Nokia provides an interesting case study of how to organise and learn from ventures whether they succeed or not. It is one of the few companies which continued to launch new businesses through its Nokia Ventures Organisation (NVO) throughout the difficult post-dotcom crash era of 2003-2004.
Whilst Nokia's ventures experienced a high failure rate, there were other important benefits. For instance, 25% of the ventures created new organisational capabilities such as the ability to serve a new customer segment. Sixteen per cent of them led to the introduction of new products. By studying the history of NVO, some key lessons emerge.
New ventures should be given the freedom to change direction and explore new options. It is important, therefore, not to put them under short-term performance metrics. They should not take volunteers just because they are keen. Often they are the wrong people. It is far better to encourage the most suitable candidates within the main organisation who should see their time with the new business as a vital part of their career progression, even if it leads to failure.
It is wrong to put new ventures under the same performance metrics as the main company. Managers should apply a more free-form system where it is judged by the learning it brings to light. Nokia also showed the benefits of having a portfolio approach to ventures, based on the different ways in which each one could benefit the company. For instance, ventures called ‘scouting options' were expected to inform Nokia about a particular market.
Companies should be ready to shift direction when entering a new market. For instance, Nokia could have shut down a failing wireless software business. Instead, it wedded it to a venture designed to prepare the ground for a new business area. It persisted in spite of producing loss-making products and developed a good position in the market.
At Nokia a special venture board monitors the progress of the projects which are divided up in different stages of development (each with its own milestone) - a practice used by venture capital firms. By doing this, Nokia reduced its exposure to losses (as each venture was being constantly monitored) and ensured that the company learnt as much as possible every step of the way. It is also important, Nokia showed, to be ready to cut your losses if the project is not right.
Extracting value from corporate venturing
Rita Gunther McGrath, Thomas Keil and Taina Tukianen
MIT Sloan Management Review, Vol 48, No 1, Fall 2006