New Company Structures and Incentive Systems for Business Building

New Company Structures and Incentive Systems for Business Building 

Finally, promising ideas have to be grown into real businesses. A highly effective approach here is the creation of new corporate structures and incentive systems which mimic the startup companies as closely as possible, while still providing the appropriate level of support from the parent company. Finding the right tradeoff here is crucial. 

On the one hand, the new business needs independence from the parent company to develop its own ideas. It must have the freedom to interact independently with the external community and have dedicated resources which are not cannibalized by the existing business. 

On the other hand, it also needs strong support from the parent company, and in more ways than merely financial access to the parent company s knowledge, internal network and business services are also required. Additionally, the parent company needs to put a controlhng system in place for the new business to ensure that the investment is really giving the expected return. 

A corporate structure that copies the venture capital approach seems to be the most effective way to achieve these objectives. The new business - a relatively independent entity, as described above - is controlled by the parent company through staged financing, given when pre-agreed milestones have been reached. These should include not only internal milestones defined, for example, by specific R D achievements, but also externally driven ones reflecting important steps towards market success, based perhaps on initial results of user tests, consumer research results, competitive benchmarks, and so on. The parent company should supply services to the new business on the basis of well-defined price and resource agreements. 

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