What every CEO should know about creating new businesses

  • Garvin D
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Abstract

The article discusses what corporate venturers should know about new business creation and corporate innovation within large, complex companies. Long-term growth means starting new businesses because sectors decline, products and services become obsolete, and markets saturate. Statistics show that most new businesses fail in the first six years. Corporate culture can be a deterrent to new business creation, which needs an open, exploratory environment. Power struggles and culture clashes can occur if the new venture requires a new environment within the mainstream organization. New ventures cannot avoid setbacks such as customer, technological, operational, regulatory, and competitive failures. The idea is to prototype the initial concept, get it to market, assess customer response, and repeat the process until an acceptable version develops. Business development goes through distinct stages with unique challenges that require different management techniques. It takes years to complete the three stages of business creation because experimentation, expansion, and integration are time consuming. A concern of start-up businesses is fitting in with the established systems and structures within the parent organization. Market knowledge and demand-driven products and services are the best predictors of success. The biggest hurdle for new businesses is mental--the way senior managers think about products, services, technologies, customers, and competitors. Every company has a theory of how their business works and how it makes a profit. INSET: THE RIGHT QUESTIONS.

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Authors

  • David A. Garvin

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