I’m willing to take a bet that the majority of corporates that have invested in either building or acquiring new business ventures would have been better off depositing that money in a fixed interest account.
The reason most corporates suck at venturing is because of the way they’ve been making decisions and doing budgeting for decades, and old habits die hard.
Here is how it’s normally done.
Someone comes up with a brain fart and appoints a management consulting firm or the product development department to investigate. They come back with impressive looking slides full of stats and graphs on international best practice, SWOT analysis, competitive analysis & vendor analysis and defines (build, buy, partner) strategic options.
The EXCO picks a strategy, normally based on the HIPPO (highest paid person’s opinion) and now it’s time to compile a business case. [Side note: HIPPOs are the most dangerous animals on earth.]
The poor bugger that’s given the job to compile the business case now has a hard time fudging the numbers to meet the criteria for funding. The numbers should be convincing but not overly optimistic. There should be a low road (typically the break-even scenario), a middle road (around 30% IRR) and a high road (to make the execs drool). Assumptions are diligently documented, and a sensitivity analysis performed. The illusion is complete…
Once the budget is approved a project team is established, and an ambitious launch date is set (this shouldn’t take us more than 6 months?).
Now, save an Armageddon, the money is spent.
The launch date is postponed a couple of times (due to good reasons of course) while a marketing agency works feverishly on branding and elaborate marketing campaigns. This alone is a couple of Bar but compared to the millions spent already it’s small change….
There is excitement in the air as the new venture goes live!
Now for the disenchantment, as slowly is becomes clear that the (thumb-sucked) assumptions in the business case was wrong. Surprised?!?!?
What’s the alternative?
The alternative is for companies to adopt a scientific approach to venturing and innovation, where gut-feel and HIPPOs are replaced with carefully planned experimentation to test hypothesis’ and to collect customer insights that informs the decision to pivot, persevere or kill the chosen strategy.
The goal is to validate business case assumptions before it is executed, thereby saving countless millions and months of wasted effort.
The design sprint process, originally developed at Google, is fast becoming the industry standard to run these experiments and has been adopted by companies such as Amazon, Google, Apple, Facebook, Tesla, Uber, Slack and most Silicon Valley startups.
A design sprint is a 3-5 day intense ‘hackathon’ that combines the best of business strategy, design thinking, lean startup, growth marketing and behavioral science. The outcome is real customer data collected from market testing a mock-up or prototype of the idea, which is then used to inform the next experiment or iteration.
I discovered the design sprint process roughly 18 months ago and it was an epiphany moment for me. So much so that I decided to leave the corporate safety net behind to start a business with a team of design sprint gurus to help companies innovate better and stop wasting so much money.