Each initiative was assigned a delivery lead, an experienced business-building coach who helped employees to identify and de-risk the core assumptions first. Key decision criteria were resources required, path to scale, time to impact, expected overall P&L impact, and unique advantages of the parent company that could be leveraged to build the new businesses. The VC board then provided initial funding to ten concepts that covered a wide range of applications, including IoT devices, process automation, data platforms, and resourcing marketplaces. All teams scoped out MVPs and pitched their concepts to a newly created internal venture-capital (VC) board that included senior managers, external venture capitalists and technologists, sector experts, and strategic customers. Over the course of six weeks, these teams then independently developed more than 100 ideas for new businesses aligned with the overall strategy. Management then invited employees to form small teams that included a team lead and a management sponsor, such as the division head. After a successful restructuring program, the company’s CEO and board first set a clear vision and ambition that new ventures should primarily benefit the core business and enable significant improvements in the top and bottom lines. In our experience, the internal incubation approach works best when the new business is expected to focus on the parent’s core business.Ī leading consumer food company achieved great success with this internal incubation approach.
They may, however, lack initial certainty on what the “winning concepts” will be and how they should be set up for the long term-as an internal division or an external spinout, for example. One way to do that is to assign an experienced business-building coach to each team to build up and nurture an agile test-and-learn culture.Įstablishing an incubation approach is particularly suitable for incumbents that have a clear overall sense of the future direction of their business and sector, as well as a strong pipeline of promising early-stage ideas. The business has to be vigilant to ensure that the start-up culture “sticks” and that the legacy corporate culture doesn’t slowly start to take over. The characteristics of each are unique, and so, too, are the criteria and conditions for success (Exhibit 1). While other approaches can certainly work, the three we explore in this article have an established track record and clear conditions for success. Joint ventures and alliances, for example, can help to reach scale and enter new markets, and working with partners in ecosystems that, in some cases, include erstwhile competitors can expand offerings, access capabilities, and accelerate scale.Īfter analyzing more than 200 corporate business builds that we have supported, we have identified three major approaches that have proven successful.
In addition, certain strategies will be important no matter which approach a company takes.
Prompted by the pandemic, new business-building archetypes have emerged, such as remote service provision, digital retail, and collaboration platforms.Īs is true for many complex undertakings, there is no single right approach for launching a new business successfully. This example supports our research, which shows that fewer than a quarter of businesses launched ten years ago are viable large-scale enterprises today.įiguring out the right approach to business building is especially important now as new opportunities for innovation surface. The start-up struggled to access data and insights, failed to fully grasp the challenges of the core business, and did not attain sufficient support in the parent organization to test and implement changes. Despite millions of dollars of investment, however, it didn’t work.
When executives wanted to optimize operations in their factories, they believed setting up a fully independent start-up dedicated to developing new factory concepts was the only way to make it happen. Yet despite the growing enthusiasm for business building, incumbents with good ideas, strong commitments, and big ambitions will frequently run headlong into a big question: How do we actually go about building a business? Getting the answer to this question right is crucial because it shapes the entire operating model of the business-building venture, with significant implications in terms of budget, organization, and strategic direction.Ī leading industrial company learned this at a cost. This article was a collaborative effort by Ralf Dreischmeier, Philipp Hillenbrand, Jerome Königsfeld, Ari Libarikian, and Lukas Salomon, representing views from Leap by McKinsey, McKinsey’s business-building practice.
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