Growing by creating new business
Starting a new business from scratch is very tough.
All statistics and quotes tell you that you have 1% chance of success, need 10 failures for every step forward, making mistakes is crucial, it is hard, it takes longer … and you will end up in a different place from your original plan.
On top of that trying to do it in a corporate environment is seen as a near impossibility. Organizational barriers, short term goals, cultural incompatibilities, are added to the above list of horrors.
And still almost all company/business strategies need successful new business growth. The existing business is in a mature market and market shares are already high limiting growth options in the core. Therefor it is logic to go from the so called ‘red’ ocean (the bloody existing competitive field) to the bright new ‘blue’ ocean. To stay with the colors the grass is greener on the other side.
For success you have to be able to create three breakthroughs:
- Find a truly attractive new growth market for your company
- A market that is growing fast, supported by underlying (mega)trends
- A market that needs new solutions and has customers with unmet needs
- A market that is not so transparent that it is going to be entered by everybody at the same time
- Determine how you can win in this new market – can you know this before you start?
- Know deeply what it takes to win in the newly identified market, understand the different steps in the whole value chain
- Have a realistic vision on both the core and the differentiating skills and capabilities that your organization has and can build uniquely
- Make sure the needs and the skills actually match in real life not only on the drawing board
- Implement with the right mix of perseverance, focus, agility and creativity
- Create a very challenging but possible timeline and top-level leadership attention
- Set up a dedicated effort to attack this new market, including the right skills at the right time (do not overkill on resources only needed next year)
- Mix inside and outside talent, nurture it away from the ongoing business, but be harsh on delivery
- Do not give up at the first (ten) problems, believe in your team but adapt to new realities fast and be rigorous in resource changes when needed
What do my own experiences suggest
The new market
When trying to open up new markets it important to follow one of these approaches:
- Start with a broad market definition and use the early efforts to better define the exact market you are aiming for
- Work with 3 to 5 possible markets and use the early efforts to prioritize these for next steps
- Focus on one market but allow the team to look for adjacencies to improve the final market to go for
In other words, do not go for broke for one (narrow) market from the start. Start-ups almost never succeed in their first chosen market and corporate development programs need multiple options (a pipeline) to overcome the internal sensitivity to risk.
The winning proposition
You need to find the right balance between building on existing strengths and new capabilities that need to be developed.
- Going for a market that does not need any of your existing core competences makes for a longer and more risky effort.
- But using only what you have now is likely a sign that you have not deeply understood the new markets needs well enough. Because it would have come your way earlier.
Test your ideas of what you believe will make you win early with key players in the value chain, both direct customers but also consumers, suppliers and other stakeholders (even future competitors if feasible).
There is no magic bullet, it is hard work and needs continuous attention from the leadership.
The impossible challenge is a well proven method to take teams away from old solutions and ways of thinking. But make sure that in the early phases the impossibility is in the content not the speed of progress. Give the miracle some time to show itself and mature before stepping up the push for milestones.
The business development team must be able to manage its own fate and resources. Reviews should be focused on the overall progress, less on how you got there. The ways of working will not fit the normal corporate processes, but at the same time need to be governed very closely.
Be agile in the approach, but also in team composition, be willing to adapt fast. The team resources will need to change rapidly in the first months. All the more pressure to use the goals and vision (and commitment from the top) to create an environment of continuity.
Especially when making the transition from new business to the scale up phase many new capabilities are needed.
The 3 steps are presented here as sequential. In realitiy they are highly interactive and iterations happen many times.