Mba Reading

Designing Corporate

Ventures in the

Shadow of Private

Venture Capital

Henry Chesbrough

"The search for innovation needs to be organizationally separate and outside of

the ongoing managerial business. Innovative organizations realize that one cannot

simultaneously create the new and take care of what one already has. They realize

that maintenance of the present business is far too big a task for the people

in it to have much time for creating the new, the different business for tomorrow.

They also realize that taking care of tomorrow is far too big and difficult a task to

be diluted vsath concern for today. Both tasks have to be done. But they are different.

Innovative organizations, therefore, put the new into separate organizational

components concerned with the creation of the new."—Peter Drucker'

Since Drucker's advice of a generation ago, many companies have tried

to separate their new business endeavors from their current business

structures in an attempt to stimulate greater innovation and generate

additional business growth. These attempts have generally met with only

temporary success. The general pattern is a cycle that starts with enthusiasm,

continues into implementation, then encounters significant difficulties, and ends

with eventual termination of the initiative. Yet, within a few years, another generation

of businesses undertakes the effort anew, and the cycle occurs again.

For example, in the 1960s and early 1970s, 25% of the Fortune 500 had

a corporate venturing program.^ These were largely disbanded, though, during

the late 1970s. Then in the early 1980s, as the independent venture capital

market grew again, corporations renewed their interest in corporate venturing.

These initiatives were again discontinued after the market downturn in 1987.

Useful comments on this paper have been received by Stephen Socolof Stefan Thomke. and Steven

Wheelvi^right. Support for this research was provided