Venture Factory: The Key to Serial Business Building
In today’s rapidly evolving business landscape, companies are increasingly turning to building new businesses as a strategic imperative to drive innovation and unlock new revenue streams. According to the fifth annual McKinsey Global Survey on new-venture building, half of CEOs consider the development of new businesses as one of their top three strategic priorities. Additionally, 90 percent of investors advocate for increased or maintained investments in new-business-building initiatives. It is evident that new ventures are expected to be the primary drivers of companies’ growth in the coming years.
The Importance of Developing a Venture Factory
To enhance the likelihood of success in building new ventures, companies need to develop a “business-building muscle” through the establishment of a dedicated organization known as a New Venture Factory (NVF). The NVF serves as an in-house incubator that creates and manages standardized tools, repeatable processes, and capabilities to support the launch and scaling of new businesses. By centralizing resources and expertise, the NVF enables companies to incubate and scale new ideas more efficiently and effectively, driving innovation and growth at an accelerated pace.
Three Building Blocks of a Successful NVF
Our analysis of companies that have successfully developed an NVF capability reveals three crucial areas of focus:
1. Developing Incubation Capabilities
The NVF acts as an in-house incubator by providing a pool of tested and standardized resources that new ventures can leverage. These incubation capabilities include hard-to-find expertise, operational know-how, and tech infrastructure and data assets. By centralizing these resources, the NVF can quickly allocate resources, codify learnings, and develop capabilities that have broad application across multiple ventures.
2. Accessing Parent Company Assets
A key element of a successful new venture is the ability to leverage assets or capabilities within the parent company that provide a competitive advantage. The NVF plays a critical role in facilitating access to the parent company’s customers, financial support, internal systems, and corporate leadership. By mediating access to these assets, the NVF enables new ventures to gain a competitive edge and drive innovation more effectively.
3. Optimizing for the Portfolio
Effective portfolio management is essential for maximizing the value of building multiple businesses. The NVF must secure a business-building mandate from corporate leaders, develop a fact base to determine which ventures to build, manage funds, and allocate talent and resources strategically. By adopting a systematic and data-driven approach to portfolio management, companies can increase the likelihood of overall success and create a central point for decision-making and resource allocation.
The NVF in Action: Case Examples
Three case studies illustrate how companies have successfully leveraged NVFs to drive serial business building:
1. Saudi Arabia’s Homeownership Revolution: Establishing Nurturing Capabilities
ROSHN Group, a leading real estate developer in Saudi Arabia, established a venture factory to drive innovation and create new value streams. By developing a “super-app” that streamlined the home-buying process and provided a range of home services, ROSHN built capabilities that could be applied to future ventures. The success of the app not only exceeded expectations but also influenced ROSHN’s recruiting approach and led to the launch of additional businesses.
2. Banco Industrial’s Digital Transformation through an NVF and Zigi
Banco Industrial, a prominent financial institution in Central America and the Caribbean, established an NVF to enhance its position in the digital finance market. The NVF launched Zigi, a mobile app that revolutionized how consumers manage their payments and finances. By orchestrating existing banking services with new solutions, the NVF facilitated Banco Industrial’s digital transformation and enabled the successful launch of Zigi.
3. The ENGIE Factory Story: Taking a Portfolio Approach
ENGIE Factory, the start-up studio of ENGIE Group, focused on developing and scaling new businesses in the sustainability field. By adopting a portfolio approach and securing committed resources, ENGIE Factory launched 12 start-ups focused on decarbonization. Through shared resources, collaborative funding efforts, and strategic talent connections, ENGIE Factory maximized each venture’s impact while aligning with ENGIE’s sustainability goals.
Conclusion
In conclusion, the establishment of a venture factory is a strategic imperative for companies looking to drive serial business building and innovation. By focusing on incubation capabilities, accessing parent company assets, and optimizing for the portfolio, companies can accelerate the launch and scaling of new ventures, drive growth, and create long-term value. As the business landscape continues to evolve, companies that invest in building a robust NVF capability will be better positioned to navigate market shifts and capitalize on emerging opportunities.
FAQ
What is a New Venture Factory (NVF)?
A New Venture Factory (NVF) is a dedicated organization within a company that creates and manages standardized tools, repeatable processes, and capabilities to support the launch and scaling of new businesses.
How can companies benefit from developing an NVF?
Companies can benefit from developing an NVF by accelerating the incubation and scaling of new ventures, accessing parent company assets for a competitive advantage, and optimizing portfolio management to maximize overall success.
What are the key building blocks of a successful NVF?
The key building blocks of a successful NVF include developing incubation capabilities, accessing parent company assets, and optimizing for the portfolio through strategic talent and resource allocation.
References
McKinsey & Company. (2021). The Venture Factory: Building Serial Businesses for Growth. Retrieved from https://www.mckinsey.com
