Venture Design Consulting

Venture design is the work of specifying a business that does not exist yet: who it serves, what it sells, what it charges, what it costs to run, why this company has a right to build it, and which assumption would end it. It happens on paper, before a team, a budget or a legal entity is committed, and it finishes in a decision to build, to park or to stop. Vivaldi has worked on new business questions since 1999, for companies including NEJM Group, LSG Sky Chefs and Lionbridge.

Two routing notes first, because the pages either side of this one do adjacent jobs. If the open question is which bets the company should be carrying at all, how each is funded and at what point it stops, that is the portfolio question, and it is answered on our corporate venturing consulting page rather than here. If the concept is already settled and the problem is standing the business up, that is corporate venture building. Design decides what the venture should be. Building makes it exist.

• Since 1999demand, innovation and new business strategy
• Más de 200estudios de caso publicados
• 10 oficinasen cuatro continentes
• 5x«Best of Consulting, Strategy and Innovation» de WirtschaftsWoche
• El campo de interacciónescrito por nuestro fundador

Cuando las empresas nos contratan

Venture design is usually bought by a chief strategy officer, a head of innovation or a corporate development lead who has a growth gap the core business cannot close and a concept that has not yet been written down as a business. The trigger is normally one of these.

• A concept that is really a product description. There is a clear answer to what will be built and no answer to who pays, at what margin, or what happens when the obvious competitor responds.
• A business case built from numbers that belong to another business. The model extrapolates the margins, the cost to serve and the sales cycle of the core, because those were the only figures available.
• Several concepts and no basis for choosing. Four ideas, one funding round, and the comparison is being made on how well each was presented.
• A venture already running on an unexamined premise. Two or three quarters in, and nobody can say in one sentence what would prove the idea wrong.
• A board that has asked for the economics. The ambition is approved in principle and what is missing is a revenue mechanism, a cost base and a number someone can allocate against.

Why a new business cannot be planned like an existing one

The reasonable version of the standard approach is that a new venture should go through the same discipline as any other investment: size the market, build the model, present the case. The discipline is right. The instruments are borrowed from a business that already exists, and that is where it breaks.

An established business is planned from things that can be looked up. The category is reported, the customers can be surveyed, the cost to serve is in last year’s accounts, and the competitive set is known. A venture has none of that. The category it would compete in may not be a category yet, its customers are currently someone else’s customers doing something else, and there is no P&L to anchor to. So the founding assumptions have to be constructed deliberately rather than discovered in data, and the quality of the venture is mostly the quality of those assumptions.

Three failures follow from pretending otherwise.

• Market sizing stands in for demand. A share of a reported category is not evidence that anyone will switch. Demand is what customers are trying to get done, and it rarely maps onto the categories a company reports in. Capital allocation does not create value on its own either, an argument we set out in capital allocation does not create value, future demand does.
• The model is defined from the company outward. The venture starts from what the organization can already make and arrives technically competent and commercially uninteresting. The right to win is then asserted with a logo rather than argued.
• The economics are an output of the deck rather than an input. Price, gross margin, cost to acquire and cost to serve get filled in last, to reach the number the ambition needs. A venture whose economics were reverse engineered from a target will meet that target in the model and nowhere else.

The alternative is unglamorous. Write the business down as a model with every assumption visible and attributed, state which of them the venture cannot survive being wrong about, and get a decision made on that basis. Most of the value is in the concepts that are stopped early, cheaply, and with a written reason that stops them coming back next year with a new sponsor.

What our venture design services include

Five pieces of work. A single concept usually needs all five, in this order.

1. Defining the business rather than the product

The first deliverable is a written specification of a business, not a description of a thing to be built.

• The demand it serves, expressed as what a customer is trying to get done and what they do about it today
• The offer, the buyer and the moment of purchase, including what the customer stops doing or stops paying for
• The participants the business depends on and does not own, since most new businesses now need partners to work at all
• What is deliberately out of scope in version one, which is usually the part that makes the economics possible

2. Building the economics from assumptions you can name

A venture model is not a forecast. It is a set of named beliefs with arithmetic attached.

• Price and the logic behind it, meaning what the customer is giving up and what the alternative costs them
• Unit economics built bottom up: cost to acquire, cost to serve, gross margin, and the point at which a unit pays for itself
• The capital and capability the parent would have to supply, separated from what it would buy or partner for
• Every input labeled as evidence, benchmark or assumption, so the model can be argued with rather than believed

3. Establishing why this company and not another

A venture that any competent firm could build is a venture a better funded one will. The right to win has to be specific.

• The asset that is genuinely hard to copy: a customer relationship, a data position, a distribution route, a license, a brand permission
• The permission question, meaning whether customers and partners would accept this company in this role
• The honest alternative: whether a partnership, an acquisition or doing nothing would reach the same place for less
• The competitive response written out in advance, including what the incumbent does on price

4. Naming the assumption that would end it

Every venture rests on a stack of beliefs, and a small number of them decide the outcome.

• The full assumption set separated into demand, willingness to pay, delivery and route to market
• A ranking by two criteria only: how uncertain it genuinely is, and how much of the business collapses if it is false
• The one to settle first, with the cheapest instrument that could disprove it, handed over to business experimentation where a test program is what is needed
• A kill condition written in advance, in the language of a result rather than a sentiment

5. Reaching a build, park or stop decision

The engagement produces a decision, not a concept library.

• A recommendation with its reasoning: build now, park until a named condition changes, or stop, with the evidence that settled it
• Economics stated at a scale someone can actually allocate against, with the sensitivities that matter flagged
• The open questions listed rather than quietly dropped, so the next team starts from what is unresolved
• A handover into venture building where the answer is build, including what was assumed and what was tested

How a venture design engagement works

1. Frame the demand. We start outside the company, with what customers are trying to get done and what they currently do about it, rather than with the category the business reports in. The output is the specific demand the venture would serve and the people who have it.
2. Specify the business. The offer, the buyer, the price logic, the participants and the unit economics written as one connected model, with every input marked as evidence, benchmark or assumption.
3. Stress it. The right to win argued against the honest alternatives, the competitive response written out, and the load bearing assumptions ranked. Where one of them can be settled cheaply, we settle it before the decision rather than after.
4. Decide. A build, park or stop recommendation with its reasoning, the economics at an allocable scale, the kill conditions, and a handover your own team can carry forward.

Why companies choose Vivaldi for venture design

We come at a new business from demand rather than from capability. Our starting question is what customers are trying to get done and where that demand is pooling, which is a different starting point from an engineering brief or an adjacency map, and it is the reason our concepts tend to be defined by a job to be done rather than by a technology.

We also work on models that depend on participants the company does not own. That is the argument in The Interaction Field, written by our founder, and it matters here because most ventures worth building now need a partner, a supplier or a developer to behave in a particular way for the economics to hold. An assumption about a participant you do not control is an assumption worth naming early.

What we do not do is worth being clear about, because several firms in this market do it and we do not. We do not fund ventures, we do not take equity in them, and we do not supply founding teams or interim operators. We design the business, argue the economics and recommend a decision. The capital, the hiring and the operating company remain yours, which also means our recommendation is not improved by your saying yes.

How to evaluate a venture design consultant

Merece la pena planteárselo a todas las empresas de tu lista, incluida la nuestra.

• Ask them to name the assumption they would test first. Give them the one page concept and ask for a single belief. A firm that answers with a process is selling a process.
• Ask how they would build the economics without a comparable business. The useful answer is a bottom up model with its assumptions labeled. The weak answer is a share of a reported market.
• Ask what a stop recommendation looks like in their contract. If the engagement can only end in a launch, you are buying momentum rather than judgment.
• Ask for a venture they advised a client against, and why. A firm that has never talked anyone out of one has either been lucky or has not been advising.
• Ask who owns the model afterward. If the economics live in a spreadsheet only the consultancy can operate, you bought a document rather than a decision tool.

Venture design vs corporate venture building vs an innovation sprint?

Trabajos relacionados

No published case studies are tagged to this page yet. Our venture design work tends to be written up under the capability that carried it, so the neighboring pages below are the honest places to look, and each answers a question this one does not.

• Corporate venture building once the decision is build, and the constraint becomes governance, funding stages, talent and surviving the parent company.
• Business experimentation if the concept is specified and the live need is a test program: the smallest instrument that could disprove the assumption, and a threshold agreed before it runs.
• Business model innovation if the question is whether the model of the business you already have is what is holding growth back.
• New business model design if that question is settled and a new model has to be specified for the existing business, particularly one built around participants you do not own.
• Product and service innovation if what is being created sits inside the current business and its P&L rather than standing on its own.
• Experimentation and ventures for the portfolio question above all of these: how much to spend finding things out, which bets are held as a set, and when each one is stopped.

Este trabajo forma parte de nuestra práctica «Marketing : Strategy & Acceleration» en Vivaldi, la consultora estratégica responsable de «Demand Landscape» y «Interaction Field».

Venture design in the US and worldwide

Our venture work runs out of ten offices on four continents, with the US team in New York. The method is portable and the assumptions are not. Willingness to pay, the credibility of a new entrant, the route to market and the regulatory cost of operating all move by country, and a venture that clears its hurdle rate in one market regularly fails on price or distribution in the next. Where a concept is intended for several markets, we specify the economics for the hardest one first, because a model that only works in the friendliest market is a pilot rather than a business.