Business

6 steps to launching a business venture that delivers growth

The returns increase as the size of the business in question increases.

The returns increase as the size of the business in question increases. Image: Getty Images.

Paul Jenkins
Global Co-Leader, Leap by McKinsey; Senior Partner, McKinsey & Company
This article is part of: World Economic Forum Annual Meeting
  • Companies investing 20% of growth capital into building new ventures achieve revenue growth 2% higher than those that don't.
  • CEOs are putting new venture building ahead of traditional strategies to grow their business.
  • Here are six steps that can help successfully innovate and launch new ventures.

As monetary conditions continue to ease in major economies across the world, there’s a growing opportunity for companies to diversify and innovate to unlock growth. Two in three CEOs expect to build new ventures in the next year. In fact, our data shows that the prioritization of new venture building among CEOs is now more common than it was before the COVID-19 pandemic, despite the higher cost of capital.

There’s a reason for this appetite. Longitudinal analysis has shown that the companies that embrace new venture building and put in place the critical processes and capabilities will be positioned to outgrow their industry peers. In 2024, the fifth annual installment of our global research, found that companies that invest 20% of their growth capital into building new ventures achieve revenue growth 2% higher than those that don’t.

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The returns increase as the size of the business in question increases. For organizations with revenues of $1 billion or more that invest 20% of their growth capital in new ventures, the returns are closer to 2.5% higher than those that don’t. Given the mean growth rate for organizations of this size is around 5.2% – the uplift constitutes nearly 50% in additional growth for these organizations.

It is a thirst for growth that is driving a surge of new venture building, with CEOs putting this strategy ahead of traditional ways to grow their business, such as organizational transformation, joint ventures, and mergers or acquisitions. Clearly, though, not every new venture will automatically find success. The top performers in this space deploy a number of key strategies to give the best chance of high performance.

Drawing on our extensive research and real-world experience, we’ve identified six steps that can help organizations successfully innovate and launch new ventures.

When looking specifically at factors at play in individual new ventures, the data suggests that businesses with at least half of the success factors identified, see 3.1 times more revenue in their fifth year than new businesses that had less than half of the factors in place.

1. Take a disciplined portfolio approach

Expert builders spread their bets. The highest performers have built an average of six new ventures in the past five years, whereas novices have built fewer than two during that time. Experience also breeds institutional process: leaders are more than three times more likely than novices to have an established framework in place for identifying, evaluating, building and launching new ventures.

2. Dedicate funding

It might sound obvious, but it’s crucial that the finance for new ventures is agreed upon and ringfenced up front to ensure the business can operate and scale with agility and confidence. This is particularly relevant for corporates, which face additional challenges in frequently changing leadership and performance swings in core businesses. Expert builders are 2.6 times more likely than novices to have financial resources set aside for new venture creation.

Experts also tend to invest a higher percentage of their capital in each venture, resulting in fewer but larger businesses. Our data reaffirms that "growth isn’t free", with revenue scaling proportionally to investment. For instance, a $3 million investment typically yields an $8 million business in five years, while $30 million can grow to $90 million – a proportionally larger return.

3. Balance independence with connection to the core business

The majority of companies give new ventures access to plenty of support from the expertise and resources of the main business. However, we see differences in the extent to which they also give them independence in decision-making. Expert builders are more courageous and give their new ventures greater independence to pursue exceptional advantages. In fact, they are twice as likely to give them a high degree of decision-making independence. It’s a tricky balance, and one that should make the core businesses uncomfortable, but getting it right makes the difference.

4. Show support from the top

When C-suite leaders from the core business put time and effort into supporting new ventures, success is more likely. Our data shows that experts are 1.4 times more likely than novices to have a C-suite champion their new ventures. What’s more, experts often designate a leader to focus on building ventures. And, are more than twice as likely to give a leader dedicated responsibility for new venture creation efforts. This is partially because for novices, the CEO has to support the new venture, while experienced new business builders, can let a member of the C-suite lead.

5. Build a focused team with expert talent

This goes hand-in-hand with the first point about maintaining a clear process for new venture building: consistency of results is improved by consistency of the team. Experts construct a regular new venture team to lead the organization’s efforts in this area, enabling them to learn from past successes and challenges. Expert builders are 1.5 times more likely than novices to have a team or unit dedicated to new venture creation. And, one-quarter of expert builders have the flexibility to compensate talent more highly than the core business can, compared with just 1% of novice builders.

6. Consider acquisitions to bring in missing capabilities

Over the past five years, we’ve seen that the most successful new venture builders don’t always need to have every capability in-house. Experts are twice as likely as novices to have acquired another business during their venture-building process, and those seeing the largest revenues from venture-building are the ones who are acquiring businesses. A careful combination of acquisition, nurturing internal talent, and building new ventures can help deliver strong results.

When combined, these factors create a formula for success. Experts who excel across all dimensions achieve 12 times more revenue in a venture's fifth year – all while investing just twice as much capital. The takeaway is clear: venture building is a learned skill, and the more organizations invest in honing it, the greater their returns.

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