• Balancing mature and emerging businesses

    by  • May 22, 2014 • Business model, strategy • 0 Comments

    3-Innovation-GrowthMature businesses typically attempt to grow by exploring new businesses opportunities. However, in their pursuit they often encounter structural problems which rise from diverse business needs, both in their existing operations and in potential emerging businesses. The existing business guarantees returns and emphasises efficiency, whereas emerging businesses demand innovativeness and are often under threat by the existing structure and systems which highlight disciplined and efficient execution. The two commonly used approaches by companies to address this dilemma include:

    1. Incubate and nurture new businesses within the existing corporate structure.
    2. Structurally separate the emerging business.

    Both these approaches have their pros and cons. Structural separation provides protection from politics and bureaucracy in the large organisation but at the same time limits access to a larger pool of corporate resources, which in turn could provide the much needed boost to new businesses. On the other hand, structurally separate entities can develop innovative ideas and projects rapidly, but they later encounter trouble in integrating with the parent organisation.

    However, as argued by Garvin & Levesque (2006), to successfully grow new businesses, rather than complete structural or integration changes, companies should strive to i) achieve and maintain a balance between trial-and-error strategy formulation with rigor and discipline, ii) balance operational experience with inventiveness and iii) balance a new businesses’ identity with integration. i.e. Having both of these worlds under the same umbrella but with the necessary provisioning required for them to prosper and coexist. This in a sense, can be seen as taking the pros of both structural alternatives mentioned.

    Reference:
    Garvin, D. A., L. C. Levesque. 2006. Meeting the challenge of corporate entrepreneurship. Harvard Bus. Rev. 84(10) 102-112

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