Academic journal article Research-Technology Management

Venturing Next to the Core: From Defense to Homeland Security: Raytheon's Homeland Security Venture Illustrates the Steps a Mature Corporation Can Take to Find New Markets for Its Core Technologies

Academic journal article Research-Technology Management

Venturing Next to the Core: From Defense to Homeland Security: Raytheon's Homeland Security Venture Illustrates the Steps a Mature Corporation Can Take to Find New Markets for Its Core Technologies

Article excerpt

This article describes Raytheon's foray into homeland security, a true corporate venture and a highly successful one at that. For decades a leading defense contractor, over the past seven years Raytheon has become the fastest growing provider of homeland security solutions for governments and public authorities around the world, largely through internal, organic development combined with some interesting new partnerships. It is an outstanding example of adjacency, of venturing into new market applications related to core business, yet still requiring an openness and innovativeness in how to sell, what to build, and how to make money--and perhaps most difficult--how to work as a venture in the context of a mature corporation.

While not every reader works in the defense and security industries, we believe that Raytheon's experiences highlight key practices for executives seeking to develop new businesses within their own companies--business featuring new product lines, new business models, and targeting new, emerging markets. What we see as necessary ingredients for success--a checklist of sorts for corporate entrepreneurs seeking to achieve dramatic success within their own companies--are:

1. Strong, if not explosive, market demand that translates into a series of well-defined applications for which the company can create pragmatic solutions. The advent of terrorism, an energy crisis, a shortage of food, healthcare, and potable water, the growth of the elderly population--these problems provide untold opportunities for innovation and growth.

2. Unshakable support from a corporation's CEO to build a viable, cash-generating business, translating into a sustained commitment for startup and growth capital, even in the face of early losses or disappointments.

3. Adjacency of new target market applications to the core business so that certain functioning assets of the corporation can be applied to accelerate venture growth, be it a technology, a distribution channel, or access to buyers and customers. Adjacency also helps convince new customers that the corporation has a right to play in the new market space.

4. Team members committed to working closely with new target customers--backed with processes and financial resources--to understand key requirements as well as the pragmatic operating constraints required for effective solutions design. User-centered design, rapid and repeated prototyping, and the development of application solutions (even if delivered as services on top of general-purpose products) are increasingly important for all companies, regardless of industry.

5. A commitment to working with customers to understand their preferences for buying and support. This may lead to an entirely different channel for sales and fulfillment relative to traditional approaches, and may present challenges far greater than technical ones.

6. A thoughtful assessment of the industrial ecosystem in which the venture will assert and position itself, and the business model implications of that role. The business plan for a new venture must clearly express any business model differences between core business and the new business, and the implications of those differences for positioning, pricing, distribution, and service. These impact not only financial models, but the types and number of people needed in the venture, as well as external partners needed for success.

7. As important as any market or technology factor, internal financial and organization "rules of engagement" for funding the new venture, as well as providing resources and flexibility to rapidly scale should the initial launch prove successful. This also requires the creation of a tactical, highly operational plan for quickly expanding the customer base and commercial offerings to secure market leadership.

8. A venture management team that as part of its staff has one or several members with a strong record of accomplishment of leading growth within the core business. …

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