Academic journal article Research-Technology Management

Designing Ventures That Work: A Study of Successful and Unsuccessful Corporate Ventures Yields Guidelines for Designing Ones That Are More Likely to Achieve Their Goals

Academic journal article Research-Technology Management

Designing Ventures That Work: A Study of Successful and Unsuccessful Corporate Ventures Yields Guidelines for Designing Ones That Are More Likely to Achieve Their Goals

Article excerpt

Academics and consultants strongly promote the idea of establishing a corporate venturing (CV) unit: a separate unit(s) within an established firm, separated from the routine structure, processes and evaluation, and semiautonomous in decision making (1-4). This provides an ambiance in which venture projects--a radical innovation, a new business opportunity or a start-up--can be explored, incubated and given the opportunity to demonstrate economic viability (3). Unfortunately, however, many CV initiatives fail. A review of venturing units within large firms shows that among 95 independent units studied in 2001, only 55 remained in 2003 and their average life was no more than 4 to 5 years (5).

We initiated this research in order to find reasons for the closure of CV units and to find a basis for leading such initiatives to deliver successful, sustainable results. (We define effective corporate venturing as the ability of the firm to develop ventures successfully on a systematic and continual basis.) Our research was built on the insights gained from a literature review. Various researchers have analyzed the factors that influence the success and failure of corporate VU(s). In aggregate, a few factors emerged that are more influential than others as a basis for effective CV, and we focused on these factors as a starting point.

We clustered the factors into three elements--necessity, objectives and ambiance--based on the similarities among them. We used a multiple-case research approach to validate and refine these factors (6, 7). For our case research, we selected Shell, Nokia and IBM because of their well-established CV and the recognition of their venturing as successful by academics and others. Besides studying internal ventures, we conducted over 20 semi-structured interviews with managers, senior managers and the top managements of these firms.

Venturing at Shell, Nokia and IBM

Shell, Nokia and IBM made appealing case studies because their CV is thriving and delivering credible results for more than a decade (see "Corporate Venturing in Practice," below). Since its inception, IBM's Emerging Business Opportunity program has produced five multi-billion dollar businesses. Over 30 percent of Shell's Exploratory Research projects have their origin in GameChanger, while Shell Technology Ventures has developed over 20 new startup companies that bring in strategic returns for Shell. Two of Nokia's four current business groups were born from the work done at Nokia's venturing arm, Nokia Venture Organisation.

Each of these firms has different strategic needs and objectives, with the result that they deploy different types of venture instruments. However, the basis of each firm's approach is linked to the key elements of necessity, objectives and ambiance. The following section elaborates on each of these.

Necessity Analysis

Venturing must start only after an appropriate assessment (see "Quick Guide for Effective Corporate Venturing," next page). The essence of necessity analysis is to evaluate whether or not a firm needs a venturing unit and whether the timing for establishing such a unit is right. In a small, agile firm, for example, where the executives are available for direct communication, establishing a separate VU is often not necessary. In such cases, the project will be supported if the senior executives deem it appropriate. The decisions are made quickly and responsively. However, this environment is not found in most large established firms (8). Conversely, some established firms might not need a venture unit. Where an appropriate culture has been established and radical ideas are accepted and given a chance--in companies like 3M, Virgin, Google, and Apple, for example--a separate VU is probably unnecessary. Hence, managers need to decide whether their firm needs a separate venturing unit or not.

Even if it is decided that venturing is necessary, the timing has to be right or else the life of such a unit will be short (9). …

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