and Business Models Must Become Competencies for R&D Leaders

Academic journal article Research-Technology Management

Corporate Venturing: An Expanded Role for R&D: Developing Growth Strategies and Business Models Must Become Competencies for R&D Leaders

Article excerpt

New product development in corporations has traditionally juxtaposed incremental developments with disruptive innovations. By necessity, the R&D executive spends the vast majority of his or her time managing the former to drive short-term revenue. The rest, arguably the true innovation of the corporation, is focused on obsolescing current product lines with next generation or substitute designs.

McKinsey and Company provides us with a convenient framework to introduce a third type of activity that will be the focus of this article (1). The consultancy calls incremental work Horizon 1 activity; the disruptive technology R&D, Horizon 3. Then, it suggests a middle ground, called Horizon 2. These projects are the development of new product lines or services that directly leverage existing company capabilities and apply them to new users and new uses. These are new market applications. H2 projects require new user and competitive research and often involve new business models and new channels. These projects are also often undertaken as new internal ventures within the corporation rather than as product line extensions.

In a new book based on the intimate study of new product line and service developments of several dozen corporations--The Fast Path to Corporate Growth--we studied the challenges and solutions used by business leaders to create new product lines and services (2). In most of these companies, we observed a common goal: to leverage proven technologies into new business units, new streams of revenue, better margins, and expanded market reach. The journeys of these companies toward enterprise growth were not easy, but they were highly productive, with first revenue generated as early as 18 months after project start.

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We also saw, however, that senior-level R&D managers typically had to demonstrate both vision and operating leadership to drive these new products to market. Their leadership had to extend far beyond just products and technologies. R&D executives had to help the corporation to quickly identify new users, perform market research to insightfully identify unmet user needs, create winning business models, and, also, help structure and implement test markets. Many of these activities are traditionally "owned" by the marketing and finance functions in mature corporations. Nonetheless, we found that those R&D executives who showed leadership in these non-technical areas were essential contributors to the success of internal ventures that extended beyond conventional markets, marketing and business models.

This article describes organic, enterprise growth and the role of R&D in one of these companies--Mars, Incorporated. While not every reader works in the same industry as Mars, we believe the company's experiences shed light on what to do and how to do it for R&D executives who wish to build new product lines and business for their corporations.

The Need for Innovation at Mars

Since its beginnings around the turn of the 19th century in the Tacoma, Washington, kitchen of Frank Mars and his mother, Mars has grown largely through internal, organic enterprise growth. Today, it owns some of the world's most popular snack, food and pet food brands, including M&M's, Snickers, Uncle Ben's rice, and Pedigree food for dogs.

However, after decades of continuous growth, Mars' external environment began to change as consumers' concerns about obesity and low-carbohydrate and low-fat diets grew. But along with these threats to its core products, there were also robust opportunities for Mars to expand to "adjacent categories" such as the energy bar segment or chocolate gifting. (3). For growth to continue, Mars would have to leverage its marketing brands and its technical competencies to new applications. Easier said than done!

In recent decades, Mars managers had become increasingly cautious about experimenting with the company's global brands. …

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