Dear Aunty B,
We are a large private company that is in the mature phase of the business cycle and have had lower growth during 2007 than expected.
The founder of the company left last year and we are attempting to grow by spotting opportunities and starting new ventures.
Our spotters have come up with a lot of opportunities and we filtered them down to four new ventures. However we have just had to make a few significant write-downs and management is losing enthusiasm and redirecting energies back to the core business.
First, the bad news. Most large companies stuff up the new venture creation process. And no wonder. It is very hard to create new ventures within a risk adverse culture that is set in its ways.
But second, the opportunity. You obviously need to improve how you screen out crazy ideas and the number of ventures you pursue. To do this you need the skills and ruthlessness of a venture capitalist to do the market assessment and judge the potential of the new venture. Will it bring benefits that will outweigh the hidden costs, such as the cost of learning, technology, infrastructure and management time? And will it complement and not undercut your core business?
So you have lower growth. That should not deter you. You probably still have loads of opportunities within the core business and the last thing you should do is distract your management with new core ventures.
I suggest you focus on driving your core business forward far more aggressively. Work on motivating your managers within a lower growth environment. Remember that while you may not have opportunities today, you may well have them next year as demographics, technology or regulations change.
So Pete, while new ventures may help, they won’t solve your problems.