Corporate Venture Strategies

The Key Source of Corporate Top-Line Growth

By: Vadim Kotelnikov

Founder, Ten3 Business e-Coach Inspiration and Innovation Unlimited!

 

"Corporate venturing is about to expand enormously." ~ Richard Koch, author of the The 80/20 Principle

 

Corporate Venture Strategies In-company Ventures Spinouts Corporate Venture Investing Venture Acquisitions Operational Excellence 6Ws of Corporate Growth Lean Production Continuous Improvement Firm (CIF) Quality Management Siz Sigma Jack Welch - a Corporate Change Leader (case study) Enterprise-wide Business Process Management (EBPM) 1000ventures.com Vadim Kotelnikov (personal web page) Sustainable Growth Strategies Kaizen Corporate Growth Strategies: Venture Strategies and Efficiency Improvement Strategies - Top-Line Growth and Bottom-Line Growth

 

 

 

Two Main Sources of Sustainable Competitive Advantage

  1. Continuous Improvement Culture: continuous effort to improve organizational climate as well as the productivity of the core business in response to continuous changes in the marketplace.

  2. Durable Corporate Venture Strategy: internal investment in innovation, new product/service development, and in-company ventures, new business creation though spinouts, and external venture investing in new technologies and emerging markets.

 

 

In-company Ventures Spinouts Managing Projects as Spinouts Strategic Alliances Corporate Venture Investing Venture Strategies

 

 

 

Why Venture Strategies?

The most successful companies are those that have developed aggressive venture strategies and have made ventures critical components of their strategic and operating success. For today's corporations, traditional internal expansions, efficiency improvements and "synergistic" acquisitions are no longer sufficient sources of growth in most industry segments that had grown crowded and hypercompetitive. The new challenge is to search for emerging "white space" opportunities, "new-business creations that would meet the unmet, unserved needs of customers in emerging markets."1

In ventures, large and midsized companies can discover a source of growth they are striving to achieve. New business creation has become central to achieving strategic and financial objectives of market champions. "Silicon Valley wouldn't exist if big companies couldn't identify technology and market opportunities and move with speed to capitalize on them", says Mike Moritz of Sequoia Capital Partners.

Opportunity Approach to Business Development

Opportunity-driven business development is an experimental approach to be practiced by companies facing radical industry or market change. According to Peter Skat-Rørdam4, this approach is based on two core beliefs:

  1. Most companies possess a wealth of attractive opportunities. Most of these usually remain undiscovered, with only a few ever brought to attention, and in the best cases only a few ever brought to attention, and in the best case only one or two actually pursued.

  2. Many companies will soon find that it necessary to employ an opportunity-driven and experimental approach to business development, especially in changing industries, simply because the future is so uncertain.4... More

3Ss of Winning in Business

In-Company Ventures

To achieve their growth objectives through in-company ventures or in-company startups, many corporation may need to change their mindset and organization concept, loose controls and provide an enabling environment to empower the venture manager. They need also to adopt the business systems approach to managing projects aimed at development of innovative products or services... More

 Success Case  GE Digital X-Ray Project

The Digital X-Ray technology development project at GE was about to die several times. This radical innovation initiative survived and finally prospered mainly due to entrepreneurial .skills of the project leader.. More

Spinouts

Today, spinouts, a new form of creating and financing a high-tech company are very popular. This novel approach has a number of advantages over a merger or acquisition and it plays an increasingly high role for high-tech companies.

A spinout enterprise differs from a spin-off. Spinouts remain closely tied to the company that developed them. In most cases, the ties are both financial and operational. Financial ties can be enforced through interlocking of stock ownership and financial oversight by the parent company. Operational ties may include shared professional and administrative services as well as marketing and leadership support.

New ventures established as independent companies can more readily fulfill their potential. In this case, the entrepreneurs do not have to argue with superiors or put up with interference... More

Corporate Investing in External Ventures

External venture investing in new technologies and emerging markets has become a vital component of corporate strategies in the new economy driven by small innovative firms. Partnership between small innovative firms and large corporation is mutually beneficial. While entrepreneurial companies can identify  technology and market opportunities and move faster to capitalize on them, they can achieve enormous leverage through technology and distribution agreements with large global corporations. Herein lies strategic opportunity for large corporations... More

Joint Ventures

As there are good business and accounting reasons to create a joint venture (JV) with a company that has complementary capabilities and resources, such as distribution channels, technology, or finance, joint ventures are becoming an increasingly common way for companies to form strategic alliances. In a joint venture, two or more "parent" companies agree to share capital, technology, human resources, risks and rewards in a formation of a new entity under shared control... More

Venture Acquisitions

In today's era driven by systemic innovation, acquiring and integrating capabilities, know-how, and technologies has become an efficient route to growth and a strong alternative to internal research and product development. Acquisition and integration of ventures is an effective method for supplementing a product and business portfolio with the best available technology, as well as enter emerging markets, with speed... More

Managing Projects as External Ventures

More and more companies are turning to project financing through spinouts. In this arrangement, loan repayments are based on profits realized from the project.

The main reasons for financing and implementing projects as external ventures are:

  • insufficient collateral to secure a bank loan for implementing a large project internally

  • the need to loose controls and organizational burden and empower management of the project dealing with development of an innovative product or service...More

 Case in Point  Lessons from Jack Welch

Jack Welch, the legendary former CEO of GE, believed in surprise move, the bold play, and shocking his rivals. "He loved the idea that he could shake things up while others looked on from the sidelines, sitting idly by while he knocked his competitors for a loop," writes Robert Slater.

Welch's critical ingredients of the quantum leap were:

"This was what Jack Welch had in mind when he began reshaping General Electric. It's what he had in mind when he began thinking about his conquest of RCA. Acquiring RCA was a revolutionary move for General Electric. Throughout most of its history, GE grown from within. It simply did not believe in growing by acquisition."

 

 Discover much more in the

FULL VERSION of e-Coach

Four Types of Market Dominance Strategies...

Four Success Factors Relating to Venture Management...

Differentiation Strategy...

Fast Company...

Changing Mindset...

Radical Innovation...

Focus Activities...

 Case in Point  IDEO...

 Case in Point  Silicon Valley Companies...

Case in Point  Quantum...

Case in Point  Charles Schwab...

 

 

 

References

  1. Venture Catalyst, Donald L. Laurie

  2. Project Manager's MBA, Cohen E. Graham

  3. High Tech Start Up, John L. Nesheim

  4. Changing Strategic Direction, Peter Skat-Rordam

  5. Jack Welch and the GE Way, Robert Slater

  6. Radical Innovation, Harvard Business School

  7. Relentless Growth, Christopher Meyer

  8. 3 Strategies of Market Leaders, Vadim Kotelnikov

  9. Innovation Strategies, Vadim Kotelnikov