FRESH TAKES ON BIG IDEAS

When most companies want to grow, they look in all the familiar places. They lean into cost cutting, new-customer acquisition, M&A, upselling, and other standard growth accelerators. But they often overlook a hugely effective growth lever hiding in plain sight: their untapped assets.
 
Large companies have rich resources—such as their intellectual property, people, data, customer relationships, distribution networks, or partnership footprints—which often remain underutilized. Large companies can think like start-ups to turn these already scaled assets into revenue-generating ventures, thereby reigniting long-term growth. A good example of this is how many retailers have launched media products that monetize their vast amounts of data on customers and shoppers. These platforms, such as Walmart’s Scintilla, help brands understand consumer trends to improve their marketing and product development. Scintilla generates significant revenue for Walmart and is highly valued by brand customers, illustrated by its 100 percent renewal rate.

In a recent global survey of more than 700 executives, we found that high-performing organizations are often able to scale new ventures out of their underutilized assets. Of the respondents who say their companies have built ventures from underutilized assets, 72 percent report above-average growth rates compared with industry peers. And when companies search every corner to spot assets that could become new ventures, they don’t just create new revenue streams. They also create a culture of innovation where experimentation is valued. That attracts top talent, who then continue experimenting to keep the value creation flywheel spinning. 

Of course, building new ventures, especially ones that push the boundaries of what’s possible, is hard. And doing so inside a large company that may be set in its ways is even harder. Companies want to get things perfect. They are afraid of upsetting their customers or disrupting their business. However, this can lead to ventures that take too long to get off the ground. It’s almost always better to launch a simplified version of a product and evolve than to overengineer something too early. When companies try to solve for every possible feature on day one, they often end up with a rigid and overbuilt product. But when they launch fast, test, and iterate, they make room for discovery.

“Of the survey respondents who say their companies have built ventures from underutilized assets, 72 percent report above-average growth rates compared with industry peers.”

Once companies create repeatable processes for venture building, they begin to reap the benefits at scale. According to our survey, leaders from companies that have built new ventures in the past five years are 13 times more likely to increase their prioritization of new venture building than leaders at companies that have not. And the more ventures companies launch, the more overall value they create. Fifty-nine percent of surveyed business leaders who launched three or more new ventures in the past five years say their companies are seeing more than 10 percent of total enterprise-wide revenue coming from their venture-building efforts, compared with 32 percent of respondents from companies that launched just one new venture.

These figures show that venture building is a muscle that gets stronger over time. Companies that learn to identify promising ideas, fund them in stage-gated ways, and nurture the entrepreneurial and technical talent required to bring them to life get better and better at this process.
 
What does it take to build a winning venture? Many of the same things it has always required: agile methods, data-driven analysis, technical skill, cross-functional collaboration, determination, and a relentless focus on the customer. But, nowadays, it almost certainly also requires the creative use of AI. In our survey, 97 percent of executives say they expect their companies to leverage AI in the venture-building process in the next five years. And some 56 percent predict that they will build AI- or data-focused products and businesses during that time. 

Most business leaders think about AI as a way to move faster or reduce costs. A more interesting application of AI is how it helps us be more creative. Building new ventures—creating something tangible from the seed of an idea—relies on both divergent and convergent thinking. Divergent thinking is about expanding an idea into a solution. Convergent thinking involves narrowing down that solution into something that can actually be built. When it comes to building new ventures, most business leaders focus on convergence: They pick an answer and tell their teams to execute. Who has time for divergence? But AI gives people the freedom to diverge more boldly without spending huge amounts of time doing so. AI is a creative catalyst that allows both technical and nontechnical teams to generate and test a wide range of ideas before committing resources.

At its heart, business building is about realizing that growth doesn’t have to come from acquisitions or cost cutting; it can come from within. Business leaders who aren’t sure where to begin can start by identifying underutilized assets, applying AI to analyze which of these assets hold the most promise, and then upskilling their teams to turn these assets into revenue-generating ventures. When companies start venture building from a place of scale, they get the innovation machine revving. They can build what’s next—again and again.

—Edited by Kristi Essick, executive editor, San Francisco

ABOUT THIS AUTHOR

Jason Bello is a senior partner in McKinsey’s Washington, DC, office.