KNOWING WHEN TO PULL THE PLUG – PART 1
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 a set of questions to revisit when evaluating your portfolio of new ventures.
A PORTFOLIO VIEW OF GROWTH OPTIONS REQUIRES THE ABILITY TO STOP!
A big mistake we see organizations make when they try to push into new territory is that they try to apply the same logicto a wellunderstood, repeatable business that they do to an uncertain new one. One of the most significant ways this happens is that once an idea has made it through the corporate approval process, its proponents and champions assume they are going to bring it to commercial launch.
1. WE HAVE LEARNED THAT IT IS GOING TO BE MUCH MORE DIFFICULT OR EXPENSIVE TO ACHIEVE OUR ORIGINAL PROJECT GOALS. The old joke about venture capital investments is that it always takes twice the time and double the investment that you thought to achieve success. It’s well worth asking whether, given the new information you are obtaining by working on the project, the original objectives are still attainable.
2. WE HAVE LEARNED THAT IT IS GOING TO TAKE MUCH MORE TIME TO ACHIEVE OUR ORIGINAL PROJECT GOALS. With uncertain projects, its almost impossible to accurately forecast what is going to happen when. And sometimes the passage of time can make an idea that made a lot of sense at the start look less and less appealing as time goes by. Startup Ikos, a platform that connects landlords and real estate owners, grew fast, at first. But the pandemic led to a dramatic falloff in revenue, alternative sources of funding fell flat and as their sources of revenue dried up.
3. THE SCOPE OF THE PROJECT HAS BECOME MUCH MORE SUBSTANTIAL THAN WAS ORIGINALLY ENVISIONED BUT THE RESOURCES DEDICATED TO IT HAVE NOT CHANGED.
This happens all the time, particularly with projects that are digital in nature or with advisory offerings. The human tendency to pile on more work, features and ideas needs a fairly firm hand to control it, otherwise you end up with huge, but underresourced programs that are doomed to fail.
4. DESPITE THE MISGIVINGS OF PEOPLE WITH EXPERTISE IN THE ORGANIZATION, THE CHAMPION FOR THIS PROJECT IS DETERMINED TO MOVE IT FORWARD. One of the fascinating dynamics of venture championing is that sometimes senior leaders support, which can be awesome for a venture, also ends up dooming them long after it was obvious to everyone that they were going nowhere.
5. NEW COMPETITORS HAVE EMERGED SINCE THIS PROJECT BEGAN WHICH NEGATIVELY CHANGES THE MARKETPLACE DYNAMICS. Sometimes, though nobody’s fault in particular, a solution you just didn’t conceive of emerges that makes whatever you’re doing less convenient, more expensive, or simply impractical.
6. THE ECOSYSTEM OF NECESSARY PARTNERSHIP HAS NOT EVOLVED AS WE EXPECTED
To create a complete offer for the customer, it is almost always necessary to partner with others around different aspects of the value-delivery mechanism, as Ron Adner points out in his great book “Winning the Right Game.”
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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