ABSTRACT
Once the product or service has proven itself and is generating significant income in the mainstream market, some key decisions must be taken, not least because the new business, that has been created around that invention, is likely to be approaching its highest valuation at the top of the adoption curve. This triggers crucial discussions on the future of the stand-alone business entity. In most situations, the autonomous, stand-alone entity will have been created within a larger business that is keen to pursue viable inventions while ring-fencing their eventual outcome and impact.
There is often significant risk attached to innovation for most businesses, especially large, publicly listed businesses because any failure or perceived failure can have a detrimental impact on the share price. Creating a separate entity, with its own budget and governance framework, therefore allows the larger business to distance itself from the innovation. If it fails, it fails quickly and quietly and doesn’t negatively impact the share price. If it is successful, then the larger business can decide to sell the new unit which is now worth significantly more than it was as an untested idea. They could partner with another organisations to take it forward. Or, they could decide to absorb the entity back into the larger business.
