Business Development Organizations
Structure and Process
This document provides research findings and conclusions on the structure and processes which large,
innovative corporations have used for business development. By business development we mean the set
of efforts for identifying, researching, analyzing and bringing to market new businesses and new products.
We distinguish business development from strategic planning, which is used to identify and clarify
likely venture areas for the company, but does not include an on-going process to develop those ventures.
Strategic planning is an infrequent analytical process; business development is usually continual, and
includes several project activities happening simultaneously.
Business development may incorporate merger and acquisition (M&A) activity, as one of the expressions
of the business development function. But M&A negotiations are usually carried out in a separate
organization by specialists, frequently in the finance department.
This report is based upon personal and telephone interviews with members of the planning and business
development organizations in eight companies: AT&T, Cincinnati Bell Information Systems, Corning Glass,
Dow Jones, Hewlett Packard, Marriott, Meredith Publishing, and NYNEX Worldwide Services. All companies
have developed or acquired significant new businesses over the last ten years. AT&T, Coming, Dow-Jones,
H-P, and Marriott have had significant activity in just the last four or five years.
Attached as an Appendix is the discussion guide we used for the interviews. The findings and conclusions
below follow the major topic areas of the discussion guide, although we have added "leadership" and
have re-ordered some of the issues. The report is organized into two sections, one dealing with the
structure for new business development and the other dealing with new business development processes.
I. Business Development Structure at the Corporate and Division (Business Unit) Level
- Business development: definition and relationship to other planning an analytical efforts.
- Business development may be the only function of a "business planning" or "business development"
organization, but most often it is one of several activities carried out by the same organization.
We have seen in our survey as many as four different activities carried out by corporate staff groups
charged with helping the corporation plan its growth or investigate new opportunities:
- Strategic planning: The corporate staff group determines once every year or less frequently
the direction the overall business should take. This activity usually involves environmental scanning,
competitor analysis, evaluation of total company strengths and weaknesses, and use of analytical models
such as those of Michael Porter or Boston Consulting Group to gain insights into the company's current position
and what opportunities it may have for future growth, profit and competitive advantage.
- Business development: The staff group undertakes a set of activities to identify, research,
analyze and test new business or new product opportunities for the corporation. Fundamental to this work
is some way of organizing and prioritizing efforts, because there will usually be too many opportunities
to follow up on them all. These efforts may involve merger and acquisition activity, but often this is
shared with, or taken over by, the corporate financial group. Business development in some companies may
also involve work to research and form strategic alliances with other companies.
- Business planning process: The staff group acts as technical assistant to the annual business
planning process. In all cases we studied the corporate group does not write the plans themselves--they
are prepared by line or staff people in the individual business units. The corporate group provides planning
guidelines and assumptions, and will act as initial reviewer of business plans before they are taken to senior
management for approval.
- Business unit support: One or more business units may need help from a central organization
on analyzing a key issue, and the staff from the central organization will act much like consultants in
such an instance. Usually the corporate group is selective about which projects to work on--such as
focusing on only those deemed to be strategic or having an impact across several business units.
"The biggest segment of time we spend is on business development, and the next is business unit support,
although only on really important issues. Strategic planning is not a big deal here--senior management knows
the corporation's core competencies, so that the task is to apply them to new opportunities. We do act as
first reviewer on business plans of the business units, but by our time records, the business planning process
only takes about 4 % of our time."
"Our company has so much growth potential in its present business units that we do not need a central group
for business development. Rather a lot of the activity of our corporate planning staff is to investigate
opportunities for strategic alliances with other companies, many of whom approach us on an unsolicited basis."
- Business development/new ventures is often distinct organizationally from "strategic planning" or
"business planning." Companies with a successful corporate effort for business development tend not
to mix this function, which is either investigation-oriented or deal-oriented, with more traditional strategic
planning or business planning. In fact, executives in business development groups with whom we spoke are fairly
adamant about the danger of mixing any planning process work with business development.
"You definitely don't even want the word, "planning, " in the name of a new business development organization,
because the rest of management will think that is what you do. Strategic planning, that vision-setting stuff,
is a real waste of time. Formal 1-5 year business planning is another story. It is something the individual
business units should do themselves, not a corporate group. We'll be glad to review those business plans, and
ask questions, but writing them is not our job."
"We have four groups who do business development, each allied with a major operating unit of the company.
Strategic planning (the 10-year timeframe) is handled by two other groups reporting parallel to us."
"We have isolated three people in our group for handling the formal business planning process with the units.
My boss and 1, on the other hand, are running major investigations of global businesses in two important areas
for the company's future. I have a staff of five, three of which are in Asia right now, and he is using a staff
of three. Some are from our group, and some are on loan from the business units."
- The emphasis given to the corporate business development is a function of management's commitment to
growth and diversification. The emphasis given a corporate group for business development is related to
the perceived need for growth and/or diversification among corporate management. More people, money and attention
are used in this effort when senior management is trying to grow or change the company in a significant way.
Cash constraints, reaction to overzealous expansion in the past, or simply the need to absorb a major acquisition
all can cause a slowing down or complete stop to business development activity.
"In our corporate planning group a few years ago we really did a lot of business development work, examining
several companies to buy and industries to enter. Once we made the major acquisition that transformed our company,
however, the emphasis on corporate business development stopped. Senior management may even cut out my function
(I head a very small planning and business development group) when I leave the job to work in a division.
Nowadays, the primary business development work is going on in our most dynamic division."
"Our business development group has been given a lot of attention because of the corporate goal to grow at
over 15% per year. With an aggressive goal like that, business development has to produce, and we have been
given the budgets to move forward."
- Division of responsibilities between corporate and the business unit level
- The corporate business development group should take stewardship over the corporate new business
development program and should be the prime mover in the continuous improvement of the program. Two keys
to successful new product innovation are: a well-defined and structured new business development program,
and a process that modifies and improves the program over time. One area that needs constant attention is the
screening criteria and processes. To ensure uniformity and timely revisions, this function must be handled
by the central business development group.
"We initiated our formal 'Five Step' program four years ago. We always had our own special way of doing
things, and that worked pretty well. But we found that good ideas were being lost because some employees didn't
understand the process or how to get their ideas put forward. So we instituted a formal process, and we have
trained over 2,000 employees on how it works. We have also made small changes along the way, to make the program
easier to administer and to use."
"For any venture that is outside the normal businesses of our divisions the CEO says, let's have Mr. Xs (SVP
Strategy and New Ventures) group take a look at it."
- Certain new product and new process innovation functions are best handled at the business unit level.
It is more efficient to handle small, incremental changes entirely within the business unit, and such projects
may not even have to pass through the formalized program.
"Low risk projects such as process innovations and product line extensions are handled at the business unit
level, and they are paid for out of the business unit's R & D budget. In order to make incremental improvements
you have to be very close to the action, and so we think its best to leave that up to the business units.
Furthermore, those kinds of projects tend to have shorter payback periods, so that the business units (which
are driven by profit goals) are the best suited to handle them."
"One of our groups has a "college" in which all the employees in that group can get a nine-month education
on all functions in that group. One of the exercises in the group is to develop a new product, and some of
these new product ideas in the college become successful new products of our company. This is a new product
process that we at corporate do not get involved with at all."
"If a project gets too big or complex, the business unit is very happy to get us involved. We have a good
working relationship with them. "
- Avoiding duplication of effort/realizing synergies between business units
- The key to maximizing new business development resources is an effective communications policy.
The only way to avoid duplication of effort is to make sure that each business unit knows what the others
are doing, and to create an environment in which the results of each project can be shared by the business
units. Furthermore, each business unit has to be continually educated on the key skills and abilities (core
competencies) that are being developed in the other business units.
"We have several programs to keep everyone well informed: we have seminars called 'Technology Forums' and
Process Forums' that help each division to know what the others are doing, we have an 'Innovation Newsletter'
that describes some of our later- stage new product projects and also describes situations in which processes
(such as quality control skills) have been transferred from one division to another, and we do newsletter
articles on what new and interesting markets we are looking at. It helps everybody know what we're working
on and where we're going. It also gives 'good press' to people who have done a good job."
"Our corporate planning group oversees activities that will help the company across business units. We
recognize that if we work on a special marketing program for the consumers in one business unit, that it can
easily be applied to the consumer in other business units--the consumers for our different businesses are
basically the same people. This can save a lot of duplication of effort."
- The corporate business development group must oversee the interaction between business units.
In order to ensure proper communication between business units, proper organization and training of key personnel,
and proper allocation of resources (both human and financial) a strong central group is absolutely necessary.
But just as important, the corporate business development group must be able to build consensus around the
decisions that are made.
"You have to have a central authority that can be a referee and make the final judgments. For example, at
some point you have to decide issues like: which projects are going to be funded and which division is going
to be the one to pursue a given technology. You can't have all your divisions spending money on the same thing.
So the decisions have to be made centrally, but it must be done carefully and fairly. You have to be able to
build a consensus; if people don't think that they are getting a fair shake, they won't participate."
- Developing new businesses that may be hostile/unattractive to current business units
- One of the crucial functions of the corporate new business group is to provide the managerial care and
resources for emerging technologies that will not receive adequate support in the business units. Projects
that will not grow naturally within the business unit can only find support in a separate organization, and some
projects will not receive adequate attention from managers whose primary responsibilities are to the business
unit. Therefore, it is absolutely crucial that the corporate business development group be able to provide
impartial management for that type of project.
"We want to 'obsolete' our own products. We're not married to a given product or process. We feel
that if a better product or process comes along, then we want to be the ones to take advantage of it. But you
can't really expect an operating division to embrace an idea that could take away its source of revenue. So when
a product like that comes along, we set up a project team that operates out of our corporate group. That way,
we know that the product will be given a fair shot at success. "
"I am working with a project team that is working on a worldwide strategy for a business that cuts across three
of our business units. Corporate business development is the only one that could really handle this."
- Speeding up the new business development process
- The majority of ideas should be screened out very early in the process, even if it means losing a few
that may be potential winners. The first key to speeding up the innovation process is to keep the workload
manageable. By aggressively screening out projects in a stage by stage process, less time win be wasted on
projects that are not going anywhere.
"Once you let people know that they will be rewarded for their ideas, the new projects just start pouring
in. One of the most important parts of our job (at corporate business development) is to screen out the majority
of ideas at a very early stage. We don't have limitless resources, and we can't waste time, money, and people
with valuable skills on projects that don't have a future. Spending too little time on too many projects will
eat up all your resources without getting anything done. You have to focus on the few really good ideas. The real
trick is to tell people "no' without discouraging them."
"We keep a lean staff (20 people) and that forces us to only work on the really important things--something
with a very high payoff or where there is real pain. With this size group I can easily nonage it all and keep
the projects moving."
- The business development organization should set an aggressive time schedule and give each project the
resources it deserves. The second key to speeding up the innovation process is to assign a good product
champion and to give him or her enough resources to get the job done. Some of the characteristics of a good
product champion are enthusiasm, aggressiveness, and leadership.
"The key is getting the right people involved and giving them enough resources to get the job done. If you
pick the right product "champion' to lead the project team, he or she will push things along at a very rapid pace.
Then it's up to the corporation to give them everything (especially the people) they need and to stay out of the
team's way. "
II. Management Processes for New Business Development
- Leadership
- The leadership of the business development group has to promote both flexibility and excellence.
The leaders of successful business development groups in large companies tend to be resourceful in the way they
use their staffs and structure their project teams. They also demand thorough work from their staffs.
"Our leader is not part of the normal bureaucracy. He is a free thinker, and is really different from the
guys running businesses here. He believes in getting the job done, and will use whatever people he needs, wherever
they are."
"My predecessor did not have the projects reporting to her, but I felt I needed to have that for quality control,
and to develop my project managers. I hired very experienced people from major consulting firms as my project
directors, so they could hit the ground running."
- The leader has to clearly stake out the role of the business development organization and also be
able to say "no." New business development organizations are sometimes expected to also act as business
planners, speech writers, market researchers and general receptacles for senior management wish lists. The
leader needs to define clearly what the business development organization will and will not do, and be able
to fend off requests for investigation or action that do not fit with this organizational mission.
"We titled our group, "Corporate strategy and new ventures." Besides helping the business units on specific
projects, we defined our role as identifying businesses that would help the company grow 20% per year. This
allowed us to avoid writing speeches or doing other odd jobs for senior management."
"We once got handed from the finance department an opportunity to buy an airline. It did not fit with our
skills at all, and so I had to walk through all the reasons why it did not make sense. I didn't devote a lot
of resource to it, but just enough to kill it. "
- Human Resources
- The staff in the business development groups must be experienced, and understand the existing businesses
of the company. In order to be valued by the business units with which they work, business development
staff need to be knowledgeable of how those business units operate, and what skin bases and core technologies
they have. Whether it be reviewing business unit plans, or working on projects for or with the business units,
the business development staff is viewed as valuable not only for their analytical ability and independence,
but because they appreciate and understand the day-to-day aspects of running the business.
"While we bring in outsiders to staff our group, we expect them to undergo a heavy indoctrination period in
the businesses. All staff spend a week or two working in the facilities of our major businesses."
"In our case, the business development staff are clustered in groups off our, and each group is lined up
against one of the major operating units of the company. Our staff members are all seasoned veterans with
multi-functional work experience in the business units with which they deal. We tend not to have junior staff
in our group, but rather use staff from the businesses or consulting firms as we need them."
"There are sometimes differences of opinion on this, but I don't think the senior people in a business
development organization should be rotational. You need a conscience in the organization, and a consistent
set of guidelines, and how can you get that when a new person is coming in all the time?"
- Management Processes
- There usually is an understandable and consistent process in place for moving ideas for businesses
forward. While analytical methods and project team structures are usually flexible in business development
organizations, the processes for moving along new ventures from the early idea stage to major investment are
consistent and well understood.
"We have reviews with the executive committee on any business idea requiring further funding beyond the
existing business development budget- -for marketing research, prototyping, and first unit. There may be two
or three reviews over a one- or two-year period of development. We never bring any idea to the committee that
has been killed, so as not to waste committee members' time."
"We always put up the new business ideas against two sets of criteria. The first is whether the business will
fit with our skill base--the types of people we employ and type of work we have them do. The second set of
criteria is more external, and includes the size and growth of demand for the service, whether we could do this
better than competitors, and other market and industry factors. We also use a lot of financial analysis
to determine the likely payoff of the business under different scenarios."
"Two or three times a year, we will do an overview for the executive committee of the business unit we are
assigned to. That will help to drive efforts to develop new businesses that build on that unit or shore it
up."
- New idea generation comes from a wide variety of sources. Executives in business development
units are very comfortable with the fact that new business ideas come from a whole variety of sources, not
just from their own groups.
"We see ideas coming from the business units, from consulting studies, from our own scanning efforts,
and from pass-alongs from the finance people on whom the investment bankers call. It is important to get as
many ideas as you can."
- Projects drive the work of the business development organization, not the formal structure. While
there is usually a hierarchy in the business development organization for salary and performance review, the
real work is done by ad hoc project teams. Project teams may be set up to handle an effort of a couple weeks
or more than a year, may consist of a few people or many, and may be made up of just business development staff
or staff plus "loaners" from the business units.
"We are set up almost like a consulting organization. All 20 people report to me for administrative purposes.
The projects report to me as well. Major projects are run by my three project directors, using other staff in my
group. If I just want a two-week investigation done, I will give it to a research assistant, and he or she will
report to me on that project as well."
- Culture
- The culture in these organizations is one of "do what works." In terms of analytics, review
processes and team structures, these groups are characterized by eclecticism and resourcefulness. The latest
strategic planning concepts are applied, but so is common. sense and raw financial analysis. Also, groups are
structured in whatever way they can be most effective.
"I can be a project leader on one team and be a team member on another. I am known as the "pit bull" who
can do a lot of the tough stuff, so I am brought into teams when they need that. Our whole group is comprised of
people with different skills and backgrounds, so we can come up with teams with a broad approach to things. We
use all the analytical techniques, but the good thing here is we believe there is really no one way of doing
things."
"In one venture we examined, everything had to be super-secret, because it involved a major acquisition of a
public company. We were reporting just to the board on that one. On another, because we were getting into a
business that could affect our credit rating, we had to bring in the CFO and his staff as part of the team.
We will structure the teams and processes as is needed."
- Failure is tolerated in these organizations, although risk/reward of ventures is carefully managed.
Executives in business development units with whom we spoke could speak of ideas or ventures gone awry, with no
one losing his or her job. In fact, failures were expected as a natural part of the process, if truly new businesses
were to be developed. On the other hand, investigations are often phased, so that not too much resource is
committed too early. A review board (often an executive committee or even the board of directors) has a chance
to nod agreement at several points along the way, as additional resources for research or prototyping are
committed.
"The key to success at our company is to win big or lose big with a new product or business. If you want
to win, you have to take risks, and although we do everything we can to minimize the risks, we don't want to
penalize people for taking a risk and failing. We have several current Executive Vice Presidents who were part
of a $150 million failure earlier in their careers. As long as you do a good job, you will still be alright."
"We may go to the committee first for approval to spend $200,000 or so for a detailed market research study.
If the idea continues to look good, we will go back again, and this time request money for a scale model, in
which we bring in architects and other experts to provide detailed information. This may cost $1 million or
more. The third time, we may be asking to build an operating unit Now we may be at the $10 million or more level.
As the unit is being built, we turn the business over to a venture team to run it. "
- A mixture of hard-nosed, independent thinking coupled with friendly cooperation with the business units is
encouraged. The business development group needs to be recognized within the company as an excellent
analytical group, in order for their help to be sought and for their recommendations to be heeded. Yet, the
members of the group also have to be "user-friendly" in order to be able to work successfully over time with
the business units.
"We view ourselves as 'honest brokers.' We need to communicate regularly with the business units, so they
know we are working with them in the best interests of the total company, but if we see something we disagree
with then we need to tell them. For example, I saw something one of my businesses put together where the numbers
didn't support their enthusiasm for the new venture. By working with them on how the charts for their presentation
should be configured, I was able to show them the numbers in a different light. At the end, I said, 'Are you
really sure you want to support this unequivocally now that the numbers look like this?"
"We want everything to be positive with the business units, so they trust us. We have always refused to 'audit'
them, and we also won't do any organizational studies in their units. This would ruin our relationship. On
the other hand, our folks have to stand up for what they believe in, and really be committed to their business
ideas. In these bureaucracies, there are always groups who want to take pot shots at you, so you better know
your stuff and believe in it. I have been away from my job for two years, and yet I still can tell the precise
monthly performance today of a major venture we developed in my tenure. That's the kind of commitment
we tried to foster."
© 1991 Hamilton Consultants
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