The basic premise of new business building is that the parent assets can be leveraged to support growth. That is what creates an advantage over greenfield startups.
Leverageable assets include capital, salesforce, customer accounts, brand, technology, and business processes. Collectively, these assets are the ‘corporate capabilities’.
The business building dilemma
The business building dilemma is twofold.
Firstly, corporate capabilities are not idle abstractions; they are intensively used as the core machinery of the business.
Secondly, capabilities are highly differentiated; that’s what makes them desirable to the venture in the first place. Capabilities are accessed via management processes designed to fit the established business.
So, when a new internal business seeks access to corporate capabilities, it’s not easy! Capabilities are highly utilized and customized, for good reason!
Which explains why many internal ventures fail to scale: access to corporate capabilities is a non-trivial challenge. It poses managers with difficult tradeoffs between serving the established business versus serving the new venture; and exposes differences in team culture and risk appetite.
The quick-fix solution is to make new businesses a special case – provide them with a passport from the CEO, free resources, and waivers to fast-track through burdensome corporate processes. The overriding priority is speed and performing like a startup.
However, treating new businesses as exceptions is not a sustainable solution for a major organization seeking to transform through scaled ventures. It undermines corporate alignment and collaboration and fails to build the ‘connective tissue’ with the core that is a prerequisite for scaling.
Why Lean Scaleup?
Lean Scaleup was created by a collaboration of twenty global corporations wrestling with this dilemma of how to transfer parent advantages to a new businesses without compromising core operating standards nor the growth potentual of the venture.
The key innovation of Lean Scaleup is a systematic approach to managing the interfaces between new businesses and corporate functions that doesn’t rely on making exceptions. The Lean Scaleup ‘gearbox’ addresses the critical areas of tension between corporate and venture: business model, capital rules, reward structures, brand, and compliance – and defines the terms of reference for partnership working in each area. It integrates the startup paradigm (speed, agility, growth) with the corporate paradigm (efficiency, control, profit) in one methodology for new business growth.
Contextuality, i.e., the performance of the parent business, is embraced rather than avoided in Lean Scaleup: pre-requisites for scaling include ‘worth-to-be-scaled’ factors (validated customer need and market potential of the new business) plus ‘ready-to-be-scaled’ factors (the corporate capability pre-conditions and dependencies). New businesses don’t proceed until both are satisfied.
In this way, Lean Scaleup extends the philosophy and practice of Lean Startup into the corporate context and supports the critical scaling phase of internal ventures.
How does scaling work in your company? Is the business building dilemma familiar? Do you avoid corporate context or embrace it? Would love to hear your thoughts and experiences.