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LEAD Innovation Blog

Read our latest articles on innovation management and innovation in a wide range of industries.

Date: 03-Oct-2018
Posted by: Michael PUTZ
Category: Market innovation

Definition: New Business Development

 

New business development is the most complex and risky way to generate new revenue. The aim is to generate profits with a new product or service and a new business model in a hitherto unknown market. In this blog post you can read what is to be understood by New Business Development and how it can be represented organizationally in practice.

A company has many options for tapping new sources of revenue. For example, it can generate new sales through an innovative business model. A new product or service in a new form is being offered to the market already under pressure. The car sharing subsidiaries of well-known car manufacturers are an example of this. A Swiss dairy farmer shows that this form of sales increase is also suitable for smaller farms. Instead of selling the milk, he rents out his cows, continues to look after them on his farm as always and offers the tenant the end product cheese at a preferential price.

In a market innovation, a company tries to transfer its own technologies to new fields of application in new markets. Uber, for example, not only transports people, but also delivers food in many cities.
Case Study LEAD Transfer

 

Type of innovation with the highest degree of novelty

While at least one area of these two types of innovation, as well as classic product and process innovation, remains unchanged and thus forms a "safe bank", everything is new in New Business Development: the product or service, the processes behind it, the business model and the market as well as the customers. In some cases, even the brand does not last. If, for example, the values of the brand simply do not fit the new market.

 

Method is suitable for companies with "gaming capital".

However, this way of generating new sales is not open to all companies. This method is not recommended for farms that need new income relatively quickly. Rather, New Business Development is ideal for those companies that want to develop new business models from a position of strength, can and want to take money and resources into their hands and are aware of the relatively high risk of failure.


5 ways to find problems and their lucrative solutions

The first step in New Business Development is always to discover a problem that concerns such a large target group that a solution to it pays off economically. There are many ways to take this first step:

  1. A visionary founder who leaves the lucrative operational business to others and is exclusively concerned with the strategic. The founder of the Austrian innovation partner, solution provider and technology service provider Beko, Professor Peter Kotauczek, is one such personality. In its 52-year history, the company has mostly been active under the radar of public perception in countless areas: Beko was both a provider of rental engineers and one of Austria's first software houses and went down in economic history as the founder of the country's first jet demand airline. Beko designed large format printers as well as racing motorcycle engines that were competitive enough to compete in the World Championship. For several years now, the B2B company has been trying to score points on the consumer market with so-called "walking floaters". "For me, BEKO is the ultimate work of art," says Kotauczek in an interview, suggesting that his decisions to penetrate new markets were never driven by pecuniary interests.
  2. In order to find problems and their lucrative solutions, some established and large companies act as business angels or incubators. Since 2012, for example, Deutsche Telekom has been operating its own incubator, hub:raum, which supports young entrepreneurs in many ways. The facility is part of Deutsche Telekom's initiative for the future, which is increasingly focusing on cooperation. In an extremely pronounced form, an entrepreneur can only concentrate on the financing and support of start-ups in order to prepare them for a lucrative exit for both sides. Just as Johann Hansmann does very successfully with his hansmengroup. It consists of a group of startups that share common values and similar goals, but operate in completely different industries.
  3. Of course, corporate venturing can also open up new business areas. Here, large corporates provide venture capital to young companies. The investor's hope is that at least one of the start-ups will be so successful that it will not only compensate for the losses of the other investments, but will also generate a big profit on the sale of the profit sharing. Axel Springer Ventures, for example, succeeded in doing so with its 51 percent interest in the Austrian start-up Runtastic. This was acquired for 22 million and sold to adidas for 111 million two years later.
  4. New business development can at least be initiated by mere cooperation with initiatives such as "Industry meets Makers", even without large investment of funds. Here an industrial partner provides a rough framework and the independent maker scene or other companies find use cases, business models, services and finished products. At Hackathons, participating companies or organizations already receive Minimum Viable Products (MVPs). Even if the guidelines for this are extremely vague, such as "improve the lives of citizens of city B."
  5. If a company does not want to make a public appearance in New Business Development, it can also form an internal team that enjoys the freedom of an experimental laboratory completely freed from everyday business. In this form, however, there is a risk that these teams are not customer-focused enough, and often even act blindly. For example, the Eastman Kodak Company certainly had enough employees to observe the markets and develop innovations based on these findings. Nevertheless, the company underestimated the potential of digital photography and went bankrupt. With this model it is advisable to work together with an external innovation service provider such as LEAD Innovation. Through decades of experience with the LEAD User Method, the company has built up a large network of advanced users and companies. This network guarantees an external perspective, also offers information about existing problems that are still awaiting a lucrative solution and also opens up partnering opportunities.

 

Conclusion: Definition of New Business Development

There are many ways to introduce new business models to new markets with new products and processes and thus generate new sales. Very large companies such as Google or its parent company Alphabet use many levers (Startup with Google, Entrepreneur with Google, Google Ventures to name but a few), which it can easily finance from the income from the advertising business. However, New Business Development is not a method reserved for larger companies. Let's try again the example of the dairy farmer who rents out his cows. If the tenant also offers his tenants a "farm holiday" where they can spend a few days with their rental cow, milk it themselves and then also drink their fresh milk, that is nothing more than new business development. By the way, this offer already exists - including a common picture with tenant and farm animal.

Paper Types of Innovation

Michael PUTZ

Born in the Salzkammergut. After working for Shell and Porsche, he concentrated on innovation management as a study assistant at the Innovation Department of the Vienna University of Economics and Business Administration. In 2003 he founded LEAD Innovation and manages the company as Managing Partner. Lectures at MIT, in front of companies like Google or NASA.

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