However, when our team applied a screen based on the principles of good strategy, only one of the ideas showed an honest chance of succeeding two others were marginal. In one company, 24 separate ideas were considered, and 11 were launched as new ventures. Given the companies’ strengths and weaknesses, few, if any, of their projects had a reasonable chance of success. In every case, the real problem we found was a shortage of opportunities rather than a shortage of courage or venturing skills. The shadowing research included companies like Shell, McDonald’s, and Whitbread. Stemming from a project at Ashridge Strategic Management Centre, the research involved three studies: shadowing managers responsible for developing new businesses in large companies, gauging the success rates of various corporate-venturing units, and looking for patterns in a database of success stories. Our findings suggest that this argument not only misses the real reason behind the high failure rate but may also promote practices that make things worse. If corporations would only copy more of the best practices from the venture capital industry or from serial new-business creators like 3M, they could reduce the failure rate to an acceptable level. As experienced venture capitalists point out, you have to kiss a lot of frogs to find a prince. They are too risk averse, their cultures are inappropriate, they fail to provide sufficient incentives, and they involve the wrong managers. The explanation most frequently offered is that companies mismanage the venturing process. No matter how the terms are defined (what can be called a new business, what’s considered core versus noncore, and what constitutes success), the finding still holds. Clayton Christensen estimates the failure rate to be over 90%, and a study by the Corporate Strategy Board suggests it may be as high as 99%. Mature companies attempting to grow by entering new businesses fail far more often than not, as numerous studies confirm.
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