As a strategy for growth corporate venturing is not new – I remember loads of conversations around it at the back end of the dotcom boom in the early 2000’s. But there is a new urgency and aspiration behind some of today’s thinking. If you believe that it’s just too hard to take the legacy organisation and transform it into a butterfly then corporate venturing is one way to explore the alternatives. And it’s not a massive step from there to say that if successful, the old organisation becomes the cash cow which funds the growth of the new – which in turn cannabalises the historic success.
So simple to write on paper but in reality so much harder. As many find (from Kodak and Blockbuster onwards) the lure of the old, ‘guaranteed’ revenue stream is a constant distraction from investment in the new. And there are multiple pitfalls in the contrasting styles of old and new business models.
Corporate venturing is of course nothing new – and there are many differing models from the hands-off, pure investment play to the internal intrapreneurial activities. The latter can be anything from an innovation portfolio to a fully integrated strategy. And one of the newest models is in the collaboration space – interestingly often best portrayed in the public sector with a public sector (or quasi-public sector) body initiating activities amongst local (geographic or virtual) communities. What underpins the differences (although not always fully articulated) is the rationale for the venture.
There are at least 4 obvious drivers for corporate venturing – financial (to generate returns from an investment portfolio), R&D (to provide coverage over and above the specific focus of the organisation), increased impact/reach (frequently a public sector driver to achieve more than existing resources/knowledge/reach make possible) and strategic. Grow & Kill is clearly in the latter category – but there may be other strategic rationale for having a venture portfolio which are linked to specific functions within the business (new markets, new products, new channels for example) rather than an all encompassing agenda.
The issue with Grow & Kill really lies in the distinction between a genuine desire and strategy to cannabalise the legacy business vs an appetite and approach for complementarity (which may still be underwritten by an aspiration for cannabalisation). The latter is clearly much more comfortable as an approach – trying something new and yet protective of the old but has within it many pitfalls, not least the allocation of investment, remuneration practices, organisational environments, and the decision on when / how to integrate the new.
Many of those apply equally to the cannabalisation route, but the overt strategic approach makes the need to deal with those up front a no brainer. In ideal world the new venture operates a much faster pace, frequently adopting Agile working practices, occupies a very different work environment, one which makes self-managed teams and project oriented work much easier as well as sending a very clear signal that this is different business. People will be looking to be remunerated differently and for many recognition of their contribution in the speed and outcomes will be a big driver. The question in an agile environment is less about performance measurement frequently and more about how to deal with experimentation – what happens when experiments do not succeed but are valuable learning exercises for example?
And employees (or contractors) are not the only concerned stakeholders – the attitude of investors, especially for those in the public markets is critical. Even those alert to the threats and risks to conventional business models can be less tolerant of unproven new directions.
But for many established organisations, whether it is articulated or not, the direction of their transformation programmes may make a grow & kill strategy more of a consideration, as the programmes inevitably become broader and deeper.