The Venture Paradox: When Success Becomes a Liability

Successful companies are increasingly turning to new ventures to drive growth, but this approach has created an unexpected challenge: protecting their success. The paradox arises from the qualities that make these ventures attractive – speed, agility, and innovative thinking. As McKinsey partners have observed, scaling new ventures can create problems of its own when they intersect with the core business.

Governance, teams, processes, and controls can become obstacles to scaling, stifling growth. This phenomenon is not unique to any particular industry or sector; it’s a symptom of a broader trend: as companies adopt more agile and innovative approaches to business building, success has its own set of complications.

The Intersection of Markets, Customers, and Advantage

To avoid these pitfalls, CEOs must be strategic about resource deployment. This involves identifying scalable ideas that sit at the intersection of growing markets, valuable customer problems, and areas where a company can build distinct advantages. Choosing where to play also means deciding how far to go – whether new ventures should stay close to the core business or pursue new markets.

When these ventures start competing for customers or revenue with the core business, CEOs must navigate this tension carefully. Decisions about resource allocation and market focus require a deep understanding of customer needs and emerging trends.

Betting on the Right Horse

One effective strategy for mitigating risk is adopting a portfolio approach. By launching multiple small bets simultaneously, companies can reduce reliance on individual successes and increase revenue growth potential. This approach has been proven by companies like Saudi Telecom Company Group, which has built successful ventures across multiple domains through incubation, partnerships, and venture investing.

The Evidence-Based Venture

To protect new ventures, CEOs must separate fact from vanity metrics. They should focus on customer and commercial facts – such as usage rates, customer retention, and economic performance – rather than relying on project milestones or superficial indicators. By doing so, they can make more informed decisions about resource allocation and when to cut their losses.

Regular review cycles and clear thresholds for further investment are essential for funding new ventures. This discipline helps CEOs prioritize resources effectively and avoid pouring money into underperforming projects.

The Risk of Premature Corporatization

CEOs must also be aware of the risks associated with premature corporatization – where new ventures become too closely tied to the core business and lose their agility and innovative spirit. This can happen when companies fail to strike a balance between accessing resources and inheriting constraints.

Companies like BCP have adopted hybrid models that combine internal expertise with external innovation and risk-taking, creating truly successful ventures such as Yape, which has scaled to over 18 million users.

The CEO’s Role in Venture Building

Ultimately, protecting new ventures requires a delicate balance between strategic vision and operational discipline. CEOs must stay close enough to the facts to make key decisions but also be willing to empower teams and foster an environment of experimentation and learning.

By adopting this approach, companies can turn business building into a repeatable source of growth rather than a one-off success story. It’s a paradox that requires CEOs to walk a fine line between protecting their successes and unleashing the full potential of their new ventures.