The drive for growth of recent years has seen some large companies rediscover the promise of new-venture units (NVUs), which develop start-up enterprises that can plant a company’s flag in fresh markets or test and launch innovative products and services. But unlike a large corporation’s venture capital arm, which invests in the undertakings of entrepreneurs outside the company,1 an NVU creates businesses from within.
Corporate new venturing isn’t a novel idea; companies have pursued variations on the model since the 1970s. But the NVUs established recently by Coca-Cola, First Data, J. P. Morgan Chase, McDonald’s, Mellon Financial, and Nokia, among others, are different both in their structure and management and in the nature of their activities. Companies launching NVUs now make them separate from any operating business so that they can focus on entrepreneurial activities without pressure from business units. These companies also ensure that the fledgling businesses developed in the NVUs get a jump start by giving them ready access to corporate resources such as customer channels and infrastructure.2
That is the theory. Are NVUs delivering on their promise? After all, most companies launched them during the boom years, when venture capital firms were poster children...