Factor 19: Resources for New Ventures

This factor deals with the availability of resources (budget, personnel, time, etc.) for new ventures.

Factor extremes as measured in survey:

Few resources are available for new ventures (in terms of budget, personnel, time, etc.)


Resources are generally available for new ventures (in terms of budget, personnel, time, etc.)

Overview to restructuring initiatives

The availability of resources is obviously a key determinant in how much resource can be allocated to the pursuit of new ideas. A consistent shortage of available resources can act to stultify the innovative climate and may, in fact, be signaling a decline of the company and its eventual bankruptcy. Options for investment are severely limited at this stage of a company’s history. Selecting new ventures, where there are funds available is discussed in ‘Factor’ 4 and represents a positive situation to be dealt with rather than the option of dealing with few resources. One should first of all be sure that the facts are as they seem. Perhaps this is a matter of perception only; from a company that simply does not want to spend funds, even if they are available.

An example of the importance of a consistent, but balanced, message on sustaining innovation investment

Factor #19 is one of the 8 most important building blocs to support corporate innovation.

Deere & Company; Chairman and Chief Executive Officer, Robert W. Lane, from an address he gave on May 7, 2007, addresses how Deere is ‘Driving Growth through Innovation’. Mr. Lane makes the point that ‘operating performance…is producing the cash needed to keep funding growth initiatives, including aggressive R&D’ but also notes that this is done in sink with doubling the Deere dividend in the last three years.

Possible Initiatives to Modify and Improve the Culture for Innovation

Get a handle of the availability of funds for new ventures

Examine, strategically, the business and its competition to get a handle on the extent to which opportunities in the industry are unable to be taken advantage of because of the shortage of resources. If the conclusion is such that all of the industry is suffering, this may be a time for consolidation with a competitor in order to rationalize and have available the resources required for growth.

Modify the hurdle rates to bring in line with reality for new innovations

Often corporate hurdle rates are so high that there are no funds available for projects that do not meet these high expectations. The financial noose is tightened even further as existing business return excellent investment returns and management exhilarates in its current success. New ventures, not seen able to meet these hurdle rates are rejected. The appearance is left that there are no funds for new projects and therefore no new projects are forthcoming. The prophecy is fulfilled. Different business opportunities have different risks and time-lines for investment return. Be sure that hurdle expectations are appropriate to the idea.

Engage in seed investment as an alternative to assuming the total investment burden

Provide minority investment in a business/corporation to gain a window on emerging technologies may be the only affordable approach. Such seed investments are often used as a way to manage risk and uncertainty and can be generally made with less than 10% ownership.