Weekly Business Insights from Top Ten Business Magazines | Week 292 | Strategy & Business Model Section | 2

Extractive summaries of and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Week 292 | April 14-20, 2023

The Missing Discipline Behind Failure to Scale

By Andy Binns and Christine Griffin | MIT Sloan Management Review | April 12, 2023

Listen to the Extractive Summary of the Article

The authors’ research finds that while 80% of companies claim to ideate and incubate new ventures, only 16% of companies successfully scale them.  A key contributor to this problem is the almost exclusive focus that companies place on the first two innovation disciplines. The ways and means of ideation and incubation — embodied in methodologies such as design thinking and lean startup, and disseminated by an army of trainers and consultants — are well known and readily available. However, when it comes to scaling, there are few methodologies to guide corporate decision-making.  This leaves a critical gap in the ability of companies to build new businesses. After all, ideation and incubation generate value only when scaling succeeds.  Five key lessons for building a scaling path that are drawn from authors’ study of both successful and unsuccessful corporate ventures are:

1. Set an Ambition Equal to the Scale of Opportunity.  One of the marked differences between successful and unsuccessful corporate ventures is the scale of their ambition. In this regard, successful ventures are more like the best entrepreneurial startups, which adopt bold, long-term aspirations. They “drive for the daylight,” making an imaginative leap to see what is possible and then working on what it will take to get there.  Starting a scaling path with a bold ambition helps to ensure that the venture scales to the size of the opportunity, not to the level of risk tolerance within the corporate culture.
2. Work Backward From the Ambition to Identify a Potential Path to Scale.  Once their ambition is clear, the leaders of successful corporate ventures hypothesize what it will take to deliver on it. They create a vision of a desirable end state and work backward to describe the specific actions they might take to achieve this vision. More accurately, the path is a set of plausible strategic options for what assets will be needed to achieve the ambition.  Typically, there are three kinds of assets needed to scale a new business venture: customers, capabilities, and capacity.
3. Think Through Options for Acquiring Needed Assets.  Venture leaders can follow four main approaches to obtaining the assets needed in the new venture and assembling its scaling path. These are: leveraging the assets already available within the company; building the assets that enable market adoption; acquiring them; and gaining access to assets through partnerships. What differentiates the successful ventures from the unsuccessful ones is the ability to combine these approaches to construct an economical and timely scaling path.
4. Adapt the Team and Organization to Support Scaling.
5. Anticipate and Prepare for Trigger Points.  Trigger-point decisions are typically moments of no return, where the strategic stakes or level of investment required is significantly higher than for less potent decisions.  Trigger points are qualitatively different because of the scale of commitment involved, the number of customers to be served, the amount of capital to be deployed, or the liabilities involved.  This is a key to scaling success.

3 key takeaways from the article

1. While 80% of companies claim to ideate and incubate new ventures, only 16% of companies successfully scale them.  A key contributor to this problem is the almost exclusive focus that companies place on the first two innovation disciplines i.e., ideation and incubation. 
2. The ways and means of ideation and incubation are well-known and readily available. However, when it comes to scaling, there are few methodologies to guide corporate decision-making.  This leaves a critical gap in the ability of companies to build new businesses.
3. Five key lessons for building a scaling path are:  Set an Ambition Equal to the Scale of Opportunity, Work Backward From the Ambition to Identify a Potential Path to Scale, Think Through Options for Acquiring Needed Assets, Adapt the Team and Organization to Support Scaling, and Anticipate and Prepare for Trigger Points.

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Topics:  New Venture Creation, Strategy, Business Model