Large companies have been able to grow by becoming proficient at developing products in their core for existing customers in known markets. Increasingly companies have sought new growth opportunities outside their core such as Apple has done with the iTunes platform. However, the odds of success drop to below 10% (Edwards, 2012) with increasing distance from the core. Using a business model perspective, we performed comprehensive paired case studies of both success and failure of projects outside the core at three IRI companies. In contrast to existing literature, we find that the likelihood of failure is not related to the degree of change in the business model required by the implementation of outside the core projects, but rather to the lack of awareness of false assumptions carried over from the incumbent business model which are embedded in the distribution channels, cost structure, and velocity elements of the business model. In order to succeed, companies need to adopt a learning strategy while the new business is developing since these false assumptions are either presumed true or are unidentifiable in the beginning of the project.
Team: Norman Golm, Director of Innovation, Regal Beloit Corp; Peter Koen, PhD, Associate Professor, Wesley J. Howe School of Technology Management, Stevens Institute of Technology; Gary Waters, VP, Emerging Businesses & Corporate Strategy, Bose Corp.