Is a business creation program even necessary?

I believe that planning new businesses and attempting to create them should be part of a company's daily routine. For that reason, I do not see the operation of a "business creation program" as the ideal end state.

At the same time, telling people that this should suddenly become routine will not work — so as a first step, taking it on as a deliberate program is a reasonable approach.

Fortunately, I have been able to engage with the programs of various companies — through design, advisory work, and selection panels. Drawing on that experience, in this article I would like to share my view on how such a program should be designed and run.

*I am aware that programs that actually function effectively are in fact few. Please read this purely as an early-stage initiative to change corporate culture and mindset.

The steps of a business creation program

Understanding your own capabilities

In the book, I argued that the basic approach is to focus on the "capability as a system" through which your company generates profit, and to explore business opportunities within the range that can be realized by "adding only small changes" without departing significantly from that system.

Patented technology and customer bases are easy to see, so they tend to be the focus when companies grasp their own capabilities — but these can serve as a catalyst for entry, yet do not guarantee victory in a new domain.

What carries defensibility against imitation, and what actually generates profit, is the "capability as a system."

This "capability as a system" is easier to grasp by focusing on the following individual capabilities.

・The capability to plan new products and services

・The operational capability to produce products and services, or to deliver services (with management as a component)

・The capability to procure raw materials and personnel

・The capability to sell through sales and marketing

By understanding who exercises these capabilities and how — and how, as a result, your company is generating profit — you can grasp your company's "capability as a system." You need to grasp not capability as a single point that focuses on a particular ability, but in detail how each element is connected and produces profit.

Making a business succeed when it departs significantly from this system requires the resolve for major investment, acquisitions, and a long period of losses. Without that resolve, taking on a business that does not ride on the existing system and has no prospect of being integrated in the future carries high risk.

Extending the system's capability is not easy even when it looks like a "small" extension. For example, the English education business Progrit grew significantly through its consumer-facing business, but for the first few years after founding it was not easy to grow B2B revenue. This was because the company had no one with experience selling to corporate accounts.

By hiring people with corporate sales experience, Progrit acquired the capability to "sell English education to corporations," and as a result was able to grow B2B revenue. As this shows, even a capability extension that looks "small" cannot be easily achieved without taking measures such as new hiring.

Selecting the target domain through internal interviews (early-stage insight)

Discover the domain your company should enter from insight gained through actual work, structural change, and the passions of your employees. The method that is fast-acting and most likely to lead to results is, the method of discovering the domain from insight gained through actual work. First, you should conduct interviews with sales and technical professionals working on the front lines and look for insight.

Front-line employees with frequent customer contact hold many early-stage insights. Capturing this should be a priority. If you want to constantly explore moves into new domains, insight discovery should be embedded in daily work.

What is referred to here as "early-stage insight" is in a state where the supporting evidence is rather thin. In many cases, it is composed of a fairly small amount of information — comments from a single customer, or remarks heard at an event. But that is entirely fine.

"Early-stage insight" formed from front-line experience and small amounts of information holds great value and becomes the starting point of the examination.

Target-domain research

Use research to grasp that your company has value to gain by moving into that domain. What matters is doing the research simply and quickly. You should not spend excessive time here. The premise is also that early-stage insight has already been discovered before the research. Even if you conduct research without any insight at all, the probability of being able to draw up an effective entry strategy is low, and time will be wasted.

In this domain research, leveraging interviews in particular is an effective method.

Discovering insight (accurate insight)

To actually enter the target domain, more accurate insight is required.

Discover insight through repeated dialogue with customers and incumbents. While bringing in the views of experts early, build an idea you can present to the customer, and through repeated presentations and feedback, capture accurate insight. That said, even when called "accurate," at this point the number of customers with whom you can have a serious discussion is often fewer than 10, and the information you can obtain is still limited. You should be fully aware of the possibility that you will need to significantly revise the strategy after the business has started.

The business idea refined through this discussion can end up in a form completely different from the early-stage insight, but be careful that it stays within the range of your company's capabilities.

For a strategy to be executable, it often must be at the level of "acquiring a little new capability." If too many new capabilities are required, you need to be prepared for corresponding investment. In such cases, consider M&A as part of the option set.

Minimum gates

Subdividing the stages and asking the business leader to explain at each one becomes a major obstacle to business creation. Even a person with the qualities of a business leader can lose enormous motivation. In some cases, it pushes them to resign.

I understand the desire of program administrators to feel reassured by "there is progress" by building in subdivided gates and large numbers of frameworks — but you must face the reality that no matter how many times you complete framework fill-in-the-blank exercises or hold reporting meetings, there is no actual progress on the business.

Subdivided gates and large numbers of frameworks do not produce businesses.

On the other hand, you cannot invest in something that is completely unclear.

As the minimum gates, this book proposes two stages: "confirmation of customer intent to purchase" and "sales track record."

First, pitch your idea to customers, obtain confirmation of intent to purchase, and present that internally. This allows a small-scale budget allocation to be approved. This is also the approach taken by Crowdworks. Before they actually started the business, Crowdworks had already obtained order confirmations from 30 companies.

Next, present a sales track record — even a small one. Here, you clear the biggest hurdle in the business: "will the customer actually pay money and continue to use it?"

What is important here is that this is a gate driven by "customer action," not by "logic." Logic is too complex and too unreliable for actually running a business. And because objective explanation is nearly impossible, it is difficult to push back against the many counterarguments that may come up. The only thing one can trust is positioned as "customer action."

Building an agile structure

By creating a state in which a passionate business leader can focus — for example, by granting authority to a small team so that no internal explanation is required — you can build an agile structure. Without this, launching a business is extremely difficult (practically impossible, one could say). For a business launch, having this structure is the premise.

This structure cannot be built in the short term. Just because you change the org chart does not mean it functions immediately. If you think your company does not have this structure, make taking on new businesses a routine and bring the organization into a state where it can move with agility.

Also, for authority to be concentrated in the business leader, trust in the leader must be cultivated. You cannot concentrate power in someone with no track record or trust.

Business launch

In business creation, unexpected situations will inevitably arise. Launch the business by repeating agile strategy revisions.

For that reason, the business leader needs to be at the front (on the sales front line) and should lead sales and marketing to customers. The early period is tough, but as quickly as possible, discover from small successes what investment will make the business grow, and shift into the concentrated-investment stage.

The business leader will gradually shift from front-line work (the sales front line) to back-office work. This shift is appropriate because the priority issue for growing the business moves from "the offering itself" to "building a profit-generating system."

Managing risk

Economic risk arises from the concentrated-investment stage onward.

By that point you can see a sales track record, so risk management itself is in a state that is relatively easy to perform.

Before that, the budget allocation is small, so the economic loss that can arise is not large. What you should worry about more is the risk of failing to discover insight.

Because insight is discovered serendipitously, you need, above all, to move in ways that raise the probability of discovery. To achieve this, you pursue both raising the probability of discovery and increasing the number of attempts.

That is, after sharing the concept of business creation, you increase the number of dialogues that more employees have with customers and incumbents.

Moving to the concentrated-investment stage

Discovering a target for concentrated investment that is accompanied by a sales track record is something close to a miracle, born of serendipity.

To fully draw out the potential of the business, make a concentrated investment and accelerate growth. Delaying the decision to invest in concentration too long erodes competitiveness over time and significantly lowers the motivation of the employees who led the business launch. Furthermore, you end up sending a bad signal internally — "this company never invests, even in a business that has a track record" — and that holds back the next round of business creation. Including the message it sends internally, concentrated investment should be made.

Most new-business programs that try to be a system are not functioning

Having written all this, I am fully aware that most of the new-business programs in the world — including those cited as success cases — are not functioning. The reason, I suspect, is that the temptation to "create new businesses through a system" is simply too strong: in the end, gates and frameworks are built, but the people who should fill them are not in place. What matters is whether people who can launch a business continuously exist within the company and whether there is an environment to back them — not setting up many gates and frameworks that become obstacles.

In practice, it is unlikely that businesses will emerge regardless of who operates a system of gates and frameworks. In reality, for people who can actually run a business, the gates are something to be bypassed: they go directly to the executive team, start without authorization and obtain approval after the fact, and then make it appear as if they have followed the program (it is more convenient for the company to claim that the business was born by riding the formal program, rather than admit that the bypass route was used).

Ultimately, it remains an organizational measure to change corporate culture and cultivate the momentum to create businesses. Rather than "creating businesses through the new-business program," the goal is probably for participants to experience the full flow with the program serving as training wheels. Eventually, the mindset of continuously creating new businesses should permeate daily work, and the "new-business program" should disappear — that, I think, is what we should aim for. At CyberAgent, after this mindset actually permeated daily work, the new-business program was discontinued.