My goal is to help large organisations innovate by building new, durable business models. The sad thing that I see is that most corporate startups die after the Minimum Viable Product (MVP) stage. This is mainly because corporate startups tend to focus on the wrong things in relation to the phase they are in. That’s why I’ve developed 6 different levels of maturity that a (corporate) venture can be in. I’ve also formulated which metrics you should focus on in each maturity level. Let me explain these six levels, divided into explore and exploit.
🔎 Explore
The journey of exploring is one of searching and adjusting (pivoting) until you have enough evidence that your ideas, value propositions and business models will work. Sometimes a reality check is needed when new evidence indicates that what you are testing is unlikely to work. Your entire business model or aspects of it may be called into question. When pivoting a (corporate) startup, your underlying hypotheses need to be reconsidered. These are the levels you can go through during exploring.
Level 1: Discovering (adoption curve: pre-market)
Measure customer understanding and context to validate the solution
Every venture starts by reducing risk through testing. Initial evidence indicates that customers really experience the problem and want the solution for the problem that you plan to solve. Validating this discovery phase does not require technical skills. Examples to measure customer understanding (problem/solution-fit) can be through videos, mockups, or other pretotypes.
Market metrics: Amount of potential customers that experience the problem and amount of potential customers that experience the problem that are willing to try the solution
Product metrics: Building a pretotype and measuring customer behaviour through download buttons or sign-ups forms
Level 2: Validating (adoption curve: innovators)
Indicate customers’ willingness to pay and loyalty
Here you look for more solid evidence that shows interest in your product or service is working. You focus on getting the first sales or letters of intent signed to show how many customers are willing to pay for your product (product/pioneer-fit). For this, you are working on the first prototype (minimum viable product) to measure loyalty.
Market metrics: Amount of potential customers that (pre)-order your solution and amount of customers that use your product extensively after ordering
Product metrics: Building a Minimum Viable Product (MVP) and measuring its usage
Level 3: Accelerating (adoption curve: early adopters)
Proven the business model on a small scale
At this level, you focus on an extensive working prototype or the first product or service to test your value proposition in a limited market (product/market-fit). Furthermore, you look for evidence that shows you can create and deliver customer value on a limited scale. The first proof of the required cost structure and customer acquisition costs indicates the expected profitability. Technical prototypes indicate that you can manage operations and resources. You are looking for evidence to justify larger investments in scaling up customer acquisition and testing the profitability on a large scale.
Market metrics: Amount of customers that fit your product and amount of customers acquired through scalable marketing and sales
Product metrics: Building a Minimum Marketable Product (MMP) and measuring customer behavior through pirate metrics (awareness, acquisition, activation, retention, revenue, referral) and other metrics that matter.
💼 Exploit
Once you have proven your business model at a small scale, you move on to exploit trajectory. Here you are going to start making financial returns. You get more competition and have to stop disruption by optimising your business model and avoiding outside threats. You keep doing small incremental innovations to maximise your market capitalisation. These are the 3 levels in the exploit phase.
Level 4: Hyperscaling (adoption curve: early majority)
Getting the venture off the ground at a rapid pace
The hyperscaling level is one in which you start building a proven and promising business model (businessmodel-fit) into immense growth. The main activities involve scaling up customer acquisition, retention and delivery of your product or service. You are going to use a lot of external capital needed to get the innovation adopted in the market. The entire team is focused on expanding on all fronts, including infrastructure and human resources.
Market metrics: A positive and predictable ratio of customer lifetime value related to customer acquisition cost while serving the early majority and slowly but surely increasing profits
Product metrics: Building a mature product while measuring customer behavior through pirate metrics (awareness, acquisition, activation, retention, revenue, referral) and other metrics that matter.
Level 5: Boosting (adoption curve: late majority)
Strengthening the performance of an established venture
In this level, you drive and maintain the growth of your proven business model with sustaining innovation. You strengthen your business model with new product innovations, new channels and the exploration of adjacent markets. In this level, changes in the external environment make your venture vulnerable. Your venture is large and profitable.
Market metrics: A positive and predictable ratio of customer lifetime value related to customer acquisition cost while serving the late majority and making serious profits
Product metrics: Fine-tuning a mature product and adding new features while measuring customer behavior through pirate metrics (awareness, acquisition, activation, retention, revenue, referral) and other metrics that matter.
Level 6: Protecting (adoption curve: laggards)
Make the venture more efficient and protect it from disruption
When you are fully mature, you need to boost performance around your established business while protecting it from disruption. Disruption can arise from shifting markets, technological, social, environmental or regulatory trends, shifting supply chains, competition, new entrants, or a change in the macroeconomic environment. You keep your focus on maintaining a strong position in the market and fending off competition. This level is often dominated by efficiency innovation. Your venture is very large and very profitable.
Market metrics: A positive and predictable ratio of customer lifetime value related to customer acquisition cost while serving the laggards and maximising profits
Product metrics: Fine-tuning a mature product and adding new features while measuring customer behavior through pirate metrics (awareness, acquisition, activation, retention, revenue, referral) and other metrics that matter.
Hopefully, you can use these maturity levels to map out your corporate portfolio. Large organisations that have successful ventures in both the explore and exploit phase are the ones that keep reinventing themselves when faced with disruption. They manage to search and execute business models which makes them produce growth engines on a systematical basis. What maturity levels are your (corporate) ventures currently in? Tell me in the comments below!
