Chintan M. Shah

Designing Ventures that Work

OVERVIEW: Corporate venturing (CV) is a widely accepted mechanism for incubating and developing new business within large established firms. Substantial research has been done on this subject, yet many firms have failed in their venturing efforts and booked large losses. In contrast, venturing at firms like IBM, Nokia and Shell is thriving, and has done well for more than a decade. This gives rise to the following questions: Why do most venturing initiatives fail and only some survive? How can a company establish CV that survives and delivers successfully? A study reveals three dominant elements of an effective corporate venturing effort: carrying out a thorough necessity analysis, achieving clarity of objectives and creating the right ambiance.

Strategies to Commercialise Breakthrough Technologies

In this paper we focus on the different strategies used by companies during the process of development and diffusion of breakthrough technologies. We distinguish three phases in this process and show that, depending on the length of these phases, pioneers might be confronted with completely different scenarios just after the invention of a breakthrough technology. Different strategies to commercialise breakthrough technologies are also distinguished: a mass market strategy, a niche market strategy and a wait-and-see strategy. We show that the result of these strategies can diverge considerably depending on the scenarios. These strategies are studied in detail for the cases of the photocopier, video cassette recorder, digital camera and microwave oven. Several conclusions are derived from the cases. The main actors involved in the development and diffusion of breakthrough technologies change considerably during the different phases. The market adaptation phase is the most turbulent among all phases: many actors enter and leave the market over a relatively short period of time while making substantial losses. Customer segments and user applications also change considerably during the phases. Usually, niche markets emerge first, i.e. specific customer segments using the technology in specific applications, which diverge considerably from the mass market applications that emerge later. In our cases, pioneers of breakthrough technologies never create a mass market. The pioneers that do survive stick to their niche market strategy. After the pioneer, multiple entrants adopt a similar strategy but many of them have to leave the market later. Only a small number of them survives, either by consistently adopting a niche market strategy or by creating a mass market. The strategy of the entrants that manage to create a mass market is discussed in more detail. The management implications of these findings are large. Companies should be well aware of which phase they are in; their strategies need to be adapted to the phase of the process, strategies that appear to be successful in the market adaptation phase, for example, can be detrimental in a later phase. The results of the case studies also indicate that most successful actors consistently pursue one strategy.

Building a Radical Innovation Mechanism at Large Firms

Large firms are generally good at managing incremental innovations, yet they often lack the capabilities that are conducive to developing and deploying radical innovations (RI). Even though large firms recognise the importance of RI, most of them have failed to establish a mechanism, that is, a well defined organisational structure, management processes and resource allocation system that facilitates RI. Drawing on extant literature we build a research framework that explains the obstacles that large firms face with respect to developing radical innovations. We collect data among three large firms, namely Shell, Nokia and IBM, and identify the practices these firms have developed and established a radical innovation mechanism that allows them to circumvent the obstacles for tapping into RI. Following these practices we conclude with managerial implications for managers that are building a RI mechanism for their firms.

Corporate Venturing: Unlocking the Innovation Chain

Corporate venturing is an important avenue of growth for many large established firms, but its results remain mixed. Previous studies suggest that ventures can be best managed through a separate unit that is responsible for all phases in the venturing process. That is for incubation, validation and commercialisation. However, managerial capabilities, management processes, evaluation criteria and deliverables vary significantly for each of these phases. Our case research at Shell, Nokia and IBM shows that the success rate of venturing can be improved if firms manage each of the three phases separately through a distinct unit. This allows a venture unit to optimise its capabilities for the requirements of that specific phase. An additional observed advantage of managing the phases separately is that it creates flexibility through an open-innovation approach, in which ventures can be spun-in and -out after each phase.

Future Growth through Radial Innovations: The Role of Senior Management

Large established firms are generally good at managing incremental innovations, yet they often fail when developing and deploying radical innovations (RIs). Senior management at large firms is becoming increasingly aware of the importance of RIs. However, most of the large firms have failed to establish a mechanism i.e. a well defined organisational structure, management processes and resource allocation system, to develop RIs systematically. Such firms can learn from leading companies like Shell, Nokia and IBM who have successfully established RI mechanism and finely balanced their resources between incremental and radical innovations. This paper presents three main implications for management. One, a firm needs a fine balance between incremental and radical innovations to ensure long-term survival and growth. Two, the senior management must establish a RI mechanism, which may include instruments such as an incubation unit, a validation unit and/ or a venture capital arm among others, to incubate and develop radical innovations systematically and continually. This mechanism should be customised to individual firm’s needs. Three, the management must de-ploy adequate resources, funds and managerial time, for a longer term for a successful RI mechanism.