Managing Internal Corporate Venturing Cycles

Companies too often vacillate in their commitment to internal corporate venturing activities, leading to less than optimal outcomes. Executives need to better understand — and manage — the factors that drive cyclicality in internal corporate venturing.

Thirty years of systematic study of internal corporate venturing has revealed that many major corporations experience a strange cyclicality in their ICV activity. (See “About the Research.”) Periods of intense ICV activity are followed by periods when such programs are shut down, only to be followed by new ICV initiatives a few years later. Like seasons, internal corporate venturing programs begin and end in a seemingly endless cycle.

About the Research »

Consider Lucent Technologies’ New Ventures Group, which was set up to reap commercial value from Bell Labs technology. In January 2000, the group was acclaimed as exemplifying best practice for a new-ventures division.1 Yet Lucent, in the aftermath of the telecom downturn, in 2002 sold 80% of its interest in the New Ventures Group to Coller Capital, a British private-capital management company.

Other ICV programs have substantially changed their character or mission. In its first three years of existence, Baxter International Inc.’s nontraditional-innovation program, for example, transformed its mission from the pursuit of new technologies in new markets to the exploration of business opportunities closer to the core business.2 (A new CEO has recently revived a broader search for new growth areas.) A few years ago, Shell GameChanger, the radical innovation program at Royal Dutch/Shell Group of Companies, might have solicited ideas ranging from carpooling to waste reclamation to sandwich sales to urbanites.

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References

1. Corporate Strategy Board, Executive Inquiry, “The New Venture Division, Attributes of an Effective New Business Incubation Structure”

Acknowledgments

The authors thank Julian Birkinshaw of the London Business School and Bill McKelvey of the University of California, Los Angeles, for helpful comments and queries.