Making New Corporate Ventures Profitable and a Win/Win for All: A Checklist for Corporate Entrepreneurs

by Marc Meyer

In this economic climate, companies with foresight are investing in new corporate ventures to open new markets and create new streams of revenue. The Northeastern College of Business faculty has worked with executives and innovation teams in industry leaders that include BAE, EMC, IBM, Mars, Microsoft, Procter & Gamble and Raytheon to build the skill sets and business processes needed for successful corporate venturing. We teach and help companies apply frameworks that integrate markets, technology, and business models for organic, enterprise growth.

“Without a "yes" to every one of the checkpoints above... the chances of success for the corporate entrepreneur diminish considerably.”

Our research and experience has told us there are 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 ecotype 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 and business model differences between core customers 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. This provides institutional credibility when asking peers to support corporate commitments in people and money to the new venture.

Without a "yes" to every one of the checkpoints above, Northeastern's research and experience has indicated that the chances of success for the corporate entrepreneur diminish considerably. Seen from a different perspective, these eight checkpoints become our recommended homework for current or prospective corporate entrepreneurs seeking to lead their companies in to the future. And an additional factor we've learned: a first win to brand the new business in the larger market can be critical. Thereafter, rapid growth comes from learning how best to leverage technology, internal processes, and branding from one deal to the next.