IMD International

INTERNAL MARKET FOR OPPORTUNITY CREATION

Venturing for high performance

By Professors Stuart Read and Maneesh Mehta  (September, 2006)

Stuart Read, Professor of Marketing

Stuart Read, Professor of Marketing

Your company desperately needs to generate new opportunities. A proposal for a new products sits on the top of your in-tray. If it is successful, will it cannibalise our existing products? If it fails, will I lose my job?

Sounds familiar? If so, you probably work at a large company inefficient at innovation. You may not be surprised to hear that, using the same amount of resources, venture capital (VC) funded start-ups are more than three times more successful creating opportunities given the same R&D development dollar than their corporate peers.


Internal market for opportunity creation
Derived from best practices in the venture capital industry, the internal market for opportunity creation is designed to create a situation that encourages and challenges new opportunities. In this way, both firm and individual creator benefit. The core idea, is that a large corporation represents a portfolio of differentiated opportunities which have some technology or market commonality.  Ideas might originate anywhere. Nurture these ideas at an appropriate level so their full potential can be realized with minimal risk. The internal market for opportunity creation is based on the following principles:

 

  • Open the market to all potential innovators and investors.
    Anyone inside the firm with profit and loss responsibility in the company can apply to manage an investment fund. Anyone inside or outside with an idea can submit a proposal.
  • Encourage iterative development of opportunities.
    Add expertise along the way. The initial funder of the project is not allowed to exclusively provide follow-on funding. Other funders (internal and external) must participate to guarantee the opportunity is evaluated at each milestone.
  • Fund opportunities at an appropriate level.
    No minimum or maximum size of investment is specified, so investment can be scaled based on industry and strategic intent of the opportunity.
  • Make everything negotiable.
    Ownership, salary, funding, the nature of the business plan and milestones are all agreed by both funders and creators.
  • Support projects that may compete with the core business.
    Better for competition to come from inside than outside.

 

The internal market drives innovation

The ultimate aim of the internal market for opportunity creation is to use all the principles in concert and shift internal thinking. Move away from the traditional model where management “pulls” innovation through the organization, and towards a culture that “pushes” resources and ideas together smoothly.

 

With this sort of environment, do you think you might pick up the new product proposal rather than leaving it for another day?

 

Professor Stuart Read teaches on the Building on Talent and the Managing Corporate Resources programs.

 

Maneesh Mehta is Managing Director of the Deloitte Touche Tohmatsu Global Emerging Strategic Clients Program.



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