Enthusiasm for corporate venturing (efforts by firms to create new businesses from within) come and go over time. Firms set up venture groups, get disillusioned with them, fold them back into the core business only to discover a few years later that they need some place for new ideas and the people who have them to go, and the whole cycle starts up again. A key reason companies find organic growth so difficult to achieve is this on-again, off again, haphazard way of managing it. Perhaps this is why my colleague Julian Birkinshaw some years ago noted that: “less than 5 percent of corporate venturing units created new businesses that were taken up by the parent company.” (source: Birkinshaw, J., A. Campbell. 2004. Know the limits of corporate venturing: Almost all units set up to create new opportunities for a company fail to develop any significant new businesses, but that isn ot to say that the techniques are useless – they can be harnessed for other purposes Financial Times, London (UK), 11).
But it doesn’t have to be that way. My colleague Thomas Keil and I have just finished a research project that finds that corporate venturing can play a huge role in business development for firms, but here is the rub: For the most part, ventures are not going to be the home for the commercial use of the innovations they generate. These, instead, come when innovations in terms of technologies, capabilities and so forth move to either a strategic new business thrust (such as Nokia’s move into multi-media) or to another venture which has the potential to gain critical mass. Our insistence that ventures stand alone is an outdated idea. Once we accept that new ventures are incubators of sorts and perhaps that their main role is as temporary capsules for new capabilities, we would manage them far more adroitly than we do.
For more on this idea, see also Bob Burgelman’s excellent article: Burgelman, R., L. Valikangas. 2005. Managing internal corporate venturing cycles. Sloan Management Rev. 46(4) 26-34.