KNOWING WHEN TO PULL THE PLUG – PART 2
RITA MCGRATH
TOPIC HIGHLIGHTS
With any corporate venturing program, one of the most important factors that will determine financial returns is the ability to stop investing in projects that simply won’t work out at all, or will be inconsequential to their parent company, even if they do succeed. Here’s Part 2 of a set of questions to revisit when evaluating your portfolio of new ventures.
7. AN OFFERING HAS UNEXPECTEDLY BEEN INTRODUCED INTO THE MARKET THAT SOLVES THE SAME PROBLEM WE DO.
Sometimes, the reality on the ground is that someone else has seen the same problem or opportunity and moved on it in a way that makes your offering, if not obsolete, at least a lot less desirable than it might have previously been.
8. CUSTOMERS ARE REPORTING THAT A CHEAPER OR LOWER QUALITY PRODUCT IS “GOOD ENOUGH.” The challenge here is that in the early days of many product categories, volumes are so small that unit economics are incredibly challenging. A new offering, therefore, has to be so irresistible that customers are willing to dig into their wallets to get hold of it. Unfortunately, such deep forms of differentiation are not always easy to pull off.
9. A MAJOR POTENTIAL CUSTOMER HAS CHOSEN A TECHNOLOGICAL STANDARD THAT WE CAN’T SUPPORT Sony famously lost out to VHS. Circuit City spent some $330 million trying to promote the adoption of a proprietary alternative to the DVD, the DIVX. Blu-Ray, a technology promoted by Samsung and other manufacturers won a pyrrhic victory over HD-DVD, only to see its advantage buried by the rise of streaming. If you are starting to see signs that you are not riding the winning horse in a standards battle, that’s a strong signal to stop.
10. WE HAVE LEARNED THAT WE HAVE NO WAY TO PROTECT THE INTELLECTUAL PROPERTY DEVELOPED IN THIS PROJECT
As all kinds of entry barriers come down, intellectual property protections are still one good way to preserve an advantage. Not having the capability to make the claim that the idea was yours can simply teach competitors that there is a market, free for the grabbing.
11. OUR STRATEGY HAS SHIFTED IN SUCH A WAY THAT THIS PROJECT IS NO LONGER A GOOD FIT.
A project begun under the auspices of one strategic regime may well find itself out in the cold in another. Nokia’s near death, burning platform experience as it confronted the rise of competing smartphones led to the fire sale of the handset business to Microsoft and the decision to focus elsewhere.
12. WE HAVE BASICALLY RUN OUT OF FUNDING TO CONTINUE THIS PROJECT
Sometimes, companies need to make hard choices about which ventures to continue and which to truncate. Even deeppocketed organizations can find the cost, even of a technically feasible project, is just way too much.
LEARNING MORE – ON LINE AND IN PERSON
We have now launched a set of learning modules around the theme of discovery driven planning and customer insight. They are short, on-demand, based on great research and experience and available now. You can experience what they are like with our demonstration module, which contains two short lessons from my book “Seeing Around Corners.” A link to the demo is here: https://www.valize.com/hub
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