Here is an excerpt from an article by Andy Binns and Christine Griffin for the MIT Sloan Management Review. To read the complete article, check out others, and obtain subscription information, please click here.
Illustration Credit: Dan Page/theispot.com
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Companies make significant investments in developing and incubating new business initiatives, but too few follow a rigorous path to scaling their ventures.
In 2018, Best Buy announced that it would enter the health market. It was an unexpected move for a consumer electronics retailer, but it was consistent with then-CEO Hubert Joly’s passionate advocacy for making Best Buy a company with a deep sense of purpose.1 Starting with a focus on helping the elderly to age safely at home, the company broadened the strategy to make Best Buy Health a provider that “enables care at home for everyone.”2 It was also a lucrative opportunity: Home health is forecast to be a $265 billion market by 2025.3
Over the next few years, Best Buy Health tested its key assumptions about the opportunity, seeking out the sweet spot that would allow it to build a new business to sit alongside the company’s existing retail franchise. By 2022, it was a $525 million business, projected to grow at a 35% to 45% compound annual growth rate through 2027. The initiative created a new growth vector for its parent company and gave it a measure of resilience in the turbulent consumer retail sector.
Best Buy succeeded where many companies fail. It moved through the three innovation disciplines required to build new businesses: ideation, incubation, and scaling. It came up with a new idea for solving the customer problem of aging safely at home, incubated it by running in-market experiments to test value propositions, and then scaled it to a revenue-generating business unit. This is a relatively rare accomplishment. Our research finds that while 80% of companies claim to ideate and incubate new ventures, only 16% of companies successfully scale them.
A key contributor to this problem is the almost exclusive focus that companies place on the first two innovation disciplines. The ways and means of ideation and incubation — embodied in methodologies such as design thinking and lean startup, and disseminated by an army of trainers and consultants — are well known and readily available. However, when it comes to scaling, there are few methodologies to guide corporate decision-making.
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Here is a direct link to the complete article.
Andy Binns (@ajmbinns) is managing director of Change Logic, a Boston-based strategic innovation advisory firm, and is the lead author of Corporate Explorer: How Corporations Beat Startups at the Innovation Game (Wiley, 2022). Christine Griffin (@cgriffin57) is a principal at Change Logic.