Learned a lot lending an editorial hand here:
MIT Sloan Management Review, April 12, 2023
by Andy Binns and Christine Griffin
Dan Page/theispot.com
In 2018, Best Buy announced that it would enter the health market. It was an unexpected move for a consumer electronics retailer, but it was consistent with then-CEO Hubert Joly’s passionate advocacy for making Best Buy a company with a deep sense of purpose. Starting with a focus on helping the elderly to age safely at home, the company broadened the strategy to make Best Buy Health a provider that “enables care at home for everyone.” It was also a lucrative opportunity: Home health is forecast to be a $265 billion market by 2025.
Over the next few years, Best Buy Health tested its key assumptions about the opportunity, seeking out the sweet spot that would allow it to build a new business to sit alongside the company’s existing retail franchise. By 2022, it was a $525 million business, projected to grow at a 35% to 45% compound annual growth rate through 2027. The initiative created a new growth vector for its parent company and gave it a measure of resilience in the turbulent consumer retail sector.
Best Buy succeeded where many companies fail. It moved through the three innovation disciplines required to build new businesses: ideation, incubation, and scaling. It came up with a new idea for solving the customer problem of aging safely at home, incubated it by running in-market experiments to test value propositions, and then scaled it to a revenue-generating business unit. This is a relatively rare accomplishment. Our 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.
Scaling is the missing innovation discipline. Indeed, when we assessed the innovation frameworks used by 15 large corporate incubation units, we found that only four mentioned scaling. For example, one large IT company’s incubation unit has a highly evolved process for ideation, validation, and incubation, but its framework stops at scaling. Scaling is considered outside the remit of such units: It becomes the kind of blind spot that author Douglas Adams characterized as “somebody else’s problem.” 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.
To learn how to bridge this gap, we studied Best Buy and 30 other successful and unsuccessful corporate ventures. We found that most of the successful companies followed a similar approach to scaling new ventures that we call a scaling path. It requires a clarity of ambition; an understanding of the assets needed to access the customers, capabilities, and capacity required by the new business; and a willingness to use a variety of techniques to assemble those assets into a coherent strategy for attaining scale. Best Buy, for example, leveraged its existing assets — its stores, customers, and Geek Squad technical assistance team — and combined them with a $2.2 billion investment in acquisitions to scale its health business.
In this article, we offer five key lessons for building a scaling path that are drawn from both successful and unsuccessful corporate ventures. Read the rest here.
Over the next few years, Best Buy Health tested its key assumptions about the opportunity, seeking out the sweet spot that would allow it to build a new business to sit alongside the company’s existing retail franchise. By 2022, it was a $525 million business, projected to grow at a 35% to 45% compound annual growth rate through 2027. The initiative created a new growth vector for its parent company and gave it a measure of resilience in the turbulent consumer retail sector.
Best Buy succeeded where many companies fail. It moved through the three innovation disciplines required to build new businesses: ideation, incubation, and scaling. It came up with a new idea for solving the customer problem of aging safely at home, incubated it by running in-market experiments to test value propositions, and then scaled it to a revenue-generating business unit. This is a relatively rare accomplishment. Our 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.
Scaling is the missing innovation discipline. Indeed, when we assessed the innovation frameworks used by 15 large corporate incubation units, we found that only four mentioned scaling. For example, one large IT company’s incubation unit has a highly evolved process for ideation, validation, and incubation, but its framework stops at scaling. Scaling is considered outside the remit of such units: It becomes the kind of blind spot that author Douglas Adams characterized as “somebody else’s problem.” 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.
To learn how to bridge this gap, we studied Best Buy and 30 other successful and unsuccessful corporate ventures. We found that most of the successful companies followed a similar approach to scaling new ventures that we call a scaling path. It requires a clarity of ambition; an understanding of the assets needed to access the customers, capabilities, and capacity required by the new business; and a willingness to use a variety of techniques to assemble those assets into a coherent strategy for attaining scale. Best Buy, for example, leveraged its existing assets — its stores, customers, and Geek Squad technical assistance team — and combined them with a $2.2 billion investment in acquisitions to scale its health business.
In this article, we offer five key lessons for building a scaling path that are drawn from both successful and unsuccessful corporate ventures. Read the rest here.
No comments:
Post a Comment